INTEGRATED ANNUAL REPORT
for the year ended 30 June 2019
PROFITABLE • SU STAIN A BLE • S TA KE HO LDERS • GROW TH
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CONTENTS
Who we are
About this report
BUSINESS AND STRATEGIC OVERVIEW
How we created value in 2019
Our operating assets and where we operate
Business model
How we sustain value
Chairman’s statement
Chief executive officer’s statement
Material matters
Strategy
Scorecard by material matter
Operating environment
Key relationships
Risks
PERFORMANCE REVIEW
Financial director’s review
Five-year review
Operational and performance review
Barberton Mines
Evander Mines
Operational production
Abridged Mineral Resources and Mineral Reserves Report
ABRIDGED SUSTAINABILITY REPORT
Environmental sustainability
Natural capital
Social sustainability
Human capital
Health and safety
Social and relationship capital
Our commercial sustainability
Manufactured capital
Intellectual capital
TRANSPARENCY AND ACCOUNTABILITY
Board of directors
Corporate governance
Remuneration policy and implementation
Background statement
Remuneration review
Part one: remuneration policy
Part two: remuneration implementation report
ANNUAL FINANCIAL STATEMENTS
Statement of directors’ responsibilities
Certificate of the company secretary
Directors’ report
Audit committee report
Independent auditors’ report
Consolidated and parent company statements of financial position
Consolidated and parent company statements of profit or loss
and other comprehensive income
Consolidated and parent company statements of cash flows
Consolidated and parent company statements of changes in equity
Notes to the consolidated and parent company annual
financial statements
OTHER INFORMATION
Shareholders’ analysis
Alternative performance measures
Glossary
Company information
Forward-looking statements
Shareholders’ diary
flap
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REPORT NAVIGATION
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For further reading on our website at
www.panafricanresources.com
For further reading in this report
Alternative Performance Measures (APMs)
Throughout our integrated annual report, the following icons are
used to show connectivity between sections:
Capitals
Financial capital
Manufactured capital
Intellectual capital
Human capital
Social and relationship capital
Natural capital
Material matters
Health and safety
Capital allocation and capital structure
Economic and social factors not in our control
Mining operations
Value-accretive growth
Environmental, social and governance (ESG) compliance
Mineral Reserves and Mineral Resources
Laws and regulations
DUAL LISTING
on South Africa’s Johannesburg Stock Exchange (JSE) and London’s
Alternative Investment Market (AIM)
MARKET CAPITALISATION
as at 30 June 2019 of USD295.2 million (2018: USD219.9 million)
DIVERSIFIED SHAREHOLDER BASE
of major South African and international institutions
THE GROUP’S BROAD-BASED BLACK ECONOMIC
EMPOWERMENT (BBBEE) OWNERSHIP
for purposes of the Mineral and Petroleum Resources Development
Act (MPRDA) equates to 26% for Barberton Mines and Evander Mines
SHARE CODE ON AIM
PAF
SHARE CODE ON JSE
PAR
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ABOUT THIS REPORT
INTEGRATED THINKING
Integrated thinking is fundamental in developing our strategy and managing our
business. Our strategy ensures that we manage the resources used or affected by
our operations to deliver sustainable value to all stakeholders over the short
(one year), medium (two to three years) and long term (beyond three years).
Throughout this report, we aim to provide information identified as being of
material interest to allow stakeholders the opportunity to make an informed
assessment of Pan African Resources’ ability to create sustainable value.
BOUNDARY AND SCOPE
This report provides information relating to Pan African Resources’ strategy, business
model, material issues, risks, governance, operational and financial performance for
the financial year 1 July 2018 to 30 June 2019. This report covers the activities of the
Pan African Resources group and our operating subsidiaries located in Mpumalanga,
South Africa.
The group’s subsidiaries are incorporated in South Africa and their functional
currency is the South African rand (rand). The group’s business is conducted in
rand 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 rand. The ongoing review of the results of the operations,
conducted by executive management and the board, is also performed in rand.
REPORTING COMPLIANCE
The following standards, codes, principles and guidelines have been applied or
materially complied with in compiling this integrated annual report:
◗◗ International Integrated Reporting Council’s (IIRC) framework
◗◗ AIM Rules of the London Stock Exchange (LSE)
◗◗ JSE Listings Requirements
◗◗ King IV Report on Corporate Governance for South Africa 2016TM* (King IV™)1
◗◗ Global Reporting Initiative (GRI) Standards
◗◗ South African Code for Reporting of Exploration Results, Mineral Resources
and Mineral Reserves, 2016 edition (the SAMREC Code)
◗◗ International Financial Reporting Standards (IFRS)
◗◗ South African Institute of Chartered Accountants (SAICA) Financial Reporting
Guidelines
◗◗ Companies Act 2006
◗◗ Principles of the United Nations Global Compact
◗◗ South African guideline for the reporting of ESG parameters within the mining,
oil and gas industries (SAMESG Guideline)
◗◗ United Nations Sustainable Development Goals (UN SDGs)
◗◗ Mining Charter and Social Labour Plan (Mining Charter and SLP).
MATERIALITY
The report content focuses on matters that materially impact our ability to
create and sustain value over the short, medium and long term. The process for
determining and prioritising material matters, and our disclosure thereof, is discussed
on
page 16. Our determination of materiality in integrated reporting is based on
the guidelines of the IIRC and the GRI.
STRATEGIC REPORT
Our strategic report, including the investment case from
was reviewed and approved by the board on 18 September 2019.
pages 1 to 97,
ALTERNATIVE PERFORMANCE MEASURES
Throughout the strategic report, we use a range of financial and non-financial
measures to assess our performance. Management uses these APMs to monitor the
group’s financial performance, alongside IFRS measures, as 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
where more detail is provided, including reconciliations to the 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.
pages 220 to 225,
ASSURANCE
Pan African Resources’ external auditor, PricewaterhouseCoopers LLP (PwC),
has independently audited the annual financial statements for the year ended
30 June 2019. Their unmodified audit report is set out on
pages 134 to 137.
FORWARD-LOOKING STATEMENTS
Refer to the forward-looking statements on the inside back cover of this report.
BOARD APPROVAL
The Pan African Resources board assumes responsibility for the integrity of
this integrated annual report. The board has applied its collective mind in the
preparation and presentation of the information in this report and is satisfied
that the report addresses all material matters and fairly presents the group’s
performance for the financial year 1 July 2018 to 30 June 2019. The report is
an accurate reflection of our strategic commitments for the short, medium
and long term.
On the recommendation of the audit and risk committee, the board approved
the integrated annual report and the consolidated annual financial statements
on 18 September 2019.
Keith Spencer
Chairman
Cobus Loots
Chief executive officer
Deon Louw
Financial director
UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
The UN SDGs set a long-term agenda to end poverty, protect the planet and
ensure prosperity for all by 2030. Pan African Resources is committed to playing
its role in the attainment of these goals.
Pan African Resources has identified the following sustainable development goals
where we believe we can have the most meaningful impact:
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.
* Copyright and trademarks are owned by the Institute of Directors in Southern Africa NPC and all of its rights are reserved.
1 King IV™
Report: http://www.panafricanresources.com/wp-content/uploads/Pan-African-Resources-King-IV-2019.pdf
WHO WE ARE
Pan African Resources PLC (Pan African Resources) is a mid-tier African-focused gold producer
with a production capacity in excess of 170,000oz of gold per annum. We own and operate a
portfolio of high-quality, low-cost operations and projects, which are located in South Africa.
OUR PURPOSE
To safely extract gold from mineral deposits in a manner that
creates sustainable value for our stakeholders.
OUR VISION
To continue to build and grow a mid-tier gold producer that
delivers on its purpose.
OUR VALUES
Action and
delivery
Teamwork
Integrity
Excellence
Ownership
Courageous
conversations
Care
Resilience
Innovation
Attitude
WHAT WE DO
GROWTH
PROFITABILITY
SUSTAINABILITY
STAKEHOLDERS
We mine gold from our
underground and surface
tailings operations and strive to
be the lowest all-in sustaining
cost producer of gold in
Southern Africa.
We focus on sustainable, low-
cost and safe gold production.
We adopt an integrated
approach to operate
sustainably for the benefit
of all stakeholders.
We grow our business in a value-
accretive manner to benefit all
stakeholders and we prioritise:
◗ organic growth projects within
◗
our portfolio
feasible and production-
enhancing projects.
As a business seeking sustainable
growth, we continually look for
value-accretive opportunities
that meet our stringent
investment criteria.
OUR STRATEGIC PILLARS
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
1
BUSINESS AND
STRATEGIC OVERVIEW
HOW WE CREATED VALUE IN 2019
GOLD PRODUCED
Gold sold*
171,706oz (2018: 111,879oz)
Revenue*
USD217.4 million (2018: USD145.8 million)
FOR OUR EMPLOYEES
Total number of employees
2,148 employees (2018: 2,069 employees)
USD50.3 million (2018: USD44.3 million)
in salaries, wages and benefits*
Invested
USD1.0 million (2018: USD1.8 million)
in skills and development training
FOR OUR COMMUNITIES
FOR OUR PROVIDERS OF CAPITAL
Profit after tax
USD38.0 million
(2018: USD122.8 million loss after tax)
Return on shareholder funds
23.0% (2018: loss 57.9%)
Earnings per share
1.97 USD cents per share
(2018: loss of 6.79 USD cents per share)
Headline earnings
USD22.9 million (2018: USD17.9 million)
Net asset value
USD183.6 million (2018: USD147.0 million)
Interest paid to debt funders
USD14.1 million (2018: USD7.0 million)
Invested
USD1.9 million (2018: USD1.1 million)
in corporate social investment (CSI), local economic development
(LED) projects and bursaries
All-in sustaining costs
USD988/oz (2018: USD1,358/oz)
or R450,564/kg (2018: R561,468/kg)
FOR THE GOVERNMENT
FOR OUR SUPPLIERS
Paid
USD14.1 million (2018: USD17.4 million)
in South African government taxes (excluding value-added tax (VAT))
Spent
USD137.8 million (2018: USD104.1 million)
in local procurement expenditure
* Refers to gold sold, revenue or salaries, wages and benefits paid for continuing operations. In the
prior financial year, the group reclassified Evander Mines’ large-scale underground operations as a
discontinued operation.
Evander Mines – Elikhulu and Kinross plants and 7 Shaft infrastructure
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BUSINESS AND
STRATEGIC OVERVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
OUR OPERATING ASSETS AND
WHERE WE OPERATE
The group’s assets at the end of the financial year include:
BARBERTON MINES
Three underground gold mines: Fairview
Mine, Sheba Mine and New Consort Mine
Barberton Tailings Retreatment Plant (BTRP)
BARBERTON MINES
Employees
1,875
Contractors
620
Life-of-mine
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)
Sustaining capital
Acquired
Mineral Resources
Mineral Reserves
Recovered grade
Cash cost
293,264 (2018: 237,831)
75,356 (2018: 73,125)
110,000
432,000
USD9.9 million (2018: USD8.7 million)
74% from Metorex in 2007 and then the remaining 26% from PAR Gold Proprietary
Limited (PAR Gold) in 2009
12.1Mt @ 7.85g/t (3.1Moz)
8.0Mt @ 5.65g/t (1.4Moz)
8.0g/t (2018: 9.6g/t)
USD1,046/oz (2018: USD1,053/oz)
BARBERTON TAILINGS RETREATMENT PLANT
Employees
75
Contractors
–
Life-of-mine
9 years
Located at Barberton Mines, the R325.7 million BTRP commenced construction in April 2012, was completed on schedule and
achieved its inaugural gold pour in June 2013.
Production (tonnes milled)
Produced (oz/annum)
Capacity (oz/annum)
Tonnage (capacity per annum)
Sustaining capital
Developed
Mineral Resources
Mineral Reserves
Recovered grade
Cash cost
1,114,923 (2018: 858,967)
24,007 (2018: 17,504)
25,000
1,200,000
–
Steady-state production commenced in 2013
21.6Mt @ 1.28g/t (0.9Moz)
9.9Mt @ 1.66g/t (0.5Moz)
0.7g/t (2018: 0.6g/t)
USD552/oz (2018: USD691/oz)
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3
Group Mineral Resources (Moz)
Group Mineral Reserves (Moz)
35.97
Measured 3.14
Indicated 20.54
Inferred 12.29
10.92
Proved 1.42
Probable 9.50
MPUMALANGA
Nelspruit
Kruger
National Park
BTRP
Barberton
Middelburg
Witbank
Evander Mines
Elikhulu
Secunda
Ermelo
Barberton
Mines
Group Mineral Resources (Moz)
Group Mineral Reserves (Moz)
35.97
Measured 3.14
Indicated 20.54
Inferred 12.29
10.92
Proved 1.42
Probable 9.50
Refer to the abridged Mineral Resources and
Mineral Reserves report on
for a detailed report.
pages 56 to 75
EVANDER MINES
Elikhulu Tailings Retreatment Plant (Elikhulu)
8 Shaft pillar mining
ELIKHULU TAILINGS RETREATMENT PLANT
Employees
91
Contractors
287
Life-of-mine
13 years
Elikhulu exploits historically generated gold tailings deposited in the Kinross, Leslie/Bracken and Winkelhaak tailings storage facilities
(TSFs).
Production (tonnes milled)
Produced (oz/annum)
Capacity (oz/annum)
Tonnage (capacity per annum)
Sustaining capital
Developed
Mineral Resources
Mineral Reserves
Recovered grade
Cash cost
10,848,209
46,201
75,000
14,400,000
–
Inaugural gold pour achieved on 16 August 2018
203.6Mt @ 0.29g/t (1.9Moz)
170.6Mt @ 0.27g/t (1.5Moz)
Tailings: 0.13g/t
USD555/oz
EVANDER MINES’ 8 SHAFT PILLAR MINING
Employees
90
Contractors
586
Life-of-mine
3 years
Evander Mines’ 8 Shaft pillar mining is expected to contribute 20,000oz to 30,000oz per annum for three years, with first gold
produced in August 2019.
Production (tonnes milled)
Produced (oz/annum)
Capacity (oz/annum)
Tonnage (capacity per annum)
Sustaining capital
Developed
Mineral Resources
Mineral Reserves
Recovered grade
Cash cost
113,000 planned
30,000 at steady state
40,000
138,000
R18 million over the project’s life
Primary pillar development completed in February 2019 and initial mining commenced in
July 2019
17.3Mt @ 11.53g/t (6.4Moz)
0.4Mt @ 8.54g/t (0.1Moz)
8.60g/t planned over the life-of-mine
Below USD1,000/oz
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019BUSINESS AND STRATEGIC OVERVIEW 4
BUSINESS AND
STRATEGIC OVERVIEW
BUSINESS MODEL
High-grade
mining
Long-life mining
operations
Cash flow
generative in any
commodity cycle
Excellent
safety record
Profitable
mining
INPUTS
We use our capital resources to realise our purpose:
To extract gold from mineral deposits in a manner
that creates sustainable value for our stakeholders
FINANCIAL CAPITAL
Our financial capital includes equity, cash generated from our
operating activities and our debt facilities
To drive sustainable cash flows and create value for our
stakeholders, we have a disciplined approach to financial
capital management
MANUFACTURED CAPITAL
Our manufactured capital includes our underground mining
infrastructure at Barberton Mines and Evander Mines, our two
surface tailings operations (Elikhulu and BTRP) and our Biological
Oxidation (BIOX®) plant in Barberton
Through our mining and prospecting rights we have access to
Mineral Reserves and Mineral Resources. These orebodies are a key
and critical resource to the group
INTELLECTUAL CAPITAL
We invest in our employees and our intellectual capital through
developing our management expertise and training our employees.
We have a unique talent mix and more than 130 years of mining
experience on the Barberton Greenstone Belt orebodies. This is
currently the only Greenstone gold complex actively being mined
on a large scale in South Africa
HUMAN CAPITAL
Our people are fundamental to the sustainability of our business
and are key enablers in the execution of our strategy. To achieve
our strategic objectives, we focus on ensuring that we have the
necessary skills, culture and employees in place
SOCIAL AND RELATIONSHIP CAPITAL
Our licence to operate depends on the quality of our relationships
with our various stakeholders. Building and maintaining relationships
based on trust, mutual respect and credibility is integral to our
growth, value creation and long-term sustainability
NATURAL CAPITAL
We require natural capital such as water, air, land and fuel for energy
to operate our manufactured capital
We rank among South Africa’s
lowest-cost gold producers, with
all-in sustaining costs per ounce
improving to USD988/oz
(2018: USD1,358/oz)
We have used our competitive
advantage of agility and flexibility to
strategically position ourselves as
a relatively low-cost, long-life gold
producer – 46.5% of the group’s
production is from low-cost
surface tailings operations
We pride ourselves on a track
record of designing, building and
commissioning tailings retreatment
plants on time and on budget
OUR STRATEGIC PILLARS
We strategically execute our business activities to align with our vision:
To continue to build and grow a mid-tier gold producer that delivers on its purpose
GROWTH
◗◗ Evander Mines
◗◗ Barberton Mines
– 8 Shaft pillar mining
– Egoli project
– Royal Sheba project
– New Consort
exploration project
– Sub-vertical shaft
project at Fairview
– Project Dibanisa
PROFITABILITY
◗◗ Long-life profitability
◗◗ High-grade orebodies
◗◗ Low-cost mining operations
SUSTAINABILITY
◗◗ Long-life orebodies
◗◗ Environmentally
compliant
◗◗ Job creation
◗◗ Fully funded
environmental
fund
STAKEHOLDERS
◗◗ Providers of capital
◗◗ Investors
◗◗ Shareholders
◗◗ Finance institutions
◗◗ Employees
◗◗ Unions
◗◗ Suppliers
◗◗ Communities
◗◗ Government and
regulatory bodies
◗◗ Customers
◗◗ Listing exchanges
GOVERNANCE >> Pan African Resources is committed to the highest standards of governance, ethics and integrity.
Our board has a balance of knowledge, skills, experience, diversity and independence to objectively and effectively discharge its governance role and responsibilities.
The group complies in all material respects with all applicable legal acts and regulations. << GOVERNANCE << GOVERNANCE
5
VALUE PROPOSITION
Pan African Resources is committed to producing low-cost ounces and optimising safety and mining
efficiencies, while minimising environmental impacts and investing in local communities.
Key value contributors are:
BUSINESS ACTIVITIES
Through carefully executing our business activities, we have positioned Pan African Resources as a relatively low-cost,
long-life gold producer, with employee health and safety as an operational imperative
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WHAT DIFFERENTIATES US
Our active management of gold
mining operations to ensure a
focus on reducing and managing
operational costs
Our competitive portfolio
of underground and tailings
operations
Our focus on sustainable and safe
gold production
Our ability to meet and exceed our
production guidance of 170,000oz
We expect to produce
approximately 185,000oz for
the 2020 financial year
OUR STRATEGIC PILLARS
We strategically execute our business activities to align with our vision:
To continue to build and grow a mid-tier gold producer that delivers on its purpose
GROWTH
◗◗ Evander Mines
◗◗ Barberton Mines
– 8 Shaft pillar mining
– Royal Sheba project
– Egoli project
– New Consort
exploration project
– Sub-vertical shaft
project at Fairview
– Project Dibanisa
PROFITABILITY
◗◗ Long-life profitability
◗◗ High-grade orebodies
◗◗ Low-cost mining operations
SUSTAINABILITY
◗◗ Long-life orebodies
◗◗ Environmentally
compliant
◗◗ Job creation
◗◗ Fully funded
environmental
fund
STAKEHOLDERS
◗◗ Providers of capital
◗◗ Investors
◗◗ Shareholders
◗◗ Finance institutions
◗◗ Employees
◗◗ Unions
◗◗ Suppliers
◗◗ Communities
◗◗ Government and
regulatory bodies
◗◗ Customers
◗◗ Listing exchanges
GOVERNANCE >> Pan African Resources is committed to the highest standards of governance, ethics and integrity.
Our board has a balance of knowledge, skills, experience, diversity and independence to objectively and effectively discharge its governance role and responsibilities.
The group complies in all material respects with all applicable legal acts and regulations. << GOVERNANCE << GOVERNANCE
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
6
Rand hedge
Organic growth
projects
Experienced
management team
170,000oz of gold sold per annum
(2020: production guidance – 185,000oz)
OUR OPERATING ENVIRONMENT
Our operating environment impacts
us through:
◗◗ Economic factors
◗◗ Political factors
◗◗ Social factors
◗◗ Legislative factors
We impact our operating environment through our
contribution to:
◗◗ The economy
◗◗ Society
◗◗ Our employees
◗◗ The environment
OUR REVENUE
Our revenue is impacted by:
◗◗ Gold price
◗◗ Gold production volume
◗◗ ZAR:USD exchange rate
OUTCOMES
The use of our capital resources to position Pan African Resources as a low-cost,
long-life gold producer, with employee safety at the operational forefront
FINANCIAL CAPITAL
We focus on managing our operational costs, achieving our production targets and optimising the performance
and stability of our mining operations. We seek to improve the long-term outcomes of our activities while meeting
the short-term expectations of our stakeholders
MANUFACTURED CAPITAL
The pursuit of excellence in mining operations underpins cost-effectiveness and safety performance
INTELLECTUAL CAPITAL
Investments into technology, processes and our employees ensure sustainability and competitive advantage
HUMAN CAPITAL
A safer working environment through the expansion of tailings operations, with competencies and values built
around safety, operational excellence and innovation
SOCIAL AND RELATIONSHIP CAPITAL
Investment in stakeholder engagement and socio-economic development builds trust and secures our social
licence to operate
NATURAL CAPITAL
Reducing our environmental footprint as tailings retreatment initiatives are expanded. Responsible extraction
is supported by our environmental management programme and rehabilitation strategy
MANAGING OUR RISKS
Pan African Resources has an established
risk management philosophy. Our
understanding of our identified risks
informs our strategy and our prioritisation
of our material matters
Our top risks include:
◗◗ Interruption to stable electricity supply
◗◗ Illegal mining and heightened criminal activity
◗◗ Regulatory changes
◗◗ Reduced working time impacting productivity
◗◗ Health and safety incidents
◗◗ Financial sustainability in a volatile environment
◗◗ Tailings dam or mine shaft failure, fire or flooding
◗◗ Operational execution
◗◗ Governance and regulatory compliance
◗◗ Strategic capital allocation
◗◗ Environmental damage
◗◗ Declining Mineral Resource and Mineral Reserve base
OUR MATERIAL MATTERS
Material matters are a summation of our key
risks and opportunities that have the potential
to impact our ability to create sustainable value
for all stakeholders over the short, medium and
long term:
◗◗ Health and safety
◗◗ Capital allocation and capital structure
◗◗ Economic and social factors not in our control
◗◗ Mining operations
◗◗ Value-accretive growth
◗◗ ESG compliance
◗◗ Mineral Reserves and Mineral Resources
◗◗ Laws and regulations
To maintain and sustain operations, our cost of production
OUR COSTS
includes:
◗◗ Salaries and wages
◗◗ Electricity
◗◗ Mining
◗◗ Processing and metallurgy
◗◗ Engineering and technical services
◗◗ Administration and other
◗◗ Security
To expand our operation, our costs include:
◗◗ Expansionary capital
◗◗ Exploration costs
GOVERNANCE >> Pan African Resources is committed to the highest standards of governance, ethics and integrity.
Our board has a balance of knowledge, skills, experience, diversity and independence to objectively and effectively discharge its governance role and responsibilities.
The group complies in all material respects with all applicable legal acts and regulations. << GOVERNANCE << GOVERNANCE
7
BUSINESS AND
STRATEGIC OVERVIEW
EXPLORE
On-mine growth projects contribute to our Mineral
Resources, which potentially extend the life of our
underground mining operations
DEVELOP
Successful development of our orebodies and execution
of our capital projects improves our costs and production
profile and increases the economic life of our operations
MINE
We extract gold-bearing ore through underground
mining and vamping
We re-mine gold-bearing tailings through hydro mining.
Gold is extracted from the concentrate after being
processed through our plants at Elikhulu and BTRP
Third-party gold-bearing ore is processed on a toll
treatment agreement at our Evander Mines’ Kinross
plant. We also treated, on a trial basis, third-party gold-
bearing ore at the New Consort Mine plant in the 2019
financial year
PROCESS
Refractory gold-bearing ore is treated by our BIOX®
plant at Barberton Mines. Specialised bacteria break down
insoluble sulphide minerals, which expose the gold for
efficient extraction. The BIOX® concentrate is sent to the
cyanide circuit at Fairview Mine for chemical processing
where gold doré is produced
Non-refractory gold-bearing ore undergoes physical and
chemical processing at our Fairview, Consort, Sheba,
BTRP, Elikhulu or Kinross plants into gold doré
Gold doré is transported to Rand Refinery Limited (Rand
Refinery) where it is refined into gold bullion
SALES
Gold sales transactions are entered into with authorised
bullion banks and other credible parties. Our customers
and gold investors include the gold bullion export market,
Rand Refinery, Gold Exchange Traded Funds (ETFs), and
the makers of Krugerrands and gold jewellery
END OF LIFE
The group’s rehabilitation liability is fully funded. Our
rehabilitation funds have been invested in a Cenviro
Solutions insurance investment product underwritten
by Centriq Insurance Company Limited. Our funds
are invested in interest-bearing accounts and equity
investments:
◗◗ To prepare for the inevitable closure of our
mines as the orebodies are exhausted, social and
economic stability requires consultation with affected
communities during the life-of-mine
◗◗ Ongoing community consultations contribute to
developing initiatives through our mine SLPs to
prepare for post-closure economic sustainability
◗◗ At the end of the life-of-mine, we responsibly and
safely manage the closure of our mines to ensure
minimal disruption to our natural resources post
mine closure
OUR REVENUE
Our revenue is impacted by:
◗◗ Gold price
◗◗ Gold production volume
◗◗ ZAR:USD exchange rate
OUR COSTS
To maintain and sustain operations, our cost of production
includes:
◗◗ Salaries and wages
◗◗ Electricity
◗◗ Mining
◗◗ Processing and metallurgy
◗◗ Engineering and technical services
◗◗ Administration and other
◗◗ Security
To expand our operation, our costs include:
◗◗ Expansionary capital
◗◗ Exploration costs
MANAGING OUR RISKS
Pan African Resources has an established
risk management philosophy. Our
understanding of our identified risks
informs our strategy and our prioritisation
of our material matters
Our top risks include:
◗◗ Interruption to stable electricity supply
◗◗ Illegal mining and heightened criminal activity
◗◗ Regulatory changes
◗◗ Reduced working time impacting productivity
◗◗ Health and safety incidents
◗◗ Financial sustainability in a volatile environment
◗◗ Tailings dam or mine shaft failure, fire or flooding
◗◗ Operational execution
◗◗ Governance and regulatory compliance
◗◗ Strategic capital allocation
◗◗ Environmental damage
◗◗ Declining Mineral Resource and Mineral Reserve base
OUR MATERIAL MATTERS
Material matters are a summation of our key
risks and opportunities that have the potential to
impact our ability to create sustainable value for all
stakeholders over the short, medium and long term:
◗◗ Health and safety
◗◗ Capital allocation and capital structure
◗◗ Economic and social factors not in our control
◗◗ Mining operations
◗◗ Value-accretive growth
◗◗ ESG compliance
◗◗ Mineral Reserves and Mineral Resources
◗◗ Laws and regulations
GOVERNANCE >> Pan African Resources is committed to the highest standards of governance, ethics and integrity.
Our board has a balance of knowledge, skills, experience, diversity and independence to objectively and effectively discharge its governance role and responsibilities.
The group complies in all material respects with all applicable legal acts and regulations. << GOVERNANCE << GOVERNANCE
8
BUSINESS AND
STRATEGIC OVERVIEW
HOW WE SUSTAIN VALUE
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
INPUTS
The six capital resources embedded in our business
activities to create and preserve value
OUTPUTS
Our outputs result from and support our vision of
growing a sustainable gold producing business in Africa
BALANCING OUR CAPITALS
Capital stocks are traded, depleted, grown or
combined as strategy is executed. For example, creating
manufactured capital through infrastructure development
decreases financial capital during that period
V
V
V
South African government
taxes paid (excluding VAT)
Paid to suppliers
Dividend
Profit after taxation
USD217.4 million
(2018: USD145.8 million)
USD14.1 million
(2018: USD17.4 million)
USD137.8 million
(2018: USD104.1 million)
USD3.4 million
(2018: nil)
USD38.0 million
(2018: USD122.8 million
loss after tax)
Interest payments to
debt funders
USD14.1 million
(2018: USD7.0 million)
Net debt
USD129.9 million
(2018: USD118.0 million)
◗ Managing long-term strategy against short-term
stakeholder expectations is an ongoing trade-off.
Investment decisions made today for the group’s
long-term sustainability may take months or years
to bear fruit
◗ The group has no control over the gold price, or
the ZAR:USD exchange rate received on our gold
sales. We mitigate their impact through strict cost
management, strategic currency and commodity
price hedging and disciplined financial capital
management
◗ Increased debt resulted in increased payments to
debt funders
◗ USD37.7 million (2018: USD97.8 million) was
invested in the construction of Elikhulu, which has
restored the profitability of Evander’s operations
FINANCIAL CAPITAL
Shareholder equity
USD183.6 million
(2018: USD147.0 million)
Revenue
Cash generated by/
(utilised in operating)
activities
Debt facilities
USD37.7 million
(2018: USD13.4 million
utilised in operating
activities)
R1 billion revolving
credit facility (RCF)
(2018: R1 billion) or
USD71.0 million
(2018: USD72.9 million)
R1 billion term loan
facility for the Elikhulu
plant (2018: R1 billion) or
USD71.0 million
(2018: USD72.9 million)
R140 million in general
banking facilities (GBP)
(2018: R140 million) or
USD9.9 million
(2018: USD10.2 million)
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MANUFACTURED CAPITAL
Mineral Reserves
Mineral Resources
Gold 10.92Moz
(2018: 11.22Moz)
Gold 35.97Moz
(2018: 33.30Moz)
Investment in
infrastructure
USD56.7 million
(2018: USD128.4 million)
Gold production
Low-cost producer
Mining flexibility at high-grade Fairview 272 and
358 mining platforms
Life-of-mine
◗ Barberton Mines
◗ BTRP
◗ Elikhulu
◗ Evander Mines’ 8
Shaft pillar mining
20 years
9 years
13 years
3 years
172,442oz per annum
(2018: 160,444oz
per annum)
All-in sustaining cost
USD988/oz
(2018 USD1,358/oz)
Tonnes milled and
processed increased
to 13,392,400 tonnes
(2018: 3,551,280 tonnes)
◗ Safety performance and cost effectiveness
underpins excellence in operational performance
◗ Elikhulu was commissioned ahead of schedule
◗ BTRP production increased to 24,007oz
(2018: 17,504oz) following our investment into the
BTRP regrind mill
◗ Incorporated Evander Tailings Retreatment Plant
(ETRP) throughput capacity of 0.2 million tonnes
per month into Elikhulu’s processing capacity
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
9
BUSINESS AND
STRATEGIC OVERVIEW
INPUTS
The six capital resources embedded in our business
activities to create and preserve value
OUTPUTS
Our outputs result from and support our vision
of growing a sustainable gold producing business
in Africa
BALANCING OUR CAPITALS
Capital stocks are traded, depleted, grown or
combined as strategy is executed. For example, creating
manufactured capital through infrastructure development
decreases financial capital during that period
V
V
V
INTELLECTUAL CAPITAL
Mining and prospecting rights
Technical know-how
Key personnel for managing the BIOX® process
Management and the board’s combined expertise
Expansion and integration of technologies at our
operations
Ethical and effective leadership
Maximised resource utilisation
Effective and efficient technology at Elikhulu
◗ Investing in technology and processes underpins
the group’s sustainability and competitive
advantage
◗ We are growing our tailings processing expertise
due to financial capital allocations to manufacturing
capital that funded Elikhulu and the BTRP
regrind mill
HUMAN CAPITAL
Employees’ skills and
experience
2,148 employees
(2018: 2,069 employees)
Zero fatalities
Skilled and experienced board
Labour stability
Skills development
and training
Employee remuneration
Improved total injury
frequency rate to 10.71
per million man hours
(2018: 12.71 per million
man hours)
USD1.0 million
(2018: USD1.8 million)
USD50.3 million
(2018: USD44.3 million)
Investment in skills development and training
Women employed at
our mines
223 women
(2018: 200 women)
◗ Tailings retreatment is not as labour intensive,
with less risk of injury, compared to underground
mining
◗ Safety performance improved significantly
◗ Employee earnings are a major source of income
for local communities, which strengthens our social
and relationship capital
◗ A three-year wage agreement at Barberton
Mines, concluded during September 2018 without
industrial action, allows for human capital stability
SOCIAL AND RELATIONSHIP CAPITAL
Social licence to operate
Investing in our communities – SLP investment
CSI, LED projects and
bursaries
USD1.9 million
(2018: USD1.1 million)
Ongoing stakeholder engagement with a focus on
community engagement
Stakeholder relations
Regular union meetings,
fulltime community liaison
officers appointed
◗ Continually improving stakeholder engagement
◗ Investing in socio-economic development reduces
short-term financial capital yet secures our social
licence to operate
◗ Investing in social and relationship capital enables
stable long-term operations and financial
investments
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NATURAL CAPITAL
Stewardship of our Mineral Reserves and Mineral
Resources
Energy consumption
Complying with applicable environmental legislation
and regulations
Water consumption
Carbon emissions
1,228,501GJ
(2018: 1,397,695GJ)
13,369m3
(2018: 16,675m3)
0.03 Co2 e/t milled
(2018: 0.12 CO2 e/t milled)
Independent rehabilitation
closure cost assessments
conducted at all
operations
◗ We extract Mineral Resources through
responsible mining techniques while mitigating
the environmental impacts of mining through land
rehabilitation
◗ Our environmental footprint reduces as tailings
retreatment initiatives are expanded
◗ Rehabilitation programmes increase social
and relationship capital through local supplier
development and job creation
◗ As tailings dams are rehabilitated, land becomes
available for agricultural use and human settlements
1 Employee remuneration for continuing operations.
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BUSINESS AND
STRATEGIC OVERVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CHAIRMAN’S STATEMENT
The year under review was a defining one
for Pan African Resources. The board and
executive management delivered a number
of initiatives to ensure that the group is
positioned as a sustainable, profitable and
relatively low-cost gold producer.
A particular highlight in the past year was the successful
commissioning of the Elikhulu Tailings Retreatment Plant, ahead of
schedule. We expect that Elikhulu will bring significant benefits to
all our stakeholders through producing safe, profitable ounces over
the project’s life.
Barberton Mines delivered a good performance during the year,
and we will continue to invest in this asset to ensure the ongoing
sustainability of what has been Pan African Resources’ flagship
operation for many years.
Most industry analysts refer to South African deep-level mining,
in its current form, as a ‘sunset industry’, with, inter alia, challenges
such as ever-increasing costs, uncertain regulation and labour unrest.
Pan African Resources has, however, worked hard to differentiate
itself from the rest of the industry. We have attractive margins, with
a lower cost of production than most of our peers. We also now
source approximately half of our overall gold production from
lower-risk surface operations.
Our group’s leadership team has worked tirelessly to reposition
the business and place it on a firm footing for future growth.
In the past years, these efforts included the cessation of large-scale
underground operations at Evander Mines’ 8 Shaft and the
construction of Elikhulu. On behalf of the board, I commend the
executive team for completing a complex turnaround of our business
with such expediency.
SAFETY
The safety of our employees and contractors is of paramount
importance to Pan African Resources. Mining operations present
many risks to our people’s health and safety. We will continue to
work towards an environment of zero harm.
OPERATING ENVIRONMENT
Gold is traditionally viewed as a safe-haven investment in times of
economic and political uncertainty. Despite the increased prevalence
of cryptocurrencies and other alternative investments, gold has
retained its appeal, as evidenced by the recent rally in gold prices.
The highly volatile world economy and changing world order, the
continued US and China trade conflict, geopolitical uncertainty and
an expected reduction in US interest rates are contributing factors
that should support USD gold prices in the coming year.
Mining operations are frequently the highest profile nodes of
economic activity in their areas of operation. They are expected
to provide jobs and assist in contributing to socio-economic
development in their immediate surrounding communities,
in response to South Africa’s persistently low economic growth
rate and high level of unemployment.
Despite all our community and local economic development
programmes, our operations are, at times, targeted by parties seeking
financial or political gain, with these parties using illegal road closures
and community protests as leverage. The result of these actions is lost
production days, which adversely impacts cash flows, reduces taxes
and royalties payable to the fiscus, and ultimately, negatively impacts
the prospects of our mining operations and stakeholders.
The socio-economic challenges in Southern Africa have also resulted
in illegal mining becoming an increasing risk to the licenced gold
mining industry and to our operations. Illegal mining contributes
to a breakdown of law and order and increases our security and
other costs. We continue to convey to all in authority that illegal
mining disrupts communities and impedes the social compact that
enables mining operations to function optimally for the benefit of
all stakeholders.
During June 2019, Barberton Mines achieved 2 million fatality-free
shifts, and I wish to again congratulate the Barberton employees
and management on this accomplishment.
South Africa’s Mining Charter III came into effect on 1 March 2019,
after almost three years of deliberations. The revised Mining
Charter III brought a degree of much-needed regulatory certainty
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11
BUSINESS AND
STRATEGIC OVERVIEW
Barberton Mines – hoppers carrying ore at Fairview 11 Level adit
to our industry, however, there remain certain contentious and
ambiguous issues within it, and Pan African Resources will, through
appropriate channels, continue to contribute towards constructive
debate on the Mining Charter III with government.
LONG-TERM SUSTAINABILITY
Pan African Resources recognises and welcomes increased scrutiny
on ESG-centred issues by the investment community. We are proud
of our commitment to the sustainable operation of our business and
we have set standards that routinely go beyond compliance. We are
equally cognisant of commercial obligations and, therefore, sustainable
cash flow generation must practically remain our key priority.
We fully acknowledge and take responsibility for our role in a
symbiotic relationship between shareholders, other stakeholders
and also with the natural environment. These relationships afford us
the opportunities and landscape to conduct our mining activities.
Without these mutually beneficial relationships, our business mission
of creating wealth on a sustainable basis would not be possible.
ETHICS, LEADERSHIP AND CORPORATE GOVERNANCE
After year-end, we further strengthened the Pan African Resources
board with the appointment of two new independent non-executive
directors. We welcome Yvonne Themba and Charles Needham to
the board and look forward to their contributions. During the year
under review, Rowan Smith resigned from the board to pursue other
interests, and I take this opportunity to thank him for his invaluable
insights and service to the group during his tenure.
The board and remuneration committee mandated an independent
remuneration expert to review the group’s remuneration framework
and policies, consult shareholders and recommend improvements,
where necessary. More detail on this work is provided in the current
year’s remuneration report on
pages 112 to 125.
After year-end, the board’s sub-committees were also re-constituted
to ensure compliance with best practice and further improve the
functioning of these committees. Further detail on these committees
is outlined in our corporate governance report on
page 107.
Pan African Resources is reviewing its ESG activities for compliance
with required standards, including South Africa’s King IV™ Report on
Corporate Governance. This exercise includes reviewing all board
charters, an independent IFRS review on annual financial statements
and disclosures and an assessment of the appropriateness of all
material service providers. During the year, the board ratified the
appointment of PwC as external auditor (subject to approval by
the shareholders at the next annual general meeting) and Questco
as JSE sponsor, following deliberations and interactions on these
appointments.
OUTLOOK
The financial and operating results for the past year demonstrate that
the board and executive team successfully delivered on what we set
out to do at the start of the year.
Our team is now focused on safely delivering on the increased
production guidance for the 2020 financial year.
APPRECIATION
Pan African Resources has emerged from a challenging two years
that tested the mettle of our people. I wish to extend my gratitude
to my fellow board members for your counsel and efforts during this
period, and also extend my thanks to management and employees
of our group for their continued commitment and dedication to
Pan African Resources.
Keith Spencer
Chairman
18 September 2019
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BUSINESS AND
STRATEGIC OVERVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S STATEMENT
It is appropriate to start this review with
heartfelt thanks to the management and
employees of Pan African Resources for
their work and commitment during the
2019 financial year. Our positive results
reflect the efforts of the team to implement
our strategy as we capitalise on opportunities
in our portfolio and invest in future growth.
The past year is best characterised as a period where our
group delivered on several clearly predefined objectives,
with the following highlights:
Safety
The group materially improved on all safety statistics, as detailed
later in this review. The milestone achievement of 2 million fatality-
free shifts at Barberton Mines during June 2019 is worth noting.
Commissioning Elikhulu
Elikhulu was safely completed and successfully commissioned,
despite the challenges associated with delivering a project of this
magnitude and complexity. It is now providing incremental low-
cost ounces to the group’s production.
Barberton Mines
A return to form by the underground operations and BTRP,
having collectively produced approximately 100,000oz for the
year, resulted in an increase of 9.6% from 2018. This improved
performance was, inter alia, due to improved underground mining
flexibility at Fairview Mine’s high-grade 272 and 358 platforms, and
also to higher gold production from BTRP, following the successful
commissioning of the BTRP regrind mill during May 2018.
Repositioning of the group in terms of cost of
production
The curtailment of expensive and difficult large-scale
underground operations at Evander Mines’ 8 Shaft, the
commissioning of Elikhulu and increased production from
Barberton Mines resulted in our all-in sustaining costs reducing
materially from USD1,358/oz to USD988/oz, an improvement
of 27.2%. The group’s combined underground and tailings
operations are internationally cost competitive and we now rank
among South Africa’s lowest-cost gold producers.
OUR WORLD AND OPERATING ENVIRONMENT
Globally, investor appetite for mining companies and mining projects
has declined in recent years. I believe the reduced interest can be
partly attributed to an increased focus on ‘green’ investing and a
fixation with new sectors perceived to provide exceptional short-
term growth, such as cannabis and blockchain technology. In addition
to these exogenous headwinds, the mining industry will have to
continue to demonstrate superior returns and disciplined capital
allocation to maintain and improve investor interest in our sector,
in a manner that is responsible towards all stakeholders and the
environments within which we operate.
Currently, all our operations are in South Africa. We frequently
promote the country as a mining investment destination with key
merits, which include the following:
◗ Access to relatively stable grid electricity and water, technical
expertise and infrastructure
◗ Access to a skilled workforce and contractors
◗ World-class constitution and legal frameworks, with well-
established financial, banking and tax regimes
◗ A rand cost base that provides margin leverage in times of
local currency weakness.
Operating in South Africa is, however, becoming increasingly
challenging, and it would be remiss not to highlight the following:
◗ South Africa’s Mining Charter III, which came into effect during the
current year and regulates aspects such as local ownership and
procurement, was a material improvement on previous iterations.
It still, however, contains problematic and ambiguous provisions
and risks creating unreasonable expectations from communities
and other stakeholders situated near mining operations
◗ The financial and operational woes of the South African electricity
utility, Eskom, are adversely impacting mining operations. For
the South African economy to grow and be competitive, it
requires access to a reliable and stable electricity supply at
a reasonable cost
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BUSINESS AND
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Elikhulu plant
◗ Above-inflation cost increases continue to erode operating margins
and impact global competitiveness, particularly in higher-cost,
deep-level mining operations. Unions representing mine employees
have to balance perceived short-term gains with the economic
reality that above-inflationary pay increases without commensurate
increases in employee performance are unsustainable
◗ Lack of economic growth, employment and economic
opportunities in South Africa, together with population growth,
are creating a dire situation for business and mining operations,
particularly in rural areas. The mining sector is expected to
contribute an ever-increasing percentage of the wealth generated
by our operations to local development and community initiatives.
Government is also increasingly expecting business to fulfil basic
service delivery functions. Lack of economic progress leads to
an increase in illegal mining, lawlessness and other social ills that
adversely impact mining operations. In this regard, it is worthwhile
elaborating further on the risks of illegal mining, as this matter
poses a serious threat to our business.
The rise of illegal mining and community unrest has resulted
in the group’s security costs nearly doubling to USD7.2 million
(2018: USD4.2 million). Illegal mining is not only about impoverished
people placing their lives at risk by accessing old and abandoned
workings for a living. It has morphed swiftly into a continent-wide
criminal network that traffics illegal gold, endangered species and
humans to unscrupulous buyers.
Illegal mining adversely affects our gold production and poses a risk
to the safety and security of our employees, both underground and in
their communities. We have expanded our security team, introduced
a new integrated security strategy, that includes the increased use of
modern technology, and adopted a multi-faceted approach to better
identify and counter criminality.
We can, in the normal course, protect our operations at a cost, but
illegal mining and its effect of unsettling communities and adversely
impacting mining economies is beyond the scope of mining houses
to resolve on their own. All resource-rich African countries are
being impacted by illegal mining activities and an effective push-back
requires policy, resources and coordination at government and inter-
government levels.
In my view, it is not the role of business to involve itself in politics.
We must, however, speak out when government policies or other
factors threaten our ability to operate sustainably and benefit our
legitimate stakeholders. In the past year, we have done so when
criminal elements threatened our people or our assets. We have
also increased our efforts to counter the impact of illegal mining and
illegal stoppages on our operations and will continue to do so.
SAFETY PERFORMANCE IN THE YEAR UNDER REVIEW
As mentioned earlier in this review, I am particularly pleased with
the group’s safety performance over the past year. Safe mining is
a non-negotiable for Pan African Resources. All large-scale mining
operations, however, have inherent safety risks that must be diligently
managed. In part, the fact that we now source a material portion
of gold production from lower-risk surface operations has assisted
our safety performance in the past year. A notable milestone was
Fairview Mine, one of our Barberton underground operations,
reaching 1 million fatality-free shifts on 15 July 2018. In addition,
Barberton Mines, for the first time, achieved 2 million fatality-free
shifts during June 2019. We commend our employees for achieving
this exceptional safety milestone. The group’s lost-time injury
frequency rate (LTIFR) improved significantly to 1.62 (2018: 3.73)
per million man hours and the reportable injury frequency rate
(RIFR) improved to 0.51 (2018: 1.08) per million man hours.
We will endeavour to further improve our safety performance in
the year ahead.
ENVIRONMENT, SOCIAL AND GOVERNANCE
In conducting our business activities, we are mindful of the impact
we have on host communities and the environment – our social
and natural capital. Contributing to communities and demonstrating
responsible environmental stewardship are critical to acquiring and
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BUSINESS AND
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S STATEMENT continued
The board is
pleased to propose
a final dividend
of R50 million
(USD3.4 million).
Reinstituting
dividends
demonstrates the
progress our group
has made in the
last year.
Processing capacity at
Evander Mines increased to
1.2 million tonnes
per month
Evander Mines’ 8 Shaft pillar
expected to contribute
±20,000 to 30,000oz
per annum at less
than USD1,000/oz
Barberton Mines improved
gold production by
9.6% to
99,393oz
(2018: 90,629oz)
BTRP increased its
production by
37.2% to
24,007oz
(2018: 17,504oz)
maintaining our social licence to operate and a vital
element to maintaining investor confidence. We
continue to consider ESG factors as a key focus
area for our business. For further information on
ESG compliance refer to
page 23.
TAILINGS STORAGE FACILITIES
We continuously review the integrity of our tailings
storage facilities and during the year appointed
an independent specialist to review all our tailings
facilities for compliance with the requisite safety
and legislative requirements. The review focused on
operational practices, geotechnical stability, facility risk
and management processes. It specifically assessed
the level of compliance of each tailings dam against
its design intent, operating and maintenance manual
and code of practice requirements and, where
relevant, international best practice.
We are committed to working with our
stakeholders to ensure verifiable best-practice
standards are developed, implemented and
maintained. We have provided additional disclosure
on our website relating to our tailings storage
facilities. This was requested by the Church of
England Pensions Board and the Swedish Council
on Ethics for the AP Funds, backed by the
UN-supported Principles for Responsible
Investment.
RISKS
We endeavour to identify and manage material risks
to our business and operations. We have disclosed
details of said risks together with mitigating actions on
pages 29 to 35 of this integrated annual report.
PERFORMANCE: LEVERAGING THE
TURNAROUND
The effective execution of the group’s ambitious
repositioning programme was made possible by our
can-do leadership culture. Pan African Resources’
executive team is lean, motivated and steeped in
our strategy, with each individual empowered and
entrusted to timeously deliver on clear objectives.
Our culture of entrepreneurship and agility in
responding to unfolding situations enabled this
expeditious internal transformation.
Despite challenging operating conditions, all
operations have improved their gold production
in the year under review.
Evander Mines
Elikhulu was successfully commissioned during
September 2018, ahead of schedule. During
October 2018, the plant attained steady-state
production with a throughput of 1 million
tonnes per month. The incorporation of the
ETRP’s throughput capacity into Elikhulu was
completed in December 2018, which increased
the plant’s processing capacity to 1.2 million tonnes
per month.
We commenced developing Evander Mines’ 8 Shaft
pillar, which is expected to contribute an additional
20,000oz to 30,000oz per annum for three years,
at an all-in sustaining cost of less than USD1,000/oz
over the life of the project.
Following Eskom’s recent load shedding and the
above-inflation increase in electricity prices, we
are investigating the merits of alternative power
sources at Evander Mines and have initiated a
feasibility study into the merits of a solar-powered
plant at the mine.
With Evander Mines’ operations now having
returned to profitability, we are assessing the merits
of the Egoli project to further extend the life of this
mine and provide further value-accretive growth
from our own portfolio of mineral assets.
Barberton Mines
As previously highlighted, our Barberton operation
reversed its recent production declines to
improve gold production by 9.6% to 99,363oz
(2018: 90,629oz). Barberton Mines’ underground
operations are benefitting from increased mining
flexibility due to, inter alia, both the high-grade
272 and 358 platforms being available at the Fairview
Mine operation. BTRP increased its production by
37.2% to 24,007oz (2018: 17,504oz), following the
May 2018 commissioning of the regrind mill, which
improved throughput and recoveries.
We are presently charting the long-term future
of Barberton Mines through work on the Royal
Sheba project and further investigation into Project
Dibanisa, which would link the Sheba Mine to
Fairview Mine’s infrastructure, saving costs and
freeing up the Sheba Mine infrastructure for the
Royal Sheba project. We have also embarked on
a strategic review in order to reduce production
costs and optimise our Barberton asset. Additional
information on these projects can be found in the
operational section on
pages 50 and 51.
STRATEGY
To fulfil the group strategy, our mining operations
must be profitable and sustainable in order to
generate value growth for our stakeholders.
When benchmarked against this strategy in the
past year, the group performed as follows:
Profitability
Pan African Resources recorded a commendable
production performance for the 2019 financial year.
Group production increased by 7.5% to 172,442oz
(2018: 160,444oz). With Elikhulu now operating
at design capacity, and supported by the improved
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15
BUSINESS AND
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production from Barberton Mines, we were able to exceed our
production guidance of 170,000oz for the 2019 financial year. This
improved performance saw continuing operations’ profits increase
to USD38.0 million (2018: USD15.6 million).
Sustainability
The repositioning of the underlying businesses over the past year as
a sustainable, safe, low-cost and long-life gold producer demonstrates
the executive team’s ability to deal with operational challenges.
The key value differentiators in the gold mining sector are production
costs, execution risk and the ability to mine safely. Surface operations
are intrinsically safer than underground operations, with greater
production predictability and cash flow certainty. Similarly, the
operational consistency of our low-cost and innovative BIOX® and
tailings retreatment processes provide more consistent gold production
and cash flows that contribute to creating sustainable stakeholder value.
South African mining is highly regulated, with onerous claims from
the government in the form of royalties and taxes to fund in-country
social development. While we acknowledge the historical and social
context that binds our operations to their nearby communities, it
needs to be recognised that shareholders only receive a few cents
in every rand earned after we have paid taxes, salaries, operating
expenses, community social contributions and rehabilitation fund
contributions. Our ongoing commercial sustainability relies on
balancing the interests of all stakeholders, so that our mines remain
an attractive investment proposition and can continue to generate
wealth for all stakeholders.
If regulators are tempted to extract additional revenue from
the sector, or government loses control of community stability
near mines, mining in South Africa may cease to be commercially
sustainable or fail to attract further investment.
parties with a legitimate interest in the outcomes of our mining
operations and the value we create.
Pan African Resources operates in the mature South African gold
mining sector, with depleting ore reserves, and steadily rising labour,
utility and processing costs. Even so, strategically and technically astute
miners can find pockets of orebodies that can be profitably mined
for years into the future. I am convinced that Pan African Resources
is one of these gold producers.
Successfully meeting all stakeholder expectations in the current
environment is a challenge. Nevertheless, I am confident that the
group’s restructured and fundamentally realigned business model
can deliver into all legitimate expectations.
OUTLOOK AND PROSPECTS
Pan African Resources has prioritised creating value from the
sustainable mining operating model we implemented last year.
Our key focus areas for the next financial year are:
◗
continuing to improve our safety performance and ESG
compliance across all operations
◗
◗ delivering on our gold production guidance of approximately
185,000oz (2018: 170,000oz) comprising of 100,000oz from
Barberton Mines’ operations and 85,000oz from Evander Mines’
operations
successfully delivering on capital projects that will maintain
and increase gold production in years to come
reducing senior debt to allow for improved funding flexibility
and liquidity
successfully mining the Evander Mines’ 8 Shaft pillar.
◗
◗
We will also continue driving value-accretive growth opportunities
such as the Royal Sheba project and the sub-vertical shaft at
Barberton Mines, as well as Evander Mines’ Egoli project.
Growth
The group’s growth hinges on selecting our best accessible Mineral
Resources for mining and processing in a cost-effective manner.
Maintaining a sustainable growth path for Barberton and Evander
Mines depends on circumspect alignment of our financial, intellectual
and infrastructural resources with identified mining and retreatment
opportunities.
We have quality pipelines of gold Mineral Resources (35.97Moz)
and Mineral Reserves (10.92Moz). We access these assets through
careful planning and low-cost mining methodologies. Our thoughtful,
ethical and robust approach to tackling issues enables agile mining
and generates more predictable production results, cash flows and
returns. For a detailed breakdown of the group’s Mineral Resources
and Mineral Reserves, refer to this report on
pages 56 to 75.
Having taken the tough decision to refocus our mining model on
low-cost, high-value and accretive ounces, rather than production
volume, the group’s Barberton and Evander operations are now
positioned for sustainable growth.
The group continues to evaluate acquisition opportunities,
particularly in other African jurisdictions, in accordance with our
rigorous capital allocation criteria.
Stakeholders
Our stakeholders are those directly influenced by the positive or
negative impacts from our mining operations and the value we create
from these operations.
We have a strong foundation on which to capitalise. Our challenge
now is to continue building and differentiating Pan African Resources
as the mid-tier, African-focused gold producer of choice.
APPRECIATION
I would like to thank my fellow board members for their guidance,
support and insight during the past financial year, and our employees
for their continued work and commitment. Pan African Resources
is well positioned for low-cost, safe and sustainable gold mining in
the future.
Shareholders invest equity capital in Pan African Resources with
the expectation of receiving a market-related return from their
investments. Our broader stakeholder universe includes shareholders,
debt funders, our employees, communities, regulators and other
Cobus Loots
Chief executive officer
18 September 2019
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16
BUSINESS AND
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MATERIAL MATTERS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Pan African Resources applies integrated thinking and a pragmatic approach in defining
material matters, which forms an integral part of our strategic planning activities. We define
material matters as those areas with the potential to substantially impact our performance or
ability to create value in the short, medium and long term.
OUR PROCESS
Pan African Resources conducted an in-depth and externally facilitated materiality assessment in March 2019 to determine the matters most
material to the group. The following process was followed:
◗ Through market research, consultation with the board and the executive management team, and an understanding of the group’s stakeholders,
we identified matters that may have a financial, reputational, operational, environmental, social, strategic or regulatory impact on the group
◗ The identified matters were collated, analysed and measured against our risk register, as determined by the group’s risk management process
◗ Material matters were identified according to their ability to impact the group’s performance or create and sustain value over the short,
medium and long term.
We track our performance against these material matters through key performance indicators (KPIs), which are also linked to our remuneration
policy and framework.
HEALTH AND SAFETY
CAPITAL ALLOCATION AND
CAPITAL STRUCTURE
Consistently high health and safety
standards are fundamental to
retaining the support of regulators,
investors and employees in our
mining activities. Achieving zero
harm is the ultimate aim of
responsible miners
Through a disciplined approach
to financial capital management
and capital allocation, we carefully
deploy and manage our capital for a
sustainable business, which creates
value for all our stakeholders. We
continuously consider mechanisms
to improve our capital structure
ECONOMIC AND SOCIAL
FACTORS NOT IN
OUR CONTROL
Pan African Resources has little
or no control over changes in
global economic and market
conditions, the South African
political environment and socio-
economic conditions. Changes in
these factors can lead to volatile
commodity prices and currency
exchange rates, security concerns
and a lack of government action
and service delivery, including
electricity supply, which all impact
on our business
MINING
OPERATIONS
As a mid-tier gold mining company,
we have used our competitive
advantage of being agile and flexible
to strategically position ourselves as
a relatively low-cost, long-life gold
producer
We constantly manage our gold
mining operations to ensure a
focus on improving underground
mining flexibility at Barberton Mines,
reducing and managing operational
costs, achieving operational targets
and optimising the performance of
our tailings operations
VALUE-ACCRETIVE
GROWTH
Pan African Resources has an
attractive pipeline of near- to
medium-term value-accretive
internal growth projects, which we
advance in a considered manner
to create sustainable stakeholder
value over the medium to
long term
We evaluate acquisition
opportunities, particularly in other
African jurisdictions, in accordance
with our rigorous capital allocation
criteria
ESG COMPLIANCE
MINERAL RESERVES AND
MINERAL RESOURCES
LAWS AND
REGULATIONS
To support the long-term
sustainability of our business, we
are committed to and focused on
how we manage and report on
our ESG compliance
South African mines are subject to
a number of laws and regulations.
We monitor compliance to all legal
requirements on an ongoing basis,
however, certain Mining Charter III
provisions are ambiguous or
controversial in their interpretation
and practical application
The group’s Mineral Reserves and
Mineral Resources underpin the
enterprise value of Pan African
Resources and enable us to deliver
on our relatively low-cost, long-life
gold producing strategy
Exploration and the development
of organic projects are essential
to the sustainability of Pan African
Resources. It enables Mineral
Reserve replacement to sustain
the life-of-mine of our continuing
operations
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
STRATEGY
17
BUSINESS AND
STRATEGIC OVERVIEW
Our business strategy is to identify and execute into organic and acquisitive growth
opportunities which will create sustainable stakeholder value by focusing on:
SAFE OPERATING
ENVIRONMENT
VALUE-ACCRETIVE
CAPITAL ALLOCATIONS
ACCEPTABLE
EXECUTION RISK
LOW-COST
PRODUCTION
THE KEY ENABLERS OF OUR STRATEGY ARE:
PEOPLE
Fostering relationships through
integrity and honesty
RESOURCES
Quality orebodies and
infrastructure enables sustainable
value creation
ENTREPRENEURIAL
CULTURE AND INNOVATION
Through leadership, control,
planning and action, our culture
enables us to create sustainable
value for stakeholders by
capitalising on organic and
acquisitive growth opportunities
SUSTAINABLE STAKEHOLDER VALUE
OUR SHORT-, MEDIUM- AND LONG-TERM STRATEGY
To fulfil our purpose, we have considered our material matters and the long-term trends in the mining industry that impact Pan African
Resources, such as scarce natural resources, a politically and regulatory challenging environment, lack of capital investment into the industry,
escalating costs and socio-economic and infrastructure challenges.
Material matters are a summation of key risks and opportunities that have the potential to impact our ability to create sustainable value for
all stakeholders over the short, medium and long term. Our strategy considers our material matters through an integrated approach.
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BUSINESS AND
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
SCORECARD BY MATERIAL MATTER
Our performance is measured against our material matters using KPIs linked to our
remuneration policy and framework.
HEALTH AND SAFETY
Achievements to date
◗ Pan African Resources materially improved its safety performance in the current financial year. The group’s safety risk reduced following the cessation of large-
scale underground operations at Evander Mines and the commissioning of Elikhulu, a lower-risk surface operation
◗ The group experienced no fatalities in the 2019 financial year (2018: no fatalities)
◗ Total reportable injury frequency (TRIFR) and LTIFR for the group improved to 10.71 (2018: 12.71) per million man hours and 1.62 (2018: 3.73) per million
man hours, respectively
◗ RIFR for the group also improved to 0.51 (2018: 1.08) per million man hours
◗ We continually introduce new training initiatives to maintain and further improve our safety standards
◗ Barberton Mines achieved 2 million fatality-free shifts during June 2019
◗ We have independently reviewed our safety standards and policies
KPI
◗ Improvement in the performance of our year-on-year safety rates
Long-term objective
◗ We are committed to and focused on ensuring the safety of all our employees,
while continually working towards a zero-harm environment
Why this KPI is important
◗ Promoting and providing our employees with a safe working and
operating environment is key to the well-being of our employees and
the sustainability of our operations
Related risks
◗ Regulatory changes
◗ Health and safety incidents
◗ Tailings dam or mine shaft failure, fire or flooding
Short- to medium-term focus
◗ Improving year-on-year safety rates for:
– total recordable injuries
– lost-time injuries
– reportable injuries
◗ Maintaining a record of zero fatalities at our operations
Total recordable injury frequency rate*
Lost-time injury frequency rate*
2019
2018
2017
2016
2015
Reportable injury frequency rate*
2019
2018
2017
2016
2015
* Per million man hours.
10.71
12.71
13.68
14.57
11.14
0.51
1.08
1.53
2.04
1.11
2019
2018
2017
2016
2015
Number of fatal injuries
2019
2018
2017
2016
2015
1.62
3.73
3.51
3.50
2.29
–
–
3.00
1.00
1.00
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CAPITAL ALLOCATION AND CAPITAL STRUCTURE
Achievements to date
◗ The group successfully commissioned Elikhulu ahead of schedule during September 2018
◗ Incorporation of ETRP’s throughput capacity of 0.2 million tonnes per month into Elikhulu’s processing capacity was completed in December 2018
◗ The group’s operational sustaining capital and expansion capital spend declined to USD9.9 million (2018: USD22.4 million) and USD46.7 million
(2018: USD105.9 million), respectively
◗ Net debt increased to USD129.9 million (2018: USD118.0 million), largely due to the capital costs associated with the construction of Elikhulu
◗ Restructuring the group’s existing RCF and the extension of its repayment profile to June 2022, with effect from 3 June 2019
◗ Cash generated by operating activities increased to USD37.7 million (2018: USD13.4 million utilised in operating activities). This improvement can be
attributed to Barberton Mines’ improved production, the cessation of Evander Mines’ unprofitable large-scale underground operations, the production
contribution from Elikhulu, and a 7.3% increase in the received rand gold price to R577,573/kg (2018: R538,100/kg)
◗ Subsequent to the financial year-end, the group entered into a gold loan for 20,000oz on 15 July 2019 with Rand Merchant Bank, a division of FirstRand Bank
Limited (RMB) in exchange for an upfront cash receipt of R394 million (USD28.3 million)
◗ Reinstituting dividend payments to shareholders
KPIs
◗ Organic growth through the commissioning of Elikhulu
◗ Incorporation of ETRP throughput into Elikhulu
Why these KPIs are important
◗ Commissioning Elikhulu was critical in returning Evander Mines to
profitability and delivering into the strategy of repositioning the group as
a relatively low-cost, long-life gold producer
◗ Incorporating ETRP into Elikhulu allowed the group to leverage plant
efficiencies and benefit from economies of scale
Long-term objectives
◗ Disciplined capital allocation remains a priority in assessing the merits of
any capital expenditure programme or acquisition
◗ All capital allocation decisions are subject to rigorous analysis and
predefined risk-adjusted return parameters to ensure the required return
is generated
◗ Our investment criteria is to earn a minimum return of 15% per annum
on capital deployed, after adjusting for project-specific and sovereign risks
◗ To ensure returns are robust through the commodity cycle, 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
Related risks
◗ Strategic capital allocation
◗ Financial sustainability in a volatile environment
◗ Governance and regulatory compliance
Short- to medium-term focus
◗ Strengthening the group’s financial position by reducing debt and, in so
doing, reducing financial risk and enhancing returns to shareholders
◗ Resuming dividend payments to shareholders when appropriate to do so
◗ Growing dividend distributions in line with our dividend policy
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BUSINESS AND
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SCORECARD BY MATERIAL MATTER continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ECONOMIC AND SOCIAL FACTORS NOT IN OUR CONTROL
Achievements to date
◗ Barberton Mines successfully concluded a three-year wage agreement during September 2018
◗ No legal industrial action was recorded in the period, however, there were 20 lost production days in the current financial year following community unrest
◗ Implementation of a new security strategy to meet increasing security threats
KPIs
◗ Achieving a group production guidance of 170,000oz for the 2019
Long-term objectives
◗ Executing the new group security strategy over a three-year period
financial year
◗ Achieving all-in sustaining costs of below USD1,000/oz for the group
(from 2019 to 2022)
◗ Engaging with stakeholders at our mining operations to ensure the allocation
of local economic development (LED) and CSI expenditure is appropriately
planned and executed
Why these KPIs are important
◗ Delivering on our production and cost guidance improves investor
confidence and demonstrates the group’s ability to produce gold
consistently, profitably and meet market expectations
Related risks
◗ Illegal mining and heightened criminal activity
◗ Reduced working time impacting productivity
◗ Regulatory changes
◗ Financial stability in a volatile environment
Short- to medium-term focus
◗ Delivering the new security strategy to ensure our mining operations are
impacted less by illegal mining and social unrest
◗ Engaging with government in relation to the lack of service delivery
and policy uncertainty, which adversely impacts our employees and
communities
◗ Focusing on ensuring compliance with SLP and LED obligations
◗ Ensuring communities and stakeholders surrounding our mining operations
benefit from the LED and CSI spend in order to promote a collaborative
approach to ensuring sustainable production from our mines
◗ We are price takers when selling our product and have no control over
the prices or exchange rates that we receive. The group’s risk management
philosophy is to hedge specific exposures arising from operational, capital
investment and transactional flows. Financial hedges are generally limited
to short-dated instruments and a maximum of 25% of the group’s annual
production, unless additional hedge limits are specifically approved by the
Pan African Resources board
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BUSINESS AND
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MINING OPERATIONS
Achievements to date
◗ Exceeding the group’s production guidance of 170,000oz for the 2019 financial year resulted in the group’s gold production increasing by 7.5%
to 172,442oz (2018: 160,444)
◗ Commissioning of Elikhulu improved the group’s gold production profile and reduced its combined cost structures
◗ Incorporation of ETRP’s throughput capacity of 0.2 million tonnes per month into Elikhulu was successfully completed in December 2018
◗ Operational margins improved following the commissioning of Elikhulu in September 2018 and the BRTP’s regrind mill in May 2018
◗ Barberton Mines produced 99,363oz (2018: 90,629oz) during the current financial year
◗ Barberton Mines increased its underground mining flexibility at the Fairview Mine through combined mining from both the high-grade 272 and 358 platforms
◗ Evander Mines’ continuing surface operations, together with mining and vamping of remnant high-grade stopes, produced 73,079oz (2018: 69,815oz)
◗ Completion of the feasibility study into the merits of mining the Evander Mines’ 8 Shaft pillar and high-grade areas in proximity to the pillar resulted in the
development and equipping of this area. First gold was produced in August 2019
◗ The group’s all-in sustaining cost improved to USD988/oz (2018: USD1,358/oz)
◗ Increased exploration at Barberton Mines (USD2.0 million) related to the Royal Sheba project, which included exploration, drilling and ongoing optimisation
costs on the project
KPIs
◗ Achieving a group production guidance of 170,000oz for the 2019
Long-term objective
◗ Create sustainable stakeholder value by optimising extraction efficiencies in
financial year
◗ Achieving all-in sustaining costs of below USD1,000/oz for the group
our mining activities in a cost-effective and safe way
Why these KPIs are important
◗ Delivering on our production and cost guidance improves investor
confidence and demonstrates the group’s ability to produce gold
consistently, profitably and meet market expectations
Related risks
◗ Reduced working time, impacting productivity
◗ Health and safety incidents
◗ Interruption to stable electricity supply
◗ Illegal mining and heightened criminal activity
◗ Regulatory changes
◗ Tailings dam or mine shaft failure, fire or flooding
◗ Operational execution
◗ Environmental damage
◗ Declining Mineral Resource and Mineral Reserve base
Short- to medium-term focus
◗ Improve production through maximising Barberton Mines’ plant capacity by
making use of both high-grade and low-grade ore sources
◗ Deliver quality ounces consistent with our production guidance
◗ Optimise the performance of Elikhulu for improved production and
sustainability
◗ Assess mining optimisation options to unlock production constraints and
reduce costs at our operations
◗ Development of a new platform at Barberton Mines’ Fairview shaft,
supported by a sub-vertical shaft. This is expected to enhance mining
flexibility and efficiencies, enabling the mining of a consistent head grade
◗ Increase development rates at Barberton Mines to sustain the replacement
of Fairview’s high-grade platforms
◗ Expand production in current mining areas to achieve the production
guidance of approximately 185,000oz for the 2020 financial year
◗ Deliver first gold from the Evander Mines’ 8 Shaft pillar and nearby
high-grade areas early in the 2020 financial year
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SCORECARD BY MATERIAL MATTER continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
VALUE-ACCRETIVE GROWTH
Achievements to date
◗ Barberton Mines’ Royal Sheba project
– The Royal Sheba project’s feasibility concluded that (as a result of the Sheba Valley’s challenging topography) mining the near-surface resource, using an
opencast mining method, would result in higher-than-anticipated capital expenditure. As such, it was determined that this project would not meet the
group’s capital allocation criteria if mined this way
– The emphasis is now on assessing the merits of using an underground sub-level open-stoping mining method by developing haulages from the current
surface adits into the orebody. General authorisation in terms of Section 39 of the National Water Act 36 of 1998 was obtained during May 2019, which
allows the group to upgrade the Royal Sheba project’s adit and bridge
◗ Barberton Mines’ New Consort exploration project
– During the 2019 financial year, we intersected a footwall lens (orebody), sited approximately 80m into the footwall of the New Consort Main Maiden
Reef (MMR). Underground drilling is underway to delineate the new orebody
– The down-dip extension of the 14 Level MMR is expected to be developed and accessed during the 2020 financial year
◗ Barberton Mines’ sub-vertical shaft project at Fairview
– The Fairview sub-vertical shaft project is expected to relieve pressure on the 3 Decline shaft, as men and material will be conveyed via the sub-vertical
shaft
– Developing top and bottom access for the sub-vertical shaft is progressing according to plan
◗ Evander Mines’ 8 Shaft pillar mining
– Evander Mines’ 8 Shaft pillar has been equipped for production, with first gold produced in August 2019
– This operation will replace the remnant underground mining and vamping activities. It is expected to contribute 20,000oz to 30,000oz per annum for the
next three years
◗ Evander Mines’ Egoli project
– This promising orebody’s feasibility study has been completed and optimisation studies are being finalised. The development options for this orebody will
be finalised during the 2020 financial year
– The group is currently reviewing the merits of expediting the Egoli project and is assessing funding options in this regard
KPIs
◗ 15% annual incremental increase in production
◗ Elikhulu being commissioned on schedule, within budget and with the
plant’s performance being materially consistent with the bankable feasibility
study and market guidance
Long-term objective
◗ As a business seeking sustainable growth opportunities, we continually look
for value-accretive opportunities that meet our stringent investment criteria
Why these KPIs are important
◗ Increasing our annual production improves investor confidence and
Short- to medium-term focus
◗ Execute into earnings and cash flow accretive growth projects with a focus
stakeholder value. It demonstrates the group’s growth potential, stability
and profitability
◗ Increasing flexibility at Barberton Mines is critical to ensuring Barberton
Mines consistently produces in excess of 100,000oz per annum
◗ Increasing production at Evander Mines through the 8 Shaft pillar project
to enable a production profile of 85,000oz for the 2020 financial year
Related risks
◗ Regulatory changes and socio-political instability
◗ Financial stability in a volatile environment
◗ Strategic capital allocation
◗ Declining Mineral Resource and Mineral Reserve base
on organic projects
◗ The group is currently focusing on the following projects to improve its
production profile over the short to medium term:
– Barberton Mines’ Royal Sheba project
– Barberton Mines’ sub-vertical shaft
– Barberton Mines’ New Consort exploration project
– Evander Mines’ 8 Shaft pillar mining
– Evander Mines’ Egoli project
◗ The group will evaluate acquisition opportunities, particularly in other
African jurisdictions, in accordance with its rigorous capital allocation
criteria
◗ Increase production by approximately 30,000oz per annum over the three-
year life of Evander Mines’ 8 Shaft pillar mining operation
◗ Promote organic growth from in-house available resources at reduced
costs and implementation times
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23
BUSINESS AND
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ESG COMPLIANCE
Achievements to date
◗ Established a people-focused ethos supporting a stable employee base
◗ External review of mine closure costs to confirm adequate resources for funding rehabilitation liabilities
◗ In Barberton, we launched clean-up campaigns of abandoned historic mining sites and are collaborating with the local tourism authority to develop sites for
geo-tourism
◗ Our Elikhulu plant, BTRP and the BIOX® gold processing plants contribute to a consistent reduction in the overall environmental impact of our operations
◗ Regular engagement with local communities, which has enabled constructive and transparent relationships with these stakeholders
◗ The group invested USD1.9 million (2018: USD1.1 million) in our CSI and LED projects, which included 26 bursaries for mining and related fields of study
◗ We prioritised skills and development training, investing USD1.0 million (2018: USD1.8 million) during the period, which has declined from the prior financial
year following the cessation of large-scale underground operations at Evander Mines
◗ The group paid USD14.1 million (2018: USD17.4 million) (excluding VAT) in South African government taxes in the current financial year. Refer to
page 110 for the group’s disclosure of payments made to government
KPI
◗ No material reportable matters associated to compliance
Long-term objective
◗ Improve how we manage and report on environmental, social and
governance compliance across all operations within the group
Why this KPI is important
◗ Being committed to and focused on ESG compliance enables and supports
Short- to medium-term focus
◗ The group is committed to zero harm and compliance with environmental
the long-term sustainability of the group
regulations
Related risks
◗ Governance and regulatory compliance
◗ Reduced working time impacting productivity
◗ Environmental damage
◗ Regulatory changes
◗ Health and safety incidents
◗ Illegal mining and heightened criminal activity
◗ Tailings dam or mine shaft failure, fire or flooding
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BUSINESS AND
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SCORECARD BY MATERIAL MATTER continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
MINERAL RESERVES AND MINERAL RESOURCES
Achievements to date
◗ Royal Sheba project’s orebody delineation and Mineral Resource conversion was conducted post the near-surface exploration programme
◗ New Consort MMR and deep footwall drilling and modelling highlighted prospective areas that could add to the Mineral Resource base
◗ De-risking the Elikhulu mine plan was achieved through grade control drilling, modelling and Mineral Resource conversion of the Kinross tailings dam in
Evander
◗ Mineral Resource conversion and de-risking of the BTRP life-of-mine through drilling, modelling, estimation and metallurgical test work on the Segalla and
Camelot tailings dams in Barberton
◗ An 8% year-on-year increase in the Mineral Resource base of 335.8Mt at 3.33g/t for 35.97Moz (2018: 331.2Mt at 3.13g/t for 33.30Moz)
◗ Effective management and optimisation of Mineral Reserves during the 2019 financial year to achieve the group’s forecast production guidance of 170,000oz
KPIs
◗ Achieving a group production guidance of 170,000oz for the 2019
Long-term objective
◗ Grow Mineral Resources and Mineral Reserves through brownfield
financial year
◗ Achieving all-in sustaining costs of below USD1,000/oz for the group
◗ 15% annual incremental increase in production
exploration and value-accretive acquisitions
Why these KPIs are important
◗ Increasing our annual production improves investor confidence and
stakeholder value. It demonstrates the group’s growth potential, stability
and profitability
◗ Mineral Resources and Mineral Reserves are key components of the
group’s sustainability
Related risks
◗ Declining Mineral Resource and Mineral Reserve base
Short- to medium-term focus
◗ Explore near-surface targets around existing operations. Convert down-dip
Mineral Resources of underground orebodies into Mineral Reserves, with a
focus on high-margin orebodies
LAWS AND REGULATIONS
Achievements to date
◗ An independent safety expert was appointed to review/audit the operational safety systems to ensure compliance. Through the review, these systems were
found to be compliant
◗ Post year-end, board sub-committees were re-constituted, to ensure compliance with best practice and further improve their functioning
◗ Pan African Resources is reviewing its ESG activities for compliance with required standards, including King IV™
◗ Safety standards and procedures are in place and are subject to independent compliance reviews
◗ An independent review of the group’s TSFs was conducted to ensure legislative compliance and structural integrity. The independent review concluded
that the active TSFs are operated and managed with the necessary control and oversight, by independently appointed professional engineers. The review
highlighted current risks and shortcomings associated with the tailings dams which are being addressed by specialised contractors and professional engineers.
A follow-up audit will be conducted in February 2020 to monitor the reduction in the risks associated with the issues identified in the initial audit
◗ The group’s adherence to regulatory guidelines has been subject to an independent compliance review. These reviews are still ongoing
KPI
◗ No material reportable matters associated to compliance
Long-term objective
◗ Compliance with all applicable legal acts and regulations which govern the
operations of the group
Why this KPI is important
◗ Being committed to and focused on ESG compliance enables and supports
the long-term sustainability of the group
Short- to medium-term focus
◗ Focusing on ensuring compliance with SLP and LED obligations
◗ Engaging with industry representative bodies and regulators to influence
Related risks
◗ Regulatory changes
◗ Governance and regulatory compliance
proposed legislation
◗ Seeking independent legal advice on proposed regulatory changes to
manage the potential consequences thereof
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
25
BUSINESS AND
STRATEGIC OVERVIEW
OPERATING ENVIRONMENT
HOW OUR OPERATING ENVIRONMENT IMPACTS US
Economic factors
South Africa’s economy experienced a shock contraction of 3.2% in
Q1 2019, but reversed this trend by growing at 3.1% in Q2 2019.
While the country avoided a recession in 2019, the economic
outlook and debt levels remain subdued.
Following three consecutive quarters of negative growth,
the country’s mining industry rebounded in Q2 2019 with an
improvement of 14.4% which contributed 1% towards GDP growth.
Gold is currently trading at its highest level in six years.
In early June 2019, the International Monetary Fund stated that
South Africa’s growth outlook depended on the pace of reforming
long-standing structural constraints and that delayed reforms would
demotivate investors, inhibit growth and continue reducing
per-capita income.
One of South Africa’s biggest economic problems is to keep Eskom,
the national power utility, financially stable and functional until its
operational problems can be addressed, and it becomes sustainable
as the country’s primary power generator. Healthy GDP growth is
not possible until consistent and affordable power is guaranteed.
At the same time, input costs are rising, particularly the cost of mining
at depth, salaries and wages, capital expenditure and electricity.
Gold’s supply and demand fundamentals,
however, support the belief that the gold
price should continue to improve over the
next few years, despite periods of short-
term volatility driven by market sentiment
and geopolitical developments. Pan African
Resources is well positioned to weather a
lower gold price and capitalise on a future
upside when it occurs.
Political factors
South Africa’s May 2019 national general election, which saw
President Cyril Ramaphosa elected as president, albeit with the ruling
African National Congress (ANC) seeing reduced support, created
the conditions during which the country retained its investment-
grade rating from Moody’s. Macroeconomic stability, however, remains
a risk with an increasing fiscal deficit, rising public debt, inefficient
state-owned enterprises and slipping global competitiveness.
Internal contestation within the ANC, between factions aligned
to President Ramaphosa and those aligned to former President
Jacob Zuma, also weigh on business and investor confidence and
adversely impact the value of the rand.
Barberton Mines – loco operator at Fairview
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BUSINESS AND
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OUR OPERATING ENVIRONMENT continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Social factors
The extractive sector must pay attention to its social licence to
operate, given the nature of its activities. Miners face heightened
stakeholder expectations on a wide range of fronts. Communities
are protesting for economic opportunities and improved local
service delivery, while government pushes for transformation and
employment creation. Labour unions mobilise for higher wages.
Formal sector unemployment rates remain extremely high across
South Africa. Mining companies are often the main providers
of employment in rural areas, which creates high community
expectations. In recent years, the protests and strikes by those
dissatisfied with the slow transformation and a lack of service delivery
have rapidly grown in number in South Africa. These have sometimes
led to violent clashes with the authorities and disrupted production
due to employees being unable to get to work.
Artisanal mining provides a living for many impoverished people
in resource-rich developing countries. This sector is typically
unregulated, with formal miners having to compete with illegal miners
for their own resources. Government tends to deal erratically with
illegal miners, and some companies that have taken strong action to
protect their operations have been accused of human rights abuses.
To navigate these complex dynamics and avoid or minimise conflicts
with host communities, miners must maximise positive impacts,
minimise negative impacts and ensure continuous engagement with
host community stakeholders. A strong social licence to operate is
vital for long-term sustainable value creation for all stakeholders.
Legislative factors
Mining is among the most regulated industries in South Africa.
Changes in labour legislation, employment equity legislation, as well as
the reform of the environmental regulatory system, create a dynamic
context for mining legislation’s evolution. Minerals and mining policy,
which is necessarily broad in its scope, needs to be coordinated with
other policies that fall within the remit of other forums.
We have seen a move towards greater industry consultation
and certainty in the local regulatory environment. The revised
Mining Charter III was released in June 2018 and approved in
September 2018, with full effect from March 2019. Although an
improvement on the previous charter, certain elements of the
revised charter remain concerning. The carbon tax implementation
is on track, but there is a lack of clarity on the draft National Climate
Change Bill and its practical implementation.
HOW WE IMPACT OUR OPERATING ENVIRONMENT
Economy
Mining and its related supply industries are critical to South Africa’s
socio-economic development. The sector accounts for roughly one-
third of the market capitalisation of the JSE and traditionally attracts
foreign investment to the country. Pan African Resources makes a
significant contribution to economic activity in the regions where it
operates through job creation, local supplier development, socio-
economic contributions and foreign exchange earnings.
After employees, the National Treasury is the second-largest
beneficiary of the value created by the mining sector, at 24% in 2018.
Although direct company taxes vary with profitability, the state
gains more consistency from royalties and employee taxes. More
than half of the government’s tax revenue goes to social protection
services ranging from social grants, free and subsidised housing to the
provision of clean water, electricity and education. These benefit from
mining industry taxes.
Pan African Resources makes a sizeable contribution to
South Africa’s economy each year. In this financial year, the group
paid USD14.1 million (2018: USD17.4 million) in South African
government taxes (excluding VAT).
Society
The industry has a strong record of transformation, exceeding
the requirements of the 2010 Mining Charter by a large margin.
This included procurement and staff demographics at all levels of
the business.
Community investments, such as building houses, schools and clinics,
upgrading local infrastructure, and providing child and adult education
learnerships, accounted for 2%, or R3.5 billion of the mining industry’s
expenditure in 2018.
Pan African Resources is a primary employer in the Barberton and
Evander regions of South Africa. The financial and social investment
flows we sustain are crucial to the well-being of communities near
our operations. During the review period, the group invested
USD1.9 million (2018: USD1.1 million) in CSI, LED projects
and bursaries.
Employees
Skilled employees are essential to the sustainability of the gold
mining industry. Training and development in the industry focuses
on developing the scarce skills needed at mines and improving the
employability of local residents.
South Africa’s chronically high unemployment rate is a national crisis,
making every job valuable. The group’s difficult and unavoidable
restructuring in 2017/18 created a sustainable mining environment
for our 2,148 current employees, with a solid foundation for
launching new projects and creating additional jobs.
During this period, the group’s employees received USD50.3 million
(2018: USD44.3 million) in salaries, wages and benefits.
Environment
Our activities associated with the exploration, extraction and
processing of Mineral Resources result in the unavoidable disturbance
of land, the consumption of resources, generation of waste and
atmospheric and water pollutants. Pan African Resources invests in
innovation and skills training to build an even greater understanding
of the conservation of our natural environment.
Our gold tailings reclamation projects not only extract the additional
economic value from these tailings but also provide an opportunity
to process the tailings with up-to-date technology. This delivers a less
toxic, more stable footprint, while making large areas of land available
for productive use.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
KEY RELATIONSHIPS
27
BUSINESS AND
STRATEGIC OVERVIEW
Pan African Resources’ licence to operate depends on the quality of our relationships with our
various stakeholders. Building and maintaining relationships based on trust, mutual respect and
credibility is integral to our growth, value creation and long-term sustainability.
Our stakeholders have been identified as one of our four strategic
pillars and stakeholder interaction is based on our values. Stakeholder
views are carefully considered when reviewing and refining our
strategy, so that they have realistic perceptions and expectations
regarding our business operations, decisions and performance. Refer
to
page 1 for the value we created for our stakeholders in 2019.
issues and with local communities through the local government
structures (municipalities), media and community engagement
forums. Stakeholder engagement at an operational level is handled by
the general and human resources managers. The board engages with
shareholders at the annual general meeting (AGM) and on an ad hoc
basis, when required.
STAKEHOLDER ENGAGEMENT APPROACH
Stakeholder engagement is important to the group as it fosters
transparent communication channels to share information and
proactively resolve concerns, while balancing the expectations
of shareholders and other stakeholders. Authentic interactivity
is essential for shaping our strategy, managing risks, identifying
opportunities and safeguarding our reputation.
Stakeholder engagement takes place at our corporate office and at
all operations. The chief executive officer shoulders responsibility for
stakeholder engagement at corporate office level and is supported
by the financial director in dealings with investors and analysts.
The human resources executive interacts with labour unions
and employees, while operational management engage with the
Department of Mineral Resources (DMR) on health and safety
Concerns raised operationally are governed by the management
committee and at board level. The safety, health, environment, quality
and community (SHEQC) committee oversees stakeholder concerns.
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.
An overview of our key stakeholder groups, their interests and concerns, and how we engage with them is provided in the following table:
Stakeholder
group
Why engaging these
stakeholders is prioritised
How we engage
Our stakeholders’ key
interests
How feedback informs
strategy
Link to
material
matter
Providers
of capital,
investors,
shareholders
and financial
institutions
Our providers of capital are
essential for business growth.
Transparent communication
is essential to aligning
expectations and understanding
potential risks and material
matters
◗ Poll results, feedback from
presentations and one-
on-one meetings
◗ Discussion at executive
and management level
◗ Safe mining
◗ Return on investment
◗ Financial performance
◗ Operational performance
◗ Union relationships
◗ Accreditations and
regulatory compliance
◗ Mineral Resources and
Mineral Reserves reporting
◗ Sustainability of the business
◗ Environmental compliance
◗ Results presentations and
roadshows
◗ Site visits
◗ Regulatory communications
◗ Ad hoc one-on-one
meetings with the investor
community
◗ Interim and full-year results
announcements
◗ Integrated annual report
◗ Communication with
financiers regarding the
group’s capital structure and
compliance with existing
debt agreements
◗ Media releases
◗ AGMs
◗ Pan African Resources’
website
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28
BUSINESS AND
STRATEGIC OVERVIEW
KEY RELATIONSHIPS continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Stakeholder
group
Why engaging these
stakeholders is prioritised
How we engage
Our stakeholders’ key
interests
How feedback informs
strategy
Link to
material
matter
Employees
Our employees enable the
group to execute its strategy
and are fundamental to our
business sustainability
◗ Safety
◗ Transformation
◗ Job security
◗ Reward and incentives
◗ Holistic and occupational
health
◗ Skills development and
training
◗ Environmental exposure
◗ Bargaining council forums
◗ Shaft committees
◗ Health and safety structures
◗ Supervisory and disciplinary
structures
◗ Social media
◗ Publicity and posters
◗ Policy and procedure
documents
◗ One-on-one supervision
◗ Contract negotiations
◗ Performance assessments
◗ Future forum meetings
Unions
Proactive relationships with
trade unions and employee
representatives support
harmonious working
relationships in the workplace,
which underpin meeting
production targets
◗ Employee committees
◗ Branch committees
◗ Shaft committees
◗ Mine committees
◗ Mine future forums
◗ Health and safety
◗ Transformation
◗ Job security
◗ Fair remuneration and
reward
Suppliers
Suppliers enable us to deliver
safely into our production
guidance
◗ One-on-one meetings
◗ Tender and procurement
processes
Communities Ongoing engagement with our
communities is vitally important
and directly influences our
social licence to operate
◗ Community meetings
and forums
◗ Media
◗ Corporate social
investment initiatives
Government
and
regulatory
bodies
Customers
Government issues mining and
prospecting rights, develop
policies and implement
regulations. We are committed
to working with government
at a national, regional and local
level to establish sound and
transparent relationships
Our direct customers must be
assured that they will always
receive their purchased gold as
specified
◗ Regular communication
with government
departments: DMR, Labour,
Water Affairs, Environment,
Education and Public Works
◗ One-on-one meetings with
the refinery
◗ Group financial
performance
◗ Payment track record
◗ Growth project pipeline
◗ Loyalty
◗ Job creation
◗ CSI
◗ Environmental
conservation/protection
◗ Local procurement
opportunities
◗ Local supplier development
◗ Transformation
◗ Mining Charter compliance
◗ Job creation
◗ Safe mining
◗ Profitable mining
◗ Environmentally responsible
mining
◗ Quality
◗ Timeous delivery
◗ Price
◗ Volume
◗ Discussion at operational,
executive and board level
◗ Discussions between
unions and management
occur on the mines
and the outcomes
are conveyed to the
corporate office
◗ Discussion at operational,
executive and board level
◗ Discussion at operational
and executive
management level
◗ Discussion at the
SHEQC committee, the
executive committee
(Exco) and board level
◗ Discussion at executive
management and board
level
◗ Discussion at executive
management and board
level
Listing
exchanges
Listing on reputable exchanges
helps attract the capital and
investors that Pan African
Resources requires. Being
listed provides frameworks
for structuring the group’s
corporate governance and
interactions with stakeholders
◗ Sponsor (JSE) and
nominated adviser (AIM)
review and oversight
◗ Panel review of reported
information
◗ Compliance with listings
requirements
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RISKS
29
Pan African Resources operates in South Africa, with high-grade, long-life and cash-generative
mining operations. The group’s assets can be differentiated from the majority of South Africa’s
mature gold mining industry, which is characterised by diminishing orebodies, falling grades and
high costs.
To remain profitable and sustainable, the group evaluates all actual
and potential risks that may impact stakeholders or threaten our
viability. The magnitude of impact, the likelihood and the velocity
of occurrence of our identified risks informs the identification and
prioritisation of material matters, discussed on
page 16.
We continually reinforce the message that managing risk is the
responsibility of everyone at Pan African Resources.
RISK MANAGEMENT APPROACH AND PROCESS
Pan African Resources has an established risk management
philosophy. The tone, risk management culture and risk appetite are
set and overseen by the board. Risk appetite levels are aligned with
board-approved strategic objectives.
The group’s risk management process is informed by the external
environment, specific regulatory requirements and internal financial,
operational and strategic processes. The board and audit and risk
committee oversee the risk management process, while management
at operational levels implement day-to-day compliance with our
risk management process. Risk awareness and a safety culture is
embedded in day-to-day operations.
Our identified risks are benchmarked against risks noted by our
mining peers to ascertain if these risks are industry-wide.
BOARD RISK GOVERNANCE
The board oversees the group’s risk management process and is
guided by the audit and risk committee, its own experience, internal
risk assessments and reviews of risk reports. The standing SHEQC
committee oversees and provides feedback to the board on safety,
health and environmental aspects. Each year, the board reviews the
group’s risk appetite for ongoing relevance in relation to the group’s
strategy. The board also ensures that risk management programmes
are operating effectively and monitors the implementation of risk
mitigating strategies against key risk indicators.
Board of directors
Audit and risk
committee
Establish the
context
Long-term
value
protection
Identify and
record risks
All steps in the risk
management process are
monitored and reviewed
to ensure continuous
improvement
Risk management
process
Communicate and
consult with internal and
external stakeholders at
each stage of the risk
management process
Treat,
monitor and
review risks
Analyse
risks
Evaluate
risks
Operations
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019BUSINESS AND STRATEGIC OVERVIEW 30
BUSINESS AND
STRATEGIC OVERVIEW
RISKS continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
To ensure risks are monitored continuously and amended as necessary, each risk is assigned
to a risk owner. Risks and their respective owners are recorded in the group’s risk register.
The group’s risk register is reviewed quarterly by the audit and risk committee.
Group risk matrix
e
r
o
c
s
k
s
i
R
6
5
11
7
8
9
10
12
1
6
2
7
3
10
9
8
4
11
Probability
Inherent risk
Residual risk
1
3
5
2
4
12
Risk
ranking1
Summary of key risks
Internal versus external
1
2
3
4
5
6
7
Interruption to stable electricity supply
Illegal mining and heightened criminal activity
Regulatory changes
Reduced working time impacting productivity
Health and safety incidents
Financial sustainability in a volatile environment
Tailings dam or mine shaft failure, fire or flooding
8 Operational execution
9
10
11
12
Governance and regulatory compliance
Strategic capital allocation
Environmental damage
Declining Mineral Resource and Mineral Reserve base
External
External/internal
External
External/internal
Internal
External/internal
Internal
Internal
Internal
Internal
Internal
Internal
1 The risk assessment approach followed by Pan
African Resources’ management is a collective
effort. The assessment of the risks faced by the
group may be subjective. Through mitigating
actions, inherent risks are reduced to an
acceptable residual risk level. The heat map
reflects the extent to which inherent risks have
been reduced through mitigating actions.
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31
BUSINESS AND
STRATEGIC OVERVIEW
PAN AFRICAN RESOURCES’ TOP STRATEGIC RISKS
1 INTERRUPTION TO STABLE ELECTRICITY SUPPLY
◗ Mining operations are dependent on Eskom for electricity supply and distribution
◗ Extended electricity supply interruptions threaten the safety of employees and contractors, especially at underground operations, and may damage electrical
equipment
◗ Heightened risk of increased production cost and reduced profit margin
◗ It also heightened the risk of the group not achieving its production targets
Mitigating actions
◗ To reduce reliance on Eskom for electricity, the group is assessing the merits of a solar-powered plant for the Elikhulu plant at Evander Mines
◗ To proactively manage electricity curtailments, the group regularly engages with Eskom. Such engagement also enables the group to maintain good relations
with the power utility
◗ Critical safety and engineering equipment is supported by alternative power sources that are regularly serviced and maintained
Links to material matters
Capitals impacted
2 ILLEGAL MINING AND HEIGHTENED CRIMINAL ACTIVITY
◗ Illegal mining threatens the safety of employees and contractors at underground and surface operations
◗ It also heightens the risk of the group not achieving its production objectives, affects the life-of-mine and reduces available reserves
◗ Theft of mining assets has increased, along with a deteriorating socio-economic environment
◗ The prevalence of criminal mining activities on the group’s operations leads to employees also becoming involved in criminal activities
Mitigating actions
◗ The group has enhanced its security measures in response to illegal mining and other criminal activities. These measures include:
– elevating our security management role by appointing a senior executive to oversee the group’s security strategy
– upgraded access control at all operations
– use of technological applications to impede illegal mining and criminal activities and to improve the responsiveness of security resources
– improved coordination with all law enforcement entities to strengthen crime prevention strategies in and around mining operations
– appointment of dedicated security managers to mining operations, all reporting to the security senior executive
– development of information management systems and processes to improve information management within the security function
◗ Integrated with our multi-faceted security strategy are our community development initiatives, which are aimed at the socio-economic upliftment of the
communities surrounding our operations
Links to material matters
Capitals impacted
3 REGULATORY CHANGES
◗ The risk that regulatory changes may lead to an uncertain investment environment which may impede the group’s ability to raise capital for its funding
requirements and growth aspirations
Mitigating actions
◗ The group is engaging with industry representative bodies and regulators to influence proposed legislation
◗ To proactively manage proposed regulatory changes and the consequences thereof, the group is seeking independent legal advice
◗ The group’s adherence to regulatory guidelines has been subject to an independent compliance review
Links to material matters
Capitals impacted
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BUSINESS AND
STRATEGIC OVERVIEW
RISKS continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
4 REDUCED WORKING TIME IMPACTING PRODUCTIVITY
◗ In South Africa, strikes and service delivery protests are increasing due to a lack of services, a sense of disempowerment and unemployment which is
compounded by the lack of investment and economic growth
◗ The resulting community unrest increases the risk of production stoppages. This is a particular concern at Barberton Mines due to communities located in
close proximity to mining operations
◗ Political and social stability – or the lack thereof – influences investor confidence in our group
◗ Risk of reduced working time is further influenced by:
– excessive travelling distances to underground workplaces
– stoppages following environmental or safety-related incidents
– external factors, including natural disasters
– power supply interruptions
Mitigating actions
◗ We have intensified engagement with communities surrounding all mining operations to understand their concerns and deal with material issues effectively.
Through community engagement, we are able to share information about our mining operations and our contribution to the region
◗ A community liaison manager was appointed in 2018 at Barberton Mines and an additional manager was appointed in 2019 at Evander Mines to address
community concerns and manage expectations
◗ Job creation programmes have been introduced and continue to be rolled out to alleviate local unemployment
◗ The operations adhere to SLP and CSI initiatives that contribute to local economic development
Links to material matters
Capitals impacted
5 HEALTH AND SAFETY INCIDENTS
◗ We value the health and safety of all our employees and strive for a zero-harm environment
◗ Mining operations are inherently dangerous and present health and safety risks to our employees, which may have a direct impact on the group’s operational
performance and strategic objectives
◗ Safety incidents can potentially halt production, affect our reputation, lead to litigation and decrease the group’s overall value
Mitigating actions
◗ Safety standards and procedures are in place and are subject to independent compliance reviews
◗ We have appointed relevant technical and engineering experts to ensure compliance with safety standards
◗ Daily, monthly and quarterly health and safety compliance inspections are conducted by operational health and safety representatives
◗ Training for emergencies has been conducted, with appointed emergency service providers present at each operational site
◗ We continually introduce new safety initiatives and awareness programmes
Links to material matters
Capitals impacted
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
33
BUSINESS AND
STRATEGIC OVERVIEW
6 FINANCIAL SUSTAINABILITY IN A VOLATILE ENVIRONMENT
◗ The group’s ability to access, service and repay debt is directly dependent on its ability to generate cash flows
◗ Failure to meet operational objectives may negatively impact on the group’s ability to service and redeem debt
◗ Cash flow generation is affected by volatility in macroeconomic variables such as exchange rates and commodity prices
◗ Excessive debt in the group’s capital structure may adversely impact the group’s financial sustainability and restrict the group’s ability to fund its capital
development programmes
◗ Access to debt and equity sources of capital is critical to sustain generic or acquisitive growth
◗ Mineral Resources and Mineral Reserves are valued based on economic and technical assumptions and the prevailing investment environment at a point
in time and should these assumptions or the investment environment change, the carrying value of these Mineral Resources and Mineral Reserves may be
subject to a downward adjustment
Mitigating actions
◗ The group’s centralised treasury function at Pan African Resources Funding Company Proprietary Limited (Funding Company) manages all group funding
requirements and risk management initiatives
◗ The ability to dispose of non-strategic assets including MC Mining shares and Pan African Resources shares held by PAR Gold and access to alternative
sources of liquidity such as prepaid gold loans
◗ Daily monitoring of working capital and monthly reviews of capital expenditure, cash flow generation and group debt levels
◗ Regular reviews and monitoring of operational and financial performance
◗ Financial risk management through strategic currency and commodity price hedging, when appropriate and within predetermined limitations, to decrease
volatility in cash flow management
◗ Hedging strategies are aligned to the group’s financial risk management policies to ensure that derivative risk remains within board-approved limits
◗ Capital structure management by raising equity and debt timeously and within prudent limits
◗ Maintaining good relationships with shareholders and bankers through regular engagement
◗ Ability to restructure the group’s term facilities to better match cash flow generation and debt redemption
◗ Mineral Resources and Mineral Reserves are independently valued and subject to annual impairment assessments
◗ The board assesses the appropriateness of the group’s capital structure to fund new organic projects in the context of the prevailing economic environment
and long-term funding requirements of the group
Links to material matters
Capital impacted
7 TAILINGS DAM OR MINE SHAFT FAILURE, FIRE OR FLOODING
◗ Tailings dam or mine shaft failure could result from:
– inadequate maintenance or corrosion
– seismic activity, flooding or fire
– overtopping of the tailings storage facility (TSF), significant movement of outer slope or high phreatic (saturated water level) surface pore pressures
◗ The majority of the group’s TSFs are located in close proximity to residential areas
Mitigating actions
◗ Third-party independent contractors have been appointed to design, build and operate the TSFs within the group
◗ Tailings and dam management is overseen by an appointed competent person at each of the group’s TSF sites to ensure compliance with legislation,
DMR requirements and the group’s internal code of practice
◗ Quarterly inspections and meetings are held between mine management, third-party TSF operators and competent persons tasked with monitoring
and compliance
◗ An independent specialist reviews the group’s TSFs to ensure that compliance with the latest legislative requirements. The review was performed during
the 2019 financial year
◗ Active management of engineering risk registers for all operations
◗ Ongoing expenditure on capital and maintenance of infrastructure to proactively address infrastructure concerns
◗ The allocation and prioritisation of sustainable capital expenditure is based on the group’s risk assessment
Links to material matters
Capitals impacted
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34
BUSINESS AND
STRATEGIC OVERVIEW
RISKS continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
8 OPERATIONAL EXECUTION
◗ Not achieving operational objectives negatively impacts operational and financial results and investor confidence in our group
◗ Operational disruption also arises from safety-related incidents, community protest action and industrial action
Mitigating actions
◗ Daily production reviews to monitor that actual production is aligned with planned production
◗ Short-, medium- and long-term production planning processes are in place
◗ In the current year, Barberton Mines improved mining flexibility by increasing processing capacity at both the Sheba and Consort plants
◗ We are assessing the merits of connecting 38 Level (Sheba) and 23 Level (Fairview) at Barberton Mines to accommodate cross-tramming between Sheba
Mine and Fairview Mine (Project Dibanisa)
◗ Improved infrastructural capacity at Barberton Mines:
– Top and bottom access to the sub-vertical shaft was completed in the current financial year. In the next financial year, we will focus on excavations that
will house the shaft infrastructure
– Sheba headgear was replaced during December 2018. The winder replacement project at Sheba Mine has commenced with completion expected in the
2021 financial year
Link to material matter
Capitals impacted
9 GOVERNANCE AND REGULATORY COMPLIANCE
◗ The group is exposed to a number of legislative, governance and accounting standards which increase business complexity and compliance risk
Mitigating actions
◗ The group engages regularly with its regulators, JSE sponsors and the nominated adviser appointed in accordance with the LSE’s AIM Rules for Companies
(Nomad) to ensure corporate law and listing compliance
◗ Comprehensive and detailed training is provided to employees on monitoring and compliance with laws and regulations
◗ Independent reviews of accounting IFRS disclosures, taxation compliance, mineral rights and other legislative compliance
◗ The group’s adherence to regulatory guidelines has been subject to an independent compliance review
Links to material matters
Capitals impacted
10 STRATEGIC CAPITAL ALLOCATION
◗ The risk of investment which results in sub-optimal returns and adversely impacts on stakeholder value creation
◗ The risk that an uncertain investment environment may impede the group’s ability to raise external capital funding
Mitigating actions
◗ All capital allocation decisions are subject to rigorous analysis and predefined risk-adjusted return parameters
◗ Potential investments that do not earn a minimum return of 15% per annum on equity, after adjusting for project-specific and sovereign risks, are declined
◗ In addition to the return requirement, any capital investment is assessed for execution risk to ensure that it falls within the group’s resources and execution
capability
Links to material matters
Capitals impacted
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
35
BUSINESS AND
STRATEGIC OVERVIEW
11 ENVIRONMENTAL DAMAGE
◗ Risk of environmental damage and the consequential reputational and financial impact
◗ Barberton Mines is in close proximity to a world heritage site and its mining right falls within a nature reserve
Mitigating actions
◗ The environmental impact of our mining operations is closely monitored and managed in accordance with environmental management plans, with annual
reports submitted to the DMR
◗ Rehabilitation liabilities are fully funded, which enables the group to mitigate the environmental effects of mining
◗ Continuous monitoring by means of environmental damage detection systems
◗ The group works closely with nature conservation authorities to minimise the adverse impact of our mining operations on the environment
◗ Specific action plans are in place to deal with flooding and spillage incidents
◗ Monitoring the rate of rise of active TSFs, together with the monitoring of the structural integrity of the TSFs by independent advisers
◗ The design of the TSF provides for a flood plain in the event of a breach of its integrity
◗ Regular environmental campaigns are hosted to reinforce environmental awareness
◗ Residue pipelines are patrolled to mitigate the risk of damage due to theft and sabotage. Throughput and pressure of these pipelines are monitored to
mitigate the risk and impact of spillages
Links to material matters
Capitals impacted
12 DECLINING MINERAL RESOURCE AND MINERAL RESERVE BASE
◗ Maintaining a reserve and resources pipeline is necessary to sustain future production, secure capital funding and is vital for the long-term sustainability of
the group
◗ While the group undertakes drilling and exploration to establish such a pipeline, the risk is that such exploration may not contribute to an increased
reserve base
◗ Economic factors such as inflationary or greater increases and volatile commodity prices impact the cut-off grade employed to report the Mineral Resource
and Mineral Reserve that are economically extractable. Due to year-on-year changes in the global market, and continuous influx of geological data from the
operations, estimates of the Mineral Resource and, subsequently, the Mineral Reserve, may change
Mitigating actions
◗ Accessing, ranking and advancing organic growth and exploration projects
◗ Identifying acquisition opportunities that meet the group’s investment criteria
◗ Mineral Reserves and, where considered appropriate, Mineral Resources are incorporated in projected cash flows, based on Mineral Reserves 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
Links to material matters
Capitals impacted
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ALL-IN SUSTAINING COSTS:
MEASURING THE COST
OF GOLD
A successful and sustainable mining operation requires an
effective balance between income and expenses, which
in mining, demands an understanding of the relationship
between operational expenses and yields.
This is why a unique metric was developed for prospective mining investors
to gain clear insights into the overall expenses incurred by mines in delivering
their production outputs.
All-in sustaining costs is a globally recognised benchmark of a mine’s operating
efficiency. This measure takes into account all relevant operational and capital
production costs, from production and procurement overheads to exploration
and development investment. This calculation delivers an overall
USD cost per ounce of gold produced by the mine.
PAN AFRICAN RESOURCES SHOWS ITS COST-SAVINGS METTLE
In recent years, Pan African Resources has succeeded in steadily increasing its
gold production levels while simultaneously reducing its all-in sustaining costs.
This measure shows the group’s cost-effectiveness in comparison to our global
peers and competitors. It also substantiates our focus on tailings operations to
lower our cost of production for more attractive margins.
Group gold production from surface sources
100,000
80,000
z
O
60,000
40,000
20,000
0
Elikhulu
ETRP
BTRP
Group
all-in
sustaining
costs
1,500
G
r
o
u
p
a
l
l
-
i
n
1,200
s
u
s
t
a
n
n
g
i
i
c
o
s
t
s
(
U
S
D
)
900
600
2015
–
6,523
24,283
2016
–
18,151
28,591
2017
–
29,473
26,745
2018
–
21,25
17,504
2019
46,201
9,999
24,007
1,093
870
1,177
1,358
988
Barberton Mines – gold pour
0792 PAR IAR Front Part 2-FA.indd 36
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2019/10/02 2:47 PM
2019/10/02 2:47 PM
INCREASING PRODUCTION WHILE LOWERING
THE COSTS
Elikhulu treats historically generated gold tailings
deposits located at Evander Mines. Elikhulu has
contributed more than 25% to the group’s total
production for the current financial year and has
contributed to lowering the group’s all-in sustaining
costs to USD988/oz (2018: USD1,358/oz).
TRANSFORMING REHABILITATION LIABILITIES INTO
COST-EFFICIENT, SUSTAINABLE REVENUE
Pan African Resources has a track record of designing,
building and commissioning tailings retreatment plants to
reduce costs and increase production.
Pan African Resources is now one of the lowest-cost gold
producers in South Africa and is internationally competitive
from an all-in sustaining costs perspective.
P
E
R
F
O
R
M
A
N
C
E
R
E
V
I
E
W
0792 PAR IAR Front Part 2-FA.indd 37
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2019/10/02 2:47 PM
38
38
PERFORMANCE REVIEW
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
FINANCIAL DIRECTOR’S REVIEW
The group has changed its presentation
currency from GBP to USD for the
30 June 2019 financial year to assist
in making the group’s results more
comparable to its peer group. For
additional information regarding the
amendment, refer to note 43 on
page 213 of the annual financial
statements.
Our improved financial performance validates
the successful execution of our repositioning
strategy, following the commissioning of
Elikhulu and Barberton Mines’ improved
production performance of approximately
100,000oz per annum. Pan African Resources
is committed to creating value by applying
stringent investment and capital allocation
criteria to its capital allocation decisions
ensuring sustainable value creation for the
benefit of all our stakeholders.
KEY FEATURES FOR THE GROUP
◗ Profit after taxation from the group’s continuing
operations improved significantly to USD38.0 million
(2018: USD15.6 million), resulting in the earnings per share (EPS)
increasing to 1.97 USD cents per share (2018: loss 6.79 USD
cents per share). EPS was also impacted by the reversal of
USD17.9 million of the impairment charge made in the
2018 financial year related to the previously impaired 8 Shaft,
7 Shaft and Kinross plant infrastructure
◗ Headline earnings* improved to USD22.9 million
(2018: USD17.9 million), resulting in the headline earnings
per share (HEPS*) increasing to 1.19 USD cents per share
(2018: 0.99 USD cents per share)
◗ The loss of USD138.4 million from discontinued operations in
the prior financial year was due to the impairment charges and
operating losses recognised after the cessation of large-scale
underground operations at Evander Mines
◗ Total all-in sustaining costs per kilogramme* decreased to
USD988/oz (2018: USD1,358/oz), due to an improved
operational performance at Barberton Mines, the inclusion of
Elikhulu’s gold production and the cessation of Evander Mines’
high-cost, large-scale underground operations
◗ Elikhulu was commissioned during September 2018, ahead of
schedule and contributed an additional 45,465oz in gold sold
and adjusted earnings before interest, taxes, depreciation and
amortisation (EBITDA)* of USD31.1 million**
* Refer to
** Calculated by converting at the average USD: ZAR exchange rate of ZAR14.19:USD1
pages 220 to 225.
APMs on
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
39
PERFORMANCE REVIEW
Elikhulu Plant – process water dam in foreground
◗ Net debt* increased to USD129.9 million (2018: USD118.0 million),
as the group’s debt facilities were utilised to complete Elikhulu.
The group’s RCF facility was restructured in June 2019 to provide
for improved flexibility and liquidity
◗ Subsequent to the financial year-end, in light of the strong prevailing
rand gold price and the opportunity it presented to lock in an
attractive cash margin and reduce interest costs, the group entered
into a gold loan for 20,000oz with RMB at an effective rand gold
price of R633,344/kg on 15 July 2019. In exchange for an upfront
cash receipt of R394 million (USD28.3 million), the group will
deliver 12 monthly instalments of 1,666.67oz to RMB, commencing
on 31 July 2019, in settlement of the gold loan
◗ The group recognised an impairment reversal of USD17.9 million
in Evander Mines due to the commencement of Evander Mines’
8 Shaft pillar project. Refer to Evander Mines’ performance and
operational review on
These assets will be depreciated over the three-year life of the
project.
pages 52 and 53 for more information.
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 organic and acquisitive growth,
Pan African Resources believes that a
target payout ratio of 40% of net cash
generated from operating activities −
after allowing for the cash flow impact
of sustaining capital, contractual debt
repayments and the cash flow impact of
once-off items − is appropriate.
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2019/10/02 2:47 PM
40
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2019
Consolidated
Audited
30 June 2019
USD thousand
Restated
(note 1)
Audited
30 June 2018
USD thousand
217,374.6
304.4
217,679.0
(152,980.0)
(16,227.8)
48,471.2
(7,562.3)
17,853.5
(354.1)
58,408.3
849.7
(13,041.8)
46,216.2
(8,174.0)
38,042.2
–
38,042.2
1.97
1.97
1,928.3
1,928.3
145,828.8
146.0
145,974.8
(107,139.9)
(6,625.5)
32,209.4
(5,903.1)
(10,763.4)
(557.8)
14,985.1
2,003.6
(4,225.3)
12,763.4
2,826.0
15,589.4
(138,405.0)
(122,815.6)
(6.79)
(6.79)
1,809.7
1,809.7
Continuing operations
Revenue
Other revenue
Revenue and other revenue
Cost of production (note 2)
Mining depreciation and amortisation
Operating profit
Other expenses
Impairment reversal/(cost)
Royalty costs
Net income before finance income and finance costs
Finance income
Finance costs
Profit for the year from continuing operations
Taxation
Profit after taxation
Discontinued operations
Loss after taxation from discontinued operations
Profit/(loss) for the year
Earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Weighted average number of shares in issue
Diluted average number of shares in issue
Consolidated
Unaudited
30 June 2019
R million
Restated
(note 1)
Unaudited
30 June 2018
R million
3,084.5
4.3
3,088.8
(2,170.8)
(230.3)
687.7
(107.3)
251.4
(5.0)
826.8
12.1
(185.1)
653.8
(116.0)
537.8
–
537.8
27.89
27.89
1,928.3
1,928.3
1,873.9
1.9
1,875.8
(1,376.7)
(85.1)
414.0
(75.9)
(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
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43 in
the annual financial statements.
Note 2: Realisation costs have been restated in the prior financial year. Refer to note 5 and 44 in the annual financial statements.
Taxation charge
The taxation charge of the group’s continuing operations increased to a debit of USD8.2 million (2018: USD2.8 million credit) due to:
◗ An increase in the deferred tax expense to USD5.3 million (2018: USD4.9 million credit) mainly due to a reduction in the gold mining deferred
taxation rates
◗ An increase in the current taxation charge to USD2.9 million (2018: USD2.1 million) as a result of an increase in revenue.
Discontinued operations
In the prior financial year (2018), the group’s discontinued operations comprised:
◗ Evander Mines’ large-scale underground operations
◗ Phoenix Platinum Proprietary Limited (Phoenix Platinum)
◗ Losses from discontinued operations were USD138.4 million, which included an impairment charge of USD129.5 million and retrenchment costs of
USD12.5 million.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
41
PERFORMANCE REVIEW
Revenue
◗ Revenue from continuing operations improved year-on-year by 49.1% predominantly due to an increase of 53.5% in gold sold from continuing operations
to 171,706oz (2018: 111,879oz) and Elikhulu contributing USD58.0 million for the current financial year.
Cost of production
The group’s cost of production for continuing operations increased by 42.9% to USD153.0 million (2018: USD107.1 million). The increase mainly relates to:
◗ Elikhulu, commissioned in September 2018, which contributed an additional USD25.4 million in production costs
◗ Remnant underground mining and vamping activities, which contributed an additional USD29.7 million.
The group’s total cost of production consists mainly of:
◗ Salaries and wages (representing 30.3% of the total gold cost of production) which increased by 11.5% to USD46.4 million (2018: USD41.6 million)
◗ Mining and processing costs (representing 41.1% of the total gold cost of production) which increased by 74.4% to USD62.8 million
(2018: USD36.0 million)
◗ Electricity costs (representing 12.0% of the gold cost of production) which increased by 77.7% to USD18.3 million (2018: USD10.3 million)
◗ Engineering and technical costs (representing 7.4% of the total gold cost of production), which increased by 56.9% to USD11.3 million
(2018: USD7.2 million)
◗ Security costs (representing 4.7% of the total gold cost of production) which increased by 71.4% to USD7.2 million (2018: USD4.2 million).
Mining depreciation and amortisation
The group’s mining depreciation and amortisation costs for continuing operations increased by 144.9% to USD16.2 million (2018: USD6.6 million).
The depreciation charge is based on the available units of production (tonnes) over the life of the operations and the depreciation charge increased
proportionately with the increase in production. Newly commissioned Elikhulu contributed an additional USD8.9 million in depreciation for the year.
Other expenditure
Other expenditure increased to USD7.6 million (2018: USD5.9 million) predominantly due to an increase in the group’s cash-settled share option costs to
USD2.4 million (2018: USD0.9 million income) in the current financial year.
Impairment reversal
In the prior financial year, following the cessation of large-scale underground operations at Evander Mines in May 2018, a total impairment charge of
USD140.3 million was recognised of which USD129.5 million was recognised in discontinued operations, and USD10.8 million relating to the ETRP, was
recognised as part of continuing operations.
A reversal of an impairment of USD17.9 million was recognised in the current financial year following the commencement of Evander Mines’ 8 Shaft pillar project.
The reversal of impairment relates specifically to the property, plant and equipment and mineral rights and other intangible assets previously impaired at Evander
Mines in the prior financial year, which will be utilised by Evander Mines’ 8 Shaft pillar project and depreciated over the project’s three-year life-of-mine.
Finance income and costs
Finance income decreased to USD0.8 million (2018: USD2.0 million) following a decrease in interest earned on the group’s rehabilitation funds.
Finance costs increased to USD13.0 million (2018: USD4.2 million) due to an increase in net debt as a result of the construction spend on Elikhulu.
Earnings per share
The combined operations EPS in USD increased to earnings of 1.97 cents per share (2018: loss of 6.79 cents per share). The combined operations HEPS*
in USD increased to 1.19 cents per share (2018: 0.99 cents per share).
The EPS and HEPS* are calculated by applying the group’s weighted average number of shares in issue to the attributable and headline earnings*.
The weighted average number of shares in issue increased by 6.6% to 1,928.3 million shares (2018: 1,809.7 million shares).
* Refer to
APMs on
pages 220 to 225.
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42
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2019
Consolidated
Consolidated
Restated
(note 1)
Audited
30 June 2018
USD thousand
Restated
(note 1)
Audited
30 June 2017
USD thousand
Audited
30 June 2019
USD thousand
363,165.3
317,773.9
354,878.5
305,354.7
655.2
2,141.1
614.5
1,021.9
21,554.8
6,802.0
25,021.1
29,964.4
5,708.5
1,888.6
15,101.3
1,924.8
–
5,341.2
–
393,129.7
38,150.6
235,063.2
(138,857.1)
2,624.7
112,984.2
(18,121.7)
(24,871.4)
(21,637.4)
(1,753.2)
183.581.9
183.581.9
145,693.3
15,781.3
109,617.7
1,727.2
18,567.1
63,854.5
35,921.3
917.7
254,246.7
41.7
8,186.4
748.2
1,746.6
22,120.4
4,133.9
26,550.0
26,513.8
3,561.3
910.6
19,578.4
1,252.2
289.5
921.8
–
344,287.7
38,150.6
235,063.2
(135,154.2)
2,624.7
74,942.0
(18,121.7)
24.871.4
(21,637.4)
(4,008.2)
146,987.6
146,987.6
152,905.5
19,929.5
112,827.4
1,237.4
18,911.2
44,394.6
36,815.3
–
292,007.6
94.1
991.0
889.5
3,295.0
23,256.1
9,776.5
24,568.7
38,088.1
6,559.7
1,388.6
17,862.1
–
–
12,277.7
7,291.5
400,258.1
38,150.6
235,063.2
(129,633.9)
2,016.4
208,414.1
(18,121.7)
(36,815.7)
(21,637.4)
–
277,435.6
277,435.6
81,736.7
15,147.5
13,828.5
2,144.2
50,616.5
40,614.3
35,163.2
–
24,147.7
6,426.2
1,587.2
2,390.9
476.9
391.1
762.0
3,800.6
63.3
–
393,129.7
–
344,287.7
471.5
400,258.1
ASSETS
Non-current assets
Property, plant and equipment and
mineral rights
Other intangible assets
Deferred taxation
Long-term inventory
Long-term receivables
Goodwill (note 2)
Investments
Rehabilitation funds
Current assets
Inventories
Current taxation asset
Trade and other receivables
Current portion of long-term receivables
Derivative financial 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 – financial institutions
Long-term liabilities – other
Deferred taxation
Current liabilities
Trade and other payables
Derivative financial liabilities
Current portion of long-term liabilities –
financial institutions
Current portion of long-term liabilities –
other
Current taxation liability
Liabilities directly associated with assets
held for sale
Total equity and liabilities
Unaudited
30 June 2019
R million
Unaudited
30 June 2018
R million
Unaudited
30 June 2017
R million
5,113.4
4,360.0
4,631.1
4,299.4
9.2
30.1
8.7
14.4
303.5
95.8
352.3
421.9
80.4
26.6
212.6
27.1
–
75.2
–
5,535.3
318.8
2,261.4
–
24.6
699.3
(140.6)
(399.2)
(154.7)
(24.7)
2,584.9
2,584.9
2,051.3
222.2
1,543.4
24.3
261.4
899.1
505.8
12.9
340.0
33.7
6.7
–
5,535.3
3,488.3
0.6
112.3
10.3
24.0
303.5
56.7
364.3
363.8
48.9
12.5
268.6
17.2
4.0
12.6
–
4,723.8
318.8
2,261.4
–
24.6
161.4
(140.6)
(399.2)
(154.7)
(55.0)
2,016.7
2,016.7
2,097.9
273.4
1,548.0
17.0
259.5
609.2
505.1
–
88.2
5.4
10.5
3,810.7
1.2
12.9
11.6
43.0
303.5
127.6
320.6
497.0
85.6
18.1
233.1
–
–
160.2
95.2
5,223.3
318.8
2,261.4
–
17.2
1,867.1
(140.6)
(548.6)
(154.7)
–
3,620.6
3,620.6
1,066.7
197.7
180.5
28.0
660.5
529.8
458.7
–
20.7
49.6
0.8
–
4,723.8
6.2
5,223.3
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43
in the annual financial statements.
Note 2: Goodwill has been restated in the prior financial year. Refer to note 44 in the annual financial statements.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
43
PERFORMANCE REVIEW
Assets
Property, plant and equipment and mineral rights
The movement in property, plant and equipment and mineral rights comprised capital expenditure for the year of USD56.7 million (2018: USD128.4 million),
a depreciation charge of USD16.1 million (2018: USD14.9 million) and an impairment reversal of USD17.8 million (2018: impairment charge
USD138.6 million).
Deferred taxation
Deferred taxation decreased to USD2.1 million (2018: USD8.2 million) as a result of:
◗ The utilisation of assessed losses at Evander Mines following the successful commissioning of Elikhulu in September 2018
◗ A reduction in the gold mining deferred taxation rates.
Investments
Investments increased to USD6.8 million (2018: USD4.1 million) following an increase in the fair value of shares held in MC Mining.
Inventories
Inventories increased to USD5.7 million (2018: USD3.6 million) due to increased consumable stock on hand to support Elikhulu.
Trade and other receivables
Trade and other receivables decreased to USD15.1 million (2018: USD19.6 million) as a result of:
◗ A decrease in the VAT receivable year-on-year following the commissioning of Elikhulu.
Cash and cash equivalents
Cash and cash equivalents increased to USD5.3 million (2018: USD0.9 million) and total debt facilities increased to USD135.2 million
(2018: USD118.9 million) resulting in an increase in net debt to USD129.9 million (2018: USD118.0 million). Net debt increased as the group’s
debt facilities were utilised to complete Elikhulu’s construction in the current financial year.
Capital and reserves
Capital and reserves increased to USD183.6 million (2018: USD147.0 million) as a result of:
◗ An increase in the group’s retained earnings of USD38.0 million resulting from profit after taxation
◗ A fair value gain adjustment through other comprehensive income of USD2.3 million (2018: USD4.0 million).
Li abilities
Long-term provisions
Long-term provisions decreased to USD15.8 million (2018: USD19.9 million) following the acceleration of certain rehabilitation projects at Evander Mines.
Liabilities – financial institutions
Liabilities – financial institutions increased USD133.8 million (2018: USD119.3) as a result of:
◗ The non-current portion of the RCF decreased to USD52.8 million (2018: USD56.7 million). USD9.9 million was classified as a current liability
◗ The non-current portion of the Elikhulu term loan facility increasing to USD56.9 million (2018: USD56.1 million). The facility was utilised to complete the
construction of Elikhulu
◗ The current portion of the Elikhulu term loan facility increasing to USD14.2 million (2018: nil).
Liabilities – other
Liabilities – other increased to USD4.1 million (2018: USD1.6 million), predominantly due to an increase in the cash-settled share option liability
which increased to USD3.7 million (2018: USD1.5 million) of which USD2.3 million (2018: USD0.3 million) was classified as a current liability in the current
financial year.
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44
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2019
Consolidated
Audited
30 June 2019
USD thousand
Restated
(note 1)
Audited
30 June 2018
USD thousand
Cash flow from operating activities
Net cash generated by/(utilised in) operating activities before
dividend, taxation, royalties, and net finance costs and income
Net dividend paid (note 2)
Income taxation paid (note 3)
Royalties (paid)/refund (note 3)
Finance costs paid (note 3)
Finance income received
Net cash generated by/(utilised in) operating activities
Cash flow from investing activities
Additions to property, plant and equipment and mineral rights
Additions to other intangible assets
Repayments/(advances) of long-term loans receivable
Rehabilitation funds withdrawal/(contributions)
Proceeds from disposal of investment
Proceeds from disposals of property plant and equipment
and mineral rights
Net cash utilised in investing activities
Cash flow from financing activities
Borrowings raised
Borrowings repaid
Proceeds from disposal of treasury shares
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
5,344.7
(11,030.0)
(2,384.0)
749.8
(7,103.4)
1,027.6
(13,395.3)
(124,698.6)
(23.3)
(517.9)
(2,038.9)
6,317.9
1.2
(120,959.6)
119,455.3
(7,782.1)
11,944.3
123,617.5
(10,737.4)
12,277.7
(618.5)
921.8
56,889.0
–
(3,847.0)
(649.9)
(15,014.8)
329.4
37,706.7
(55,115.7)
(16.3)
286.0
2,585.4
–
466.3
(51,794.3)
21,494.0
(3,523.6)
–
17,970.4
3,882.8
921.8
536.6
5,341.2
Consolidated
Unaudited
30 June 2019
R million
Restated
(note 1)
Unaudited
30 June 2018
R million
815.9
–
(54.1)
(9.3)
(214.7)
4.7
542.5
(782.1)
(0.2)
4.1
36.7
–
6.6
(734.9)
305.0
(50.0)
–
255.0
62.6
12.6
–
75.2
63.7
(148.9)
(31.6)
8.3
(91.3)
13.2
(186.6)
(1,601.4)
(0.3)
(6.5)
(26.2)
89.0
–
(1,545.4)
1,535.0
(100.0)
149.4
1,584.4
(147.6)
160.2
–
12.6
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43 in
the annual financial statements.
Note 2: Net dividend paid represents the total dividend paid less the reciprocal dividend received from PAR Gold. Refer to the dividend note 11 and the related parties note 40 in the
annual financial statements.
Note 3: The income taxes, royalties and finance costs paid and received have been disclosed in the face of the statement of cash flows in the current and prior financial year.
Net cash generated by/(utilised in) operating activities
Cash generated by/(utilised in) from operations improved to USD37.7 million (2018: USD13.4 million). The cash generated by operations was supported by
Barberton Mines’ improved operational performance and the commissioning of Elikhulu. In the prior financial year, the group paid a net dividend of
USD11.0 million.
Net cash utilised in investing activities
The cash outflows from investing activities decreased to USD51.8 million (2018: USD121.0 million), largely due to:
◗ Capital expenditure incurred of USD55.1 million (2018: USD124.7 million) of which USD37.7 million (2018: USD97.8 million) was in relation to the
construction of Elikhulu
◗ In the prior financial year, the group received cash from the disposal of Phoenix Platinum of USD6.3 million.
Net cash generated by financing activities
Net cash generated by financing activities decreased to USD18.0 million (2018: USD123.6 million), largely due to the lower utilisation of the group’s
debt facilities for the construction of Elikhulu.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
45
PERFORMANCE REVIEW
FINANCIAL RISK MANAGEMENT
The group manages its financial risk by means of a centralised treasury function housed in 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. The group 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. The rand gold price is one of the major risks that directly impacts the group’s
financial results. To manage this risk during periods of peak debt, a number of zero cost collar derivatives structures were entered into to reduce
the negative cash flow impact of a potential decline in the rand gold price. As at 30 June 2019, the group held the following derivative positions:
Remaining term
1 July 2019 − 31 December 2019
1 January 2020 − 30 June 2020
Volume
(oz)
25,000
20,000
Put
(R/kg)
594,000
615,000
Call
(R/kg)
666,008
740,287
These derivatives secure an average gold price of R594,000/kg on 25,000oz and limited the group’s participation in gold price movements to an
average price of R666,008/kg for the first half of the 2020 financial year. The second half of the 2020 financial year is secured by an average gold
price of R615,000/kg on 20,000oz and limits our participation in gold price movements to an average price of R740,287/kg.
Net debt*
Total debt facilities utilised as at 30 June 2019 increased to USD135.2 million (2018: USD118.9 million), and cash holdings increased to
USD5.3 million (2018: USD0.9 million), resulting in an increase in net debt to USD129.9 million (2018: USD118.0 million). Net debt* increased
as the group’s debt facilities were utilised to construct Elikhulu.
Summary of utilised debt facilities:
Financial instruments
RCF
Elikhulu term
loan facility
Total
30 June 2019
USD million
30 June 2018
USD million
30 June 2019
USD million
30 June 2018
USD million
30 June 2019
USD million
30 June 2018
USD million
30 June 2019
USD million
30 June 2018
USD million
Non-current portion
Current portion
Total
–
0.9
0.9
–
(0.3)
(0.3)
35.4
27.8
63.2
56.7
6.4
63.1
56.9
14.2
71.1
56.1
–
56.1
92.3
42.9
135.2
112.8
6.1
118.9
Note: the amounts above exclude IFRS 9 accounting adjustments of USD0.6 million (2018: nil). Financial instruments have been included in net
debt as defined in the group’s debt facility agreement.
* Refer to
APMs on
pages 220 to 225.
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46
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
FINANCIAL DIRECTOR’S REVIEW continued
Revolving credit facility and term debt facility
We have restructured the group’s R1 billion RCF that provides the group with access to a RCF to fund working capital requirements. The term
facility, which was used to fund the capital expenditure of Elikhulu, was unaffected by the restructuring of the RCF. As a consequence of the
restructure, the covenants of the group’s term facilities (RCF and Elikhulu term loan facility) were renegotiated.
The group’s covenants have improved year-on-year as summarised below:
Net debt to equity ratio*
Net debt to net adjusted EBITDA ratio*
Interest cover ratio*
Debt service cover ratio*
Measurement
30 June 2019
30 June 2018
Must be less than 1:1
At the following measurement dates, must be less than:
30 June 2020 2.5:1
30 June 2021 2:1
30 June 2022 1.5:1
At the following measurement dates, must be greater than:
30 June 2020 4:1
30 June 2021 4.5:1
30 June 2022 5:1
Must be greater than 1.3 times
0.7
2.2
4.1
1.4
0.8
3.6
4.6
4.1
The group’s restructured R1 billion RCF is provided by a consortium of South African banks and has a tenure to June 2022. The facility bears
interest at the one-month Johannesburg Inter-bank Acceptance Rate (JIBAR) rate plus a margin of 3.3% from 3 June 2019 (2018: JIBAR plus a
margin of 3.0%). The increased interest rate is due to the restructure of the group’s term facility.
The restructured RCF became effective on 3 June 2019 and will amortise as follows:
Amortisation profile
Up to 15 April 2020
15 June 2020
15 December 2020
15 June 2021
15 September 2021
15 December 2021
15 March 2022
15 June 2022
RCF available
balance
R million
Repayments
R million
1,000
750
725
700
650
600
550
500
250
25
25
50
50
50
50
500
The repayment profile of Elikhulu’s term debt facility comprises quarterly, equal principal instalments of R50 million each, commencing in
September 2019. The facility bears interest at a three-month JIBAR rate plus a margin of 3.8% (2018: 3.8%).
* Refer to
APMs on
pages 220 to 225.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
47
PERFORMANCE REVIEW
Dividend payment
2019
2018
2017
2016
2015
R million
Nil
185,000
300,000
210,000
258,029
GOING CONCERN
Refer to the directors’ report on
further discussed.
page 129 where going concern is
LOOKING AHEAD
Our focus for the 2020 financial year is:
◗ Reducing operational cost and managing cash flow generation
◗ Strengthening the group’s financial position by reducing senior
debt and, in so doing, reducing financial risk and enhancing returns
to shareholders
◗ Reviewing of our procurement processes and strategy
◗
Increasing returns to shareholders following the reinstituted
dividend.
Deon Louw
Financial director
18 September 2019
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 and
risk committee, after taking into account the variability of group cash
flow generation, capital expenditure programmes and the board’s
aspiration to declaring an attractive dividend.
Capital allocation discipline
The board is conscious of the aspirations of our stakeholders for
sustainable 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
BTRP and Elikhulu 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.
Furthermore, 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.
DIVIDENDS
Proposed dividend for the financial year ended 30 June 2019
The board has analysed the group performance and proposed a final
dividend of R50 million or approximately USD3.4 million, equating
to 2.2375 ZAR cents per share or approximately 0.12660 pence per
share (0.15169 USD cents per share) at prevailing exchange rates.
This dividend remains subject to approval at the annual general
meeting on 28 November 2019.
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 organic 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 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 consider 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.
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48
PERFORMANCE REVIEW
FIVE-YEAR REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Operating performance
Gold mining tonnes milled
Gold tailings processed
Overall recovered grade
Gold sold
Gold spot price received
Total gold mining cash costs
Coal sold
PGE 6E sold
Unit
2019
2018
2017
2016
2015
(t)
(t)
(g/t)
(oz)
(USD/oz)
(USD/oz)
(t)
(oz)
311,606
13,392,400
0.4
171,706
1,266
891
–
–
509,955
3,551,280
1.4
160,444
1,301
1,162
–
2,5411
507,699
3,143,414
1.5
173,285
1,242
986
670,210
8,709
676,664
2,801,021
1.8
204,928
1,164
725
136,102
8,339
908,958
1,618,794
2.2
175,857
1,212
949
–
10,245
1 PGE sold up to the date of disposal of Phoenix Platinum (7 November 2017).
2019
2018
2017
2016
2015
R
million
USD
million
R
million
USD
million
R
million
USD
million
R
million
USD
million
R
million
USD
million
Statement of
profit or loss
Revenue and other
revenue
Cost of production
Operating profit
Total operations
Adjusted EBITDA*
Impairment
reversal/(cost)
Profit/(loss) after
taxation
Headline earnings*
Dividends
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
Statement of
cash flows
Net cash generated
from/(utilised in)
operating activities2
Capital expenditure2
Net movements
in cash and cash
equivalents2
3,088.9
(2,170.8)
687.8
217.7
(153.0)
48.5
1,875.8
(1,376.7)
413.9
146.0
(107.1)
32.2
2,158.2
(1,301.4)
744.4
158.8
(95.8)
54.8
3,460.1
(2,155.5)
1,066.6
238.6
(148.7)
73.6
2,539.4
(1,987.4)
353.4
221.8
(173.6)
30.9
805.7
56.8
416.0
32.4
816.0
60.0
963.5
66.4
512.1
44.7
251.4
17.9
(1,781.1)
(140.3)
(100.9)
(7.4)
–
–
(1.0)
(0.1)
537.9
322.6
–
38.0
22.9
–
(1,556.9)
229.1
(185.0)
(122.8)
17.8
(13.2)
309.9
315.6
(300.0)
22.8
23.2
(21.3)
547.0
547.1
(210.0)
37.7
37.7
(14.6)
210.2
213.6
(258.0)
18.4
18.7
(23.5)
5,113.4
421.9
–
2,584.8
2,051.4
899.1
363.2
30.0
–
183.6
145.7
63.9
4,359.9
363.8
–
2,016.7
2,097.9
609.1
317.8
26.5
–
147.0
152.9
44.4
4,631.2
497.0
95.2
3,620.5
1,066.7
530.0
354.9
38.1
7.3
277.4
81.7
40.6
4,450.9
434.2
1.3
2,874.4
1,372.4
639.6
303.2
29.6
0.1
194.4
93.5
43.6
4,147.1
332.3
–
2,738.5
1,309.5
431.4
358.5
27.3
–
242.7
107.7
35.5
–
–
–
–
6.2
0.5
–
–
–
–
542.5
782.3
37.7
55.1
186.5
1,601.7
13.4
(124.7)
48.4
613.1
3.6
45.1
581.4
302.0
40.1
20.8
95.7
352.0
8.4
30.7
62.6
3.9
(147.6)
(10.7)
108.5
8.0
(11.7)
(0.8)
(36.9)
(3.2)
1 Current assets as at 30 June 2016 excluded non-current assets held for sale of R1.3 million (USD0.1 million).
2 2017, 2016, 2015 net cash generated from/(utilised in) operating activities, capital expenditure and net movements in cash and cash equivalents have been translated at the average
ZAR:USD exchange rate prevailing for the respective financial year.
* Refer to
APMs on
pages 220 to 225.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
49
PERFORMANCE REVIEW
2019
2018
2017
2016
2015
Unit
R
USD
R
USD
R
USD
R
USD
R
USD
Key ratios
Return on
shareholders’ funds*
Net debt: equity
ratio*
Net debt: net
adjusted EBITDA*
Interest cover
Debt service cover*
Current ratio*
Statistics
Shares in issue
(million)
Weighted average
number of shares
in issue
Earnings per
share
Headline earnings
per share3*
Net asset value per
share*
Dividends per share
(%)
(ratio)
(ratio)
(ratio)
(ratio)
(ratio)
23.4
0.71
2.22
4.10
1.41
0.5
23.0
(55.2)
(57.9)
9.5
9.2
0.71
2.24
4.1
1.36
0.5
0.81
3.89
4.61
3.73
0.6
0.80
3.65
4.61
4.1
0.6
0.12
0.02
0.08
19.32
9.08
0.9
0.09
19.32
9.24
0.9
19.5
0.11
0.35
34.30
–
0.7
16.4
0.11
0.35
34.73
–
0.7
7.7
7.6
0.12
0.11
0.63
22.38
–
0.8
0.59
22.38
–
0.8
(number)
2,234.7
2,234.7
2,234.7
1,943.2
1,831.5
(number)
1,928.3
1,809.7
1,564.3
1,811.4
1,830.4
(cents)
27.89
1.97
(86.03)
(6.79)
19.81
1.46
30.20
2.08
11.48
(cents)
16.80
1.19
12.66
0.99
20.17
1.48
30.20
2.08
11.67
1.00
1.02
(cents)
(cents)
134.05
–
9.52
–
104.58
8.28
7.62
0.60
201.33
15.44
15.43
1.10
190.76
11.47
14.44
0.80
149.52
14.10
13.25
1.29
3 2017, 2016 and 2015 headline earnings have been translated at the average ZAR:USD exchange rate prevailing for the respective financial year.
2019
2018
2017
2016
2015
Shares traded
R
million
GBP
million
R
million
GBP
million
R
million
GBP
million
R
million
GBP
million
R
million
GBP
million
Value of shares traded
680.9
19.65
1,702.8
70.6
1,920.1
164.5
1,540.6
58.2
1,266.7
64.3
2019
2018
2017
2016
2015
Unit
JSE
AIM
JSE
AIM
JSE
AIM
JSE
AIM
JSE
AIM
(million)
418.7
222.8
952.1
639.1
623.7
932.6
650.7
461.6
573.2
527.9
(%)
18.74
9.97
42.6
28.6
32.1
46.6
33.5
25.5
31.3
28.8
(number)
23,424
14,449
5,824
19,082
16,217
34,020
35,926
20,784
29,855
21,221
Volume of shares
traded
Volume traded
as percentage of
number in issue
Number of
transactions
2019
2018
2017
2016
2015
Cents
Pence
Cents
Pence
Cents
Pence
Cents
Pence
Cents
Pence
Price earnings*
Dividend yield*
(ratio)
(%)
Traded prices
Last sale in year
High
Low
Average price per share traded
6.7
–
186.0
215.0
125.0
161.7
6.5
–
10.0
10.8
6.9
8.8
(1.6)
4.2
(1.4)
4.0
11.9
5.0
135.0
285.0
105.0
197.0
7.1
15.8
6.6
11.2
236.0
469.0
224.0
308.3
12.0
4.9
13.7
24.3
13.8
17.8
12.4
5.1
375.0
400.0
122.0
224.6
13.5
4.3
19.0
19.0
6.3
12.4
15.7
6.3
180.0
278.0
180.0
222.3
14.9
6.7
9.5
15.5
9.5
12.2
* Refer to
APMs on
pages 220 to 225.
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50
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
OPERATIONAL AND PERFORMANCE REVIEW
BARBERTON MINES
SALES AND PRODUCTION
Gold sales from the Barberton complex increased by 9.6% to
99,363oz (2018: 90,629oz).
◗ Underground and surface operations increased by 3.1% to
75,356oz (2018: 73,125oz)
◗ BTRP production increased by 37.2% to 24,007oz
(2018: 17,504oz), due to an improved tonnage throughput and
recoveries following the successful commissioning of the BTRP
regrind mill in May 2018.
All-in sustaining costs per kilogramme increased by 5.4% to
R491,605/kg (2018: R464,690/kg) and in USD per ounce terms,
decreased by 4.1% to USD1.078/oz (2018: USD1,124/oz) following
an increase in gold production.
◗ Barberton Mines’ underground and surface operations all-in
sustaining cost per kilogramme increased by 12.0% to
R567,947/kg (2018: R507,130/kg) and in USD per ounce terms,
increased by 1.5% to USD1,245/oz (2018: USD1,227oz)
◗ BTRP’s all-in sustaining cost per kilogramme decreased by 12.3%
to R251,973/kg (2018: R287,390/kg) and in USD per ounce
terms, decreased by 20.5% to USD552/oz (2018: USD695/oz).
The establishment of a third high-grade platform in the Fairview
11-block is anticipated within the first quarter of the 2020 financial
year, which is expected to further improve mining flexibility.
Fairview Mine saw an increase in free gold, and the group is
installing a new gravity circuit at a cost of approximately R18 million
(USD1.3 million) to improve Fairview Mines’ free gold recovery and
further enhance operational efficiencies. The expected pay-back on
the project falls within two years, emphasising the added value the
project will provide to Barberton Mines.
ROYAL SHEBA PROJECT UPDATE
Extensive feasibility work was completed on Barberton Mines’ Royal
Sheba project. Due to the group’s disciplined capital allocation criteria
and the capital cost estimates to develop this mine, Pan African
Resources will not pursue the Royal Sheba project on a stand-alone
basis. The existing Barberton Mines processing plant infrastructure
can be upgraded to process ore from this orebody. The benefits of
this approach are the ability to expedite the environmental licensing
process, shorten the timeline to production, enhance returns from
mining this orebody and negate the requirement for external capital
funding. We look forward to updating the market on this project in
the months ahead.
SUB-VERTICAL SHAFT UPDATE
Development of the top and bottom access for the sub-vertical
shaft is progressing according to plan, with our focus in 2020 on
the following:
◗ Completion of all preparatory development for the sub-vertical
shaft
◗ Establishment of sufficient hoisting flexibility to cater for the
additional tonnages when reaming of the shaft commences in
the 2021 financial year.
Jan Thirion
General manager
Ounces
99,363
90,629
98,508
113,281
105,776
Tonnes
1,408,187
1,096,798
1,068,606
1,227,598
1,232,376
G/t
2.2
2.6
2.9
2.9
2.7
G/t
8.0
9.6
9.0
9.8
9.7
Gold sold
2019
2018
2017
2016
2015
Total tonnes milled and processed
2019
2018
2017
2016
2015
Total recovered grade
2019
2018
2017
2016
2015
Underground recovered grade
2019
2018
2017
2016
2015
The establishment of a third high-grade
platform in the Fairview 11-block is
anticipated within the first quarter of the
2020 financial year, which is expected to
further improve mining flexibility.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
51
PERFORMANCE REVIEW
Barberton Mines’ goal is to reposition
its underground operations as low-cost
production by focusing on good quality, safe
and sustainable ounces through optimisation
of underground and plant infrastructure.
Evander Mines – 7 Shaft headgear
COST OF PRODUCTION
Production costs increased by 3.3% to USD92.0 million
(2018: USD89.1 million), mainly impacted by the following:
◗ Security costs increased significantly by 39.5% to USD5.3 million
(2018: USD3.8 million)
◗ Salaries and wages increased by 0.2% to USD40.9 million
(2018: USD40.8 million). In rand terms, salaries and wages
increased by 10.5% to R579.7 million (2018: R524.7 million)
following the three-year wage agreement reached during
September 2018
◗ Electricity costs increased by 4.2% to USD10.0 million
(2018: USD9.6 million) or by 15.0% to R142.5 million
(2018: R123.9 million) in rand terms due to annual tariff increases.
CHALLENGES
Gold production was impacted by operational disruptions from
community unrest which resulted in 20 lost production days. This was
an improvement on the 58 days lost in the prior financial year owing
to increased community engagement efforts.
Illegal mining negatively affects our gold production and the safety
and security of our employees, which in turn impacts revenues
and security costs. During the 2019 financial year, more than 2,500
suspected criminals were arrested at Barberton Mines for theft of
gold-bearing material and other commodities. To better control and
monitor this risk, the group appointed a risk and security executive
and approved a new integrated security strategy with a multi-faceted
approach, including the increased use of modern technology.
CAPITAL EXPENDITURE
Total capital expenditure at Barberton Mines decreased by 1.2%
to USD16.2 million (2018: USD16.4 million) comprising:
◗ Sustaining capital expenditure of USD9.9 million
(2018: USD8.7 million)
◗ Expansion capital expenditure of USD6.3 million
(2018: USD7.7 million).
The increase in capital expenditure in the current financial year
was attributed to the Royal Sheba project which included
exploration drilling and ongoing optimisation costs (R28.0 million or
USD2.0 million) and investment in a gravity circuit for the Fairview
plant (R12.6 million or USD0.9 million), as well as various surface
and underground drilling and exploration projects. These projects,
together with improvements to our underground ore handling and
processing plant infrastructure, have the potential to boost Barberton
Mines’ production in the coming years.
LOOKING AHEAD
Our focus remains on continuing to improve our safety performance,
delivering quality ounces consistent with our production guidance of
approximately 100,000oz per annum and advancing value-accretive
growth opportunities.
We have a demonstrable record of replenishing our Mineral
Resources through effective brownfield exploration and look to
organic growth projects, such as the Royal Sheba project, to further
enhance the sustainability of the group’s operations.
Our primary focus areas for 2020 are:
◗ Reduction of underground unit costs
◗ Optimisation of Barberton Mines’ infrastructure utilisation by
advancing the Royal Sheba project, the Fairview sub-vertical shaft
project and Project Dibanisa
Investment in a gravity circuit at Fairview Mine to improve free
gold recoveries.
◗
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52
OPERATIONAL AND
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
OPERATIONAL AND PERFORMANCE REVIEW continued
EVANDER MINES
SALES AND PRODUCTION
Evander Mines’ sales increased by 3.6% to 72,343oz
(2018: 69,815oz) comprising:
◗ Elikhulu
– Achieved its inaugural gold pour on 16 August 2018 and was
commissioned ahead of schedule during September 2018
– Processed 10,848,209 tonnes from September 2018
to June 2019
– Achieved a recovered grade of 0.13g/t
– Achieved gold sales of 45,465oz which excludes pre-
production gold of 736oz capitalised as pre-production
income and gold inventory locked up in the Elikhulu circuit.
The production figures include the 200,000 tonnes per month
throughput from ETRP, which was incorporated into Elikhulu,
increasing Elikhulu’s processing capacity to 1.2 million tonnes
per month from January 2019.
◗ Remnant mining and surface sources which contributed a further
26,878oz (2018: 21,250oz).
All-in sustaining costs per kilogramme decreased by 42.6% to
R394,193/kg (2018: R687,098/kg) and in USD per ounce terms
decreased by 48.0% to USD864/oz (2018: USD1,662/oz) following
an increase in gold production. Elikhulu’s all-in sustaining cost
per kilogramme was R269,442/kg and in USD per ounce terms,
USD587oz.
The independent feasibility study into the merits of mining Evander
Mines’ 8 Shaft pillar and high-grade areas in proximity to the pillar was
completed and the board of directors approved the development of
this project, with first gold produced in August 2019. Evander Mines’
8 Shaft pillar will replace the current remnant underground mining
and vamping production and is expected to contribute an average of
20,000oz to 30,000oz per annum over the next three financial years
with approximately 20,000oz forecast for the 2020 financial year.
COST OF PRODUCTION
Evander Mines’ cost of production for continuing operations
increased to USD60.9 million (2018: USD18.0 million). The primary
cost drivers were:
◗ Elikhulu’s cost of production of USD25.4 million (2018: nil)
◗ Remnant mining and surface sources mining and processing costs
increased to USD35.5 million (2018: USD18.0 million).
Lazarus Motshwaiwa
General manager
Evander Mines
Oriel Shikwambana
General manager
Elikhulu
Ounces
72,343
69,815
74,777
91,647
70,081
Gold sold
2019
2018
2017
2016
2015
Total tonnes milled and processed
Tonnes
2019
2018
2017
2016
2015
Total recovered grade
2019
2018
2017
2016
2015
Elikhulu recovered grade
2019
2018
2017
2016
2015
11,984,213
2,454,482
2,582,507
2,250,267
1,295,376
G/t
0.2
0.9
0.9
1.3
1.7
G/t
0.13
–
–
–
–
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
53
PERFORMANCE REVIEW
Barberton Mines – BTRP metallurgical plant
CAPITAL EXPENDITURE
Total capital expenditure at Evander Mines was USD40.4 million
(2018: USD111.9 million) comprising:
◗ Sustaining capital expenditure of nil (2018: USD13.7 million)
◗ Expansion capital expenditure of USD40.4 million
(2018: USD98.2 million).
The expansionary capital both in the current and prior year related
predominantly to the development of Elikhulu.
CHALLENGES
Production was impacted following the initial instability of the re-
mining feed to Elikhulu. Subsequent optimisation of flow density and
throughput stabilised the re-mining feed.
The cessation of large-scale underground operations at Evander
Mines, and the retrenchment of affected employees in the prior
financial year, resulted in increased unemployment in the communities
surrounding Evander Mines, which gave rise to increased illegal mining
and theft.
A revised integrated security strategy was implemented, resulting
in access points to old mine shafts being closed, thereby limiting
unauthorised access of illegal miners to underground mining areas.
LOOKING AHEAD
Our goal for the year ahead is to achieve optimal performance in
our operations, both surface and underground. We are focused on
gaining maximum value from our current assets through operational
optimisation.
Our focus areas for the year ahead include:
◗ Achieving continued low-risk, high-margin performance
from Elikhulu
◗ Mining the Evander Mines’ 8 Shaft pillar
◗ Reviewing the merits of expediting the Egoli project and
assessing funding options.
Evander Mines’ 8 Shaft pillar is expected
to contribute an average of 20,000oz
to 30,000oz per annum over the next
three financial years.
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54
PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
OPERATIONAL PRODUCTION
Mining operations
Tailings operations
Total operations
Year
ended
30 June
Barberton
Mines
Evander
Mines
Units
Total
BTRP
ETRP
Elikhulu
Total
Barberton
Mines
total
Evander
Mines
total
Group
total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(g/t)
(g/t)
(%)
(%)
(%)
(%)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
247,635
63,971
311,606
237,831
272,124
509,955
45,629
–
–
–
45,629
–
293,264
63,971
357,235
237,831
272,124
509,955
–
–
–
–
–
–
–
–
–
327,109
–
327,109
–
–
–
–
–
–
–
–
–
247,635
63,971
311,606
237,831
272,124
509,955
45,629
–
45,629
327,109
–
327,109
327,109
–
293,264
63,971
357,235
327,109
237,831
599,233
837,064
–
–
–
–
–
–
–
–
–
–
–
–
– 1,114,923
918,809
10,848,209
12,881,941
1,114,923
11,767,018
12,881,941
–
–
–
858,967
1,855,249
–
–
153,224
327,109
–
–
–
2,714,216
858,967
1,855,249
2,714,216
153,224
327,109
–
–
153,224
153,224
327,109
327,109
– 1,114,923
1,072,033
10,848,209
13,035,165
1,114,923
11,920,242
13,035,165
–
858,967
2,182,358
–
3,041,325
858,967
2,182,358
3,041,325
293,264
63,971
357,235
1,114,923
1,072,033
10,848,209
13,035,165
1,408,187
11,984,213
13,392,400
237,831
272,124
509,955
858,967
2,182,358
–
3,041,325
1,096,798
2,454,482
3,551,280
8.0
9.6
94
93
–
–
8.2
5.6
94
98
–
–
8.0
7.4
94
95
–
–
72,864
16,879
89,743
73,125
48,565
121,690
2,492
–
–
–
–
–
–
–
–
–
–
–
2,492
–
–
–
–
–
0.7
0.6
0.3
0.3
–
–
45
46
–
–
–
–
–
–
49
39
–
–
–
–
0.1
–
–
–
49
–
–
–
–
–
0.2
0.4
–
–
48
44
–
–
–
–
2.2
2.6
94
93
45
46
0.2
0.9
94
98
49
39
0.4
1.4
94
95
48
44
72,864
16,879
89,743
73,125
48,565
121,690
2,492
–
–
–
2,492
–
24,007
17,504
–
–
3,762
7,128
6,237
14,122
46,201
73,970
24,007
49,963
73,970
–
–
–
24,632
17,504
6,237
14,122
–
–
7,128
6,237
24,632
6,237
14,122
14,122
75,356
16,879
92,235
24,007
9,999
46,201
80,207
99,363
73,079
172,442
73,125
48,565
121,690
17,504
21,250
–
38,754
90,629
69,815
160,444
75,356
16,879
92,235
24,007
9,999
45,465
79,471
99,363
72,343
171,706
73,125
48,565
121,690
17,504
21,250
–
38,754
90,629
69,815
160,444
(R/kg)
577,902
573,722
577,137
578,146
560,446
581,920
578,078
577,961
577,039
577,573
(R/kg)
534,288
537,161
535,434
535,055
555,870
–
546,469
534,436
542,856
538,100
(USD/oz)
(USD/oz)
1,267
1,292
1,258
1,299
1,265
1,295
1,267
1,294
1,228
1,344
1,267
–
1,267
1,322
1,267
1,293
1,265
1,299
1,266
1,301
(R/kg)
477,109
803,183
536,781
251,624
265,210
254,925
255,222
422,630
384,266
406,466
(R/kg)
435,368
695,246
539,082
285,593
305,108
–
296,294
406,441
576,497
480,439
(R/kg)
567,947
806,630
611,626
251,973
265,210
269,442
263,633
491,605
394,193
450,564
(R/kg)
507,130
853,797
645,481
287,390
306,120
–
297,661
464,690
687,098
561,468
(R/kg)
602,601
879,188
653,216
262,779
265,210
647,489
483,175
520,497
648,711
574,516
(R/kg)
513,553
963,882
693,274
443,188
306,120
–
368,029
499,963
763,675
614,713
Tonnes milled
– underground
Tonnes milled
– surface
Tonnes milled – total
underground and surface
Tonnes processed
– tailings (note 4)
Tonnes processed
– surface feedstock
Tonnes processed
– total tailings and
surface feedstock
Tonnes milled and
processed – total
Overall recovered
grade
Overall recovery
– underground
Overall recovery
– tailings
Gold produced
– underground
Gold production
– surface operations
Gold produced
– tailings
Gold produced
– surface feedstock
Gold produced
– total
Gold sold – total
(note 1)
Average rand gold
price received
Average USD gold
price received
Rand cash cost*
Rand all-in sustaining
costs*
Rand all-in cost *
* Refer to
APMs on
pages 220 to 225.
0792 PAR IAR Front Part 2-FA.indd 54
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
55
PERFORMANCE REVIEW
Mining operations
Tailings operations
Total operations
Year
ended
30 June
Barberton
Mines
Evander
Mines
Units
Total
BTRP
ETRP
Elikhulu
Total
Barberton
Mines
total
Evander
Mines
total
USD cash cost*
USD all-in sustaining
cost*
USD all-in cost*
Rand cash cost per
tonne*
Capital expenditure
Revenue
Cost of production
All-in sustaining cost*
All-in cost*
Adjusted EBITDA*
Average exchange rate
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(R/t)
(R/t)
(R million)
(R million)
1,046
1,053
1,245
1,227
1,321
1,242
3,813
4,163
221.2
125.0
1,761
1,682
1,768
2,065
1,927
2,331
6,592
3,859
38.1
181.5
1,177
1,304
1,341
1,561
1,432
1,677
4,311
4,001
259.3
306.5
(R million)
1,354.5
301.2
1,655.7
(R million)
1,215.2
811.4
2,026.6
(R million)
1,118.3
421.7
1,540.0
(R million)
990.2
1,050.2
2,040.4
(R million)
1,331.2
423.5
1,754.7
(R million)
1,153.4
1,289.7
2,443.1
(R million)
1,412.4
461.6
1,874.0
(R million)
1,168.0
1,456.0
2,624.0
(R million)
277.9
(32.9)
245.0
(R million)
247.0
(270.0)
(23.0)
(R/USD)
(R/USD)
14.19
12.85
14.19
12.85
14.19
12.85
552
691
552
695
576
1,072
169
181
8.1
85.4
431.7
291.3
187.9
155.5
188.1
156.5
196.2
241.3
178.0
94.6
14.19
12.85
581
738
581
740
581
740
77
92
–
–
174.3
367.4
82.5
201.7
82.5
202.3
82.5
202.3
65.0
150.6
14.19
12.85
555
–
587
–
559
717
578
720
1,410
1,059
–
33
–
890
48
117
534.6
542.7
1,256.1
1,341.5
926
983
1,078
1,124
1,141
1,209
928
1,045
229.3
210.4
Group
total
891
1,162
988
1,358
1,259
1,487
162
675
842
1,394
864
1,662
1,422
1,847
72
510
572.7
802.0
1,437.6
1,648.0
822.9
1,428.9
1,786.2
1,298.4
3,084.6
–
658.7
1,506.5
1,178.8
2,685.3
360.5
630.9
1,306.2
864.7
2,170.9
–
357.2
1,145.7
1,251.9
2,397.6
381.0
651.6
1,519.3
887.0
2,406.3
–
358.8
1,309.9
1,492.0
2,801.9
915.6
1,194.3
1,608.6
1,459.7
3,068.3
–
443.6
1,409.3
1,658.3
3,067.6
441.4
–
14.28
12.85
684.4
245.2
14.19
12.85
455.9
341.6
14.19
12.85
473.5
(119.4)
14.19
12.85
929.4
222.2
14.19
12.85
Note 1: Gold sold excludes 736oz produced by Elikhulu during August 2018. The associated gold revenue and costs were capitalised for accounting purposes, prior to Elikhulu achieving
commercial production on 1 September 2019.
* Refer to
APMs on
pages 220 to 225.
Fairview underground conveyor
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES
AND MINERAL RESERVES REPORT
Hendrik Pretorius
Group project geologist
ABOUT THIS ABRIDGED REPORT
Pan African Resources uses the internationally
recognised procedures and standards of
the SAMREC Code, 2016 edition.
SCOPE OF REPORT
This version of the Pan African Resources Abridged Mineral Resources and
Mineral Reserves Report 2019 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 2019. The entire suite of documents, including the full Mineral
Resources and Mineral Reserves report, is available on our website at
www.panafricanresources.com as published on 28 October 2019.
The Mineral Resource component is inclusive of Mineral Reserves, unless
otherwise stated. Information in this report is presented by operation, mine
or project on an attributable basis. The tables and graphs used 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
◗ Mineral Resource and Mineral Reserve risk tables
◗ Appointed competent persons.
Matters discussed in detail in this abridged version
include regional geology, location, exploration
drilling and organic Mineral Reserve projects. More
detail on the resource estimation methodology,
classification criteria and modifying factors are
presented in the group’s Mineral Resource and
Mineral Reserve document, which is available
on our website at
Rounding of numbers in this document may result
in minor computational discrepancies.
www.panafricanresources.com.
REPORTING CODE
The guiding principle of the Mineral Resources
and Mineral Reserves report 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 reporting Mineral Resources
and Mineral Reserves, developed by the South
African Institute of Mining and Metallurgy as the
recommended guideline for Mineral Reserve
and Mineral Resource reporting for JSE-listed
companies. Furthermore, the group also complies
with JSE Section 12 and AIM Rules for Mining,
Oil and Gas Companies of the LSE during the
reporting of Mineral Resources and Mineral
Reserves.
PAN AFRICAN RESOURCES’ REPORTING
IN COMPLIANCE WITH THE SAMREC
CODE
In order 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 R700,000/kg
(USD1,534/oz at ZAR14.19:USD1). At our
underground mines, the optimal cut-off grade 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, 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 to optimise the economic cut-off
grade:
◗ Database inventory of all Mineral Resource
blocks
◗ An assumed gold price – R600,000/kg
(USD1,315/oz at ZAR14.19:USD1) for Mineral
Reserves
◗ Planned production rates for each mine
◗ Mine call factors based on current and
historical results
◗ Plant recovery factors based on current and
historical results
◗ Planned cash operating costs
◗ Anticipated capital requirements.
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PERFORMANCE REVIEW
Barberton Mines – chairlift at Fairview Mine
Mineral Reserves represent the portion of the Measured and
Indicated Mineral Resource above an economic cut-off in the
life-of-mine plan. These Mineral Reserves have been estimated
after considering all modifying factors affecting extraction. A range
of disciplines is 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.
The competent person for Pan African Resources, Hendrik Pretorius,
the group project geologist, signs off the Mineral Resources and
Mineral Reserves for the group. He is a member of the South African
Council for Natural Scientific Professions (SACNASP 400051/11 –
Management Enterprise Building, Mark Shuttleworth Street, Innovation
Hub, Pretoria, South Africa), as well as a member in good standing of
the Geological Society of South Africa (CSIR Mining Precinct, Corner
Rustenburg and Carlow Roads, Melville, South Africa). Hendrik has
16 years’ experience in economic geology and mineral resource
management (MRM). He is based at The Firs Office Building, 2nd
Floor, Office 204, corner Cradock and Biermann Avenues, Rosebank,
Johannesburg, South Africa. He holds a BSc (Hons) Geology from
the University of Johannesburg as well as a Graduate Diploma in
Engineering from the University of the Witwatersrand. Hendrik has
reviewed and approved the information contained in this document
as it pertains to Mineral Resources and Mineral Reserves and
has provided written confirmation to Pan African Resources that
the information is compliant with the SAMREC Code and, where
applicable, the relevant Table 1 of the SAMREC Code, and may be
published in the form and context in which it appears.
Hendrik is supported by key personnel and task experts for each discipline. Key personnel and their relevant experience are listed in the
table below:
Name
Designation
Operation
Group
Group
Bert van den Berg
Group mining
engineer
Barry Naicker
Group mineral
resource and
reserve manager
Roelf le Roux
Mineral resource
manager
Professional registration
and qualification
Mine Managers Association of South Africa, the
South African Institute of Mining and Metallurgy
BSc (Engineering) Mining engineering
Relevant
experience
>16 years
SACNASP (400234/10)
>18 years
MEng Mineral Resource Management
BSc (Hons) Geology
Barberton Mines
BSc (Hons) Geology
>31 years
Ronnie Fraser
Chief surveyor
Barberton Mines
Institute of Mine Surveyors South Africa
>46 years
Mine surveyors certificate of competency
Walter Seymore
Ore reserve
manager
Evander Mines
ND Geotechnology
>21 years
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
BARBERTON MINES
Regional geology and location
The mineralisation at Barberton Mines is classified as Achaean epigenetic hydrothermal lode gold deposits within a granite greenstone
terrain. The distribution and localisation of these orebodies in the Barberton Greenstone Belt can be largely attributed to the combined
influence of thermal metamorphism and structural deformation. The Barberton Greenstone Belt has produced approximately 11Moz of
gold since gold was discovered in this goldfield in the early 1880s. Barberton Mines has produced more than 75% of the total production
from the Barberton Greenstone Belt.
New Consort slimes dam
G
H
New Consort Mine
A
B
Bullion
,
0
0
0
0
4
+
X
,
0
0
0
5
4
+
X
,
0
0
0
0
5
+
X
Clutha Mine
Lilly Fault
To Kaapmuiden
Eureka Syncline
Thomas and Joe’s Luck
Margaret, Mamba and Eureka
Sheba Mine
Royal Sheba Mine
M
N
Sheba Fault
L
Sheba slimes dams
Ulundi Syncline
Fairview slimes dam
BTRP
Barberton Mines
Fairview Mine
Barberton Mines
BIOX
® Metallurgical Plant
K
To Nelspruit
0
2km
Eagles Nest Mine
Barbrook Fault
n
n i a
o
v
e
d D
n
e a
c
n
Fl o r e
LEGEND
Infrastructure
Main road
Town
Shaft
Mine authorisation boundary
New order prospecting area
Geology
Nelspruit Suite
Kaap Vallei Tonalite
Onverwacht Group
Jameson Schist Belt
Moodies Group
Fig Tree Group
Zwartkoppies formation
fault
Y-5,000
Y-10,000
Y-15,000
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PERFORMANCE REVIEW
The Barberton ores are mineralised shears with gold occluded in
sulphide minerals. The sulphides often occur as massive assemblages
in the shear structure. Lower-grade ore, in the wall rock, form
as a result of the alteration process during fluid flow and is
associated with disseminated sulphide minerals. A late stage of
gold mineralisation occurred in brittle fractures with the formation
of quartz veins. These quartz veins often contain free gold in
visible clusters.
The mining methods used at Barberton Mines’ underground
operations are semi-mechanised up-dip cut and fill and up-dip room
and stick. An estimated 16% to 18% of gold is recovered by sweeping
and vamping contractors focusing on worked-out areas and mining
high-grade pillars. Gold is extracted using the BIOX® gold extraction
process, an environmentally friendly process which uses bacteria to
release gold from the sulphide ore.
Barberton Mines’ mining right extends over approximately
7,250 hectares. Most of the surface rights that form part of
Barberton Mines’ mining area are owned by local government
(Department of Public Works) and are under the management of the
Mpumalanga Tourism and Parks Agency. Barberton Mines has had an
active lease agreement with the Department of Public Works of the
South African government since 2012. This lease agreement enables
Barberton Mines to continue using the surface areas for its approved
mine works programme.
Barberton Mines owns surface rights on the farms Fairview 542JU,
Portion 1 Bramber South 348JU, which adjoins the Fairview mining
right area, and Portion 1 of the farm Segalla 306 JU at New Consort.
Certain mine infrastructure, offices and operational tailings dams
are located on these properties. Fairview Mine properties consist
of approximately 3,000 hectares, of which approximately 4% of
the surface is currently disturbed by mining and mining-related
activities. The New Consort Mine property consists of approximately
2,500 hectares, of which 14% is currently disturbed by mining and
mining-related activities.
Barberton Mines has established an environmental management
programme. Each operation has an approved environmental
impact assessment, environmental management programme
and water-use licence. Barberton Mines’ discounted rehabilitation
provision, of USD3.0 million, (undiscounted USD5.1 million) is
funded by means of a Cenviro Solutions insurance investment
product underwritten by Centriq Insurance Company Limited, with
a current value of USD3.9 million. These funds are invested in a
portfolio comprising a combination of money market, capital market
and equity instruments. The aim is to provide the group with the
necessary liquidity for rehabilitation activities and preserve the value
of the rehabilitation capital. The audit and risk committee reviews the
performance of this portfolio on a quarterly basis.
Barberton Mines – Fairview – cleaning of newly smelted dorè bar
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
EVANDER MINES
Regional geology and location
Exploration in the area started in 1903 with the advent of
diamond drilling and progressed intermittently through various
major exploration phases up to the incorporation of the first mine
(Winkelhaak Mine) in 1955 within the Evander basin region of the
world-renowned Witwatersrand Supergroup. Since then, three
other mines were brought into production – namely Leslie Mine,
Bracken Mine and Kinross Mine.
Evander Mines (Leslie, Bracken, Winkelhaak and Kinross Mines)
exploits the Kimberley Reef in the Evander basin. The Kimberley
Reef is mined throughout the major gold mining districts within the
Witwatersrand Supergroup. Deposition models for gold within the
conglomeratic horizons follow a paleo-placer type sedimentological
deposition, along with winnowing, erosion and concentration of
gold-bearing footwall lithologies. Various studies have highlighted
the importance of hydrothermal activity of deposition and
remobilisation and enrichment within certain packages of the
Witwatersrand Supergroup.
Mining methods employed in the Evander basin are underground
conventional scraper mining and rail-bound equipment with some
trackless mechanised development (large-scale underground
operations ceased on 31 May 2018). Hydraulic mining of the Kinross
tailings dam is employed to pump material to the Elikhulu plant.
The gold is then extracted at a carbon-in-leach (CIL) hybrid plant.
Evander Mines is situated in Mpumalanga, approximately 120km
east-south-east from Johannesburg near the town of Secunda,
which hosts the Sasol II Plant. This operation exploits several coal
seams in the area.
Evander Mines’ mining right extends over approximately
31,783 hectares. Evander Mines owns a surface area of
6,676 hectares, of which 2,230 hectares is disturbed by mining
and mining-related activities. The surface activities are limited to
the three main shaft complexes: Kinross, Winkelhaak, and Leslie/
Bracken. There is also one TSF associated with each of the three
complexes. No surface exploration activities are being undertaken
at present.
Historically, mining involved underground operations from nine
shafts at the Kinross (ceased in May 2018), Winkelhaak and
Bracken/Leslie sections. Water abstraction is via both 7 Shaft and
8 Shaft in the Kinross section. Evander Mines also undertook
reworking of surface tailings via ETRP, which is now fully
incorporated into Elikhulu.
Evander Mines has established an approved environmental Impact
assessment, environmental management programme and water-
use licence, which includes Elikhulu. A rehabilitation strategy and
implementation plan was compiled and updated in 2017 to
rehabilitate dormant and non-productive areas.
Evander Mines’ discounted rehabilitation provision, USD12.8 million
(undiscounted USD18.5 million) is fully funded by means of a
Cenviro Solutions insurance investment product underwritten
by Centriq Insurance Company Limited with a current value of
USD21.2 million. These funds are invested in a portfolio comprising
a combination of money market, capital market and equity
instruments. The aim is to provide the group with the necessary
liquidity for the rehabilitation activities and preserve the value of
the rehabilitation capital. The audit and risk committee reviews the
performance of this portfolio on a quarterly basis.
Poplar Extension
Poplar
Leandra
Legend
Evander Mining Right - 126
Prospecting Right - 4272
Prospecting Right - 248
Taung Gold Mining Right
National Road
Regional Road
Railway Line
Town
Operational Shaft
Shaft
N17
Rolspruit
Evander South
E9
Evander South
Extension
E8
E10
Kinross
Egoli
Evander
E7
E5
E6
N17
Trichardt
Secunda
E1
E2
E3
Embalenhle
-2 910 000
-2 915 000
-2 920 000
-2 925 000
-2 930 000
-2 935 000
-2 940 000
-15 000
-10 000
-5 000
0
5 000
10 000
15 000
20 000
25 000
0
5
10
15
20
km
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
61
PERFORMANCE REVIEW
MINERAL TENURE
The group is committed to complying with the MPRDA. In this regard, Barberton Mines’ and Evander Mines’ mining rights are valid until
April 2021 and April 2038, respectively. On 23 August 2018, Barberton Mines submitted renewal applications to the South African Department
of Mineral Resources to extend the operation’s mining rights for a further 30 years, up to August 2048.
The DMR has responded to these renewal applications by stating that the renewals were lodged too early. The company has, however, taken
legal advice to the effect that the DMR should process the renewal applications in accordance with the South Africa Mineral and Petroleum
Resources Development Act 28 of 2002. Consequently, the company lodged an appeal against the decision of the DMR to delay the processing
of the renewal applications. This internal administrative process is not expected to impact on the company’s security of tenure with regard to its
mining rights.
It is noted that the Evander South Mineral Resource of 21.7Mt at 7.66g/t for 5.3Moz (11.6Mt at 8.88g/t for 3.3Moz are Indicated and 10.1Mt
at 6.25g/t for 2.0Moz are Inferred Mineral Resources) occurs on the Evander South prospecting right MP30/5/1/2/2/248 PR. This prospecting
right is being consolidated into the Evander Mines mining right MP30/5/1/2/2/126 MR through a Section 102, application which was lodged
in 8 December 2017.
Pan African Resources’ attributable gold Mineral Resources and Mineral Reserves as at 30 June 2019 are tabled below, with detail presented in
the group Mineral Resources and group Mineral Reserves sections of this report, respectively. Production statistics for the preceding years are
presented in this document (refer to
pages 54 and 55).
Total
Inferred
Indicated
Measured
Mineral Resources
Mineral Reserves
As at
30 June 2019
As at
30 June 2018
36.0Moz Au
12.3Moz Au
20.5Moz Au
3.1Moz Au
33.3Moz Au
10.2Moz Au
20.1Moz Au
3.0Moz Au
As at
30 June 2019
As at
30 June 2018
Total
10.9Moz Au
11.2Moz Au
Probable
Proved
9.5Moz Au
1.4Moz Au
10.23Moz Au
0.98Moz Au
All Mineral Resources and Mineral Reserves reported are within the group’s existing mining rights and prospecting rights.
MINERAL RESOURCE CLASSIFICATION
Barberton Mines
Measured Resource blocks are generally 20m on strike and 10m in
the dip direction of actual mining. Where blocks are defined adjacent
to a development end only, the grade and true width of the reef
in the block are estimated by calculating the arithmetic mean or
‘stretch average’ of the samples along the development end. If the
sample spacing is at the standard stope sampling grid of 3m, the
block value is derived by calculating the inverse weighted estimated
value of all available samples. If the sample interval is variable, the
block is assigned the inverse weighted estimate of the strip grades.
During ordinary kriging, a Measured Resource block is defined as a
block estimated within the modelled variogram range with a slope
of regression of not less than 70%, effectively reporting a Measured
Resource within 50m of sufficient representative sampling.
Indicated Resource blocks are defined where only diamond drill hole
samples and information are available. Both the grades and orebody
widths are either estimated by means of an inverse weighted
estimate or ordinary kriging. The Indicated Resource extends up to
the modelled variogram ranges of a sufficiently sampled area. Grades
and widths are mostly interpolated into the Indicated Resource
blocks as to extrapolation that occurs for Inferred Resource blocks.
The Inferred Resource blocks are characterised by an average grade
and width obtained from arithmetic means, Sichel’s-t estimates
and wide-range ordinary kriging. Inferred Resource blocks are
extrapolated to double the modelled variogram range or grade
continuity for each orebody.
Evander Mines
Grade estimates are kriged into 30m x 30m blocks for the Measured
Resources from point data within the modelled variogram ranges.
Indicated Mineral Resources are estimated into 60m x 60m parent
cells employing a regularised, declustered grid of samples on the
same basis. Estimation is conducted within the modelled variogram
ranges per geozone. Inferred Mineral Resources are estimated into
a 120m x 120m parent cell within the identified geozones, based on
the modelled variogram range from a regularised and declustered
data set on the same grid size. The Measured and Indicated Resource
models are then tested on kriging efficiency and slope of regression
and merged together with the inferred model to produce a
combined kriged block model.
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
MINERAL RESERVE CLASSIFICATION
Indicated Mineral Resources are converted to Probable Mineral Reserves due to the lower confidence, mainly in grade continuity, relative
to that of Measured Mineral Resources. In most instances Measured Mineral Resources are converted to Proved Mineral Reserves. Certain
Measured Mineral Resource blocks are not immediately accessible for mining and require further development or equipping. In these situations,
a Measured Mineral Resource block has been converted to a Probable Mineral Reserve.
GROUP MINERAL RESOURCE TABULATION
The total Mineral Resources for the group increased from 33.3Moz (331.2Mt at 3.13g/t) in June 2018 to 36.0Moz (335.8Mt at 3.13g/t)
in June 2019 – a gross annual increase of 2.7Moz (4.6Mt at 18.04g/t), or 8.0%.
As at 30 June 2019
Contained gold
Grade
g/t
1.84
2.93
5.90
3.33
Tonnes
gold
97.5
639.2
381.8
1,118.5
Tonnes
million
53.1
218.1
64.7
335.8
Mineral Resources
Moz
3.14
20.54
12.29
35.97
Tonnes
million
55.5
219
56.6
331.2
As at 30 June 2018
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
Category
Measured
Indicated
Inferred
Total
Resource reconciliation – gold ounce
0.17
0.28
0.02
0.23
3.22
–
0.14
33.30
35.97
z
o
M
40
35
30
25
20
15
10
5
0
30 June 2018
Mined during
2018/2019
Sheba and
Royal Sheba
New
Consort
Fairview
BTRP and
surface ore
Evander
Elikhulu
30 June 2019
Mineral Resource and reporting date Decrease in Mineral Resource Increase in Mineral Resource
Mineral Resources increased mainly due to cut-off grade changes at Evander Mines. The changes in the cut-off grade are impacted by
the higher gold price used in the cut-off grade estimations relative to the previous declarations (June 2019: R700,000/kg Au –
June 2018: R600,000/kg Au). Additional Inferred Mineral Resources were identified at the BTRP operation in the form of the
Camelot and Sheba TSFs.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
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PERFORMANCE REVIEW
GROUP MINERAL RESERVE TABULATION
Pan African Resources’ Mineral Reserves decreased from 11.2Moz (239.1Mt at 1.46g/t) in June 2018 to 10.9Moz (216.6Mt at 1.57g/t)
in June 2019 – a gross annual decrease of 0.28Moz (22.5Mt at 0.38g/t), or 2.5%.
As at 30 June 2019
Contained gold
Grade
g/t
1.22
1.64
1.57
Tonnes
gold
44.3
295.5
339.8
Tonnes
million
36.4
180.2
216.6
Mineral Reserves
Moz
1.42
9.50
10.92
Tonnes
million
48.4
190.7
239.1
As at 30 June 2018
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
Category
Proved
Probable
Total
Reserve reconciliation – gold ounce
0.17
0.15
0.01
0.02
0.03
0.10
–
0.15
11.22
10.92
12
10
8
6
4
2
0
z
o
M
30 June 2018
Mined during
2018/2019
Sheba and
Royal Sheba
New
Consort
Fairview
BTRP and
surface ore
Evander
Elikhulu
30 June 2019
Mineral Reserve and reporting date Decrease in Mineral Resource Increase in Mineral Reserve
Mineral Reserves remained relatively constant year-on-year, with a minimal decrease of 2.5%. This includes 163.7Koz (excluding 8.7Koz of
processed surface sources) recovered through mining. Increases in the Mineral Reserves are observed for the New Consort, Fairview,
BTRP and Evander operations, with decreases at Sheba, Royal Sheba and Elikhulu. Decreases are due to depletion and modelling changes.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
GROUP STRATEGY – MINERAL RESOURCES AND MINERAL RESERVES
Pan African Resources has an exceptional asset base and attractive growth opportunities, both
in established projects and brownfield resource definition prospects. Strategy in this regard is
based on global best practice in MRM: to dynamically explore and develop projects that will
become next-generation long-term business units.
improving the conversion of Mineral Resources to Mineral Reserves by accessing, developing and exploiting surface and underground assets
This strategy includes:
◗
◗ unlocking the value of major organic projects
◗
identifying new expansion opportunities to sustain growth.
VALUE CREATION
In order to obtain investment approval and subsequent project implementation, a project evolves from initial sample testing to commissioning a
series of study stages, commencing with exploratory work and terminating with feasibility studies. If a project is evaluated as feasible, and meets
the return requirements, it is then implemented (subject to funding). Pan African Resources distinguishes itself from its peers by having a clear
focus on growth and mining resources that are profitable at lower gold prices, in order to deliver long-term economic benefit.
The graph below demonstrates the group’s mineral assets and how value is created through projects and operations such as the BTRP, ETRP,
Elikhulu, Royal Sheba, Egoli and Evander Mines’ 8 Shaft pillar.
EXPLORATION
DEVELOPMENT
PROJECT
MINE CONSTRUCTION
Mineral
Resources
Inferred
Measured
Indicated
Proved
Probable
Evander No 8 Shaft pillar
Fairview sub-vertical shaft
Royal Sheba
MINE
PRODUCTION
Mineral
Reserves
Springs surface sources
Royal Sheba
east extension
Egoli pay channel
Rolspruit
Poplar
Evander No 9 Shaft
A Block
Evander South
Elikhulu
ETRP
BTRP
Barberton Mines
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
E
U
L
A
V
T
C
E
J
O
R
P
ORGANIC GROWTH
The operations’ robust life-of-mine plans support the group’s business. Current resource definition drilling and initiatives to access and develop
orebodies were aggressively pursued at the Barberton operations during the year ended April 2019. 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. These projects include Elikhulu, Egoli, Royal Sheba and Evander Mines’ 8 Shaft pillar. The following tables reflect the progress of
near-mine growth projects that contributed ounces to Mineral Resources for the year.
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65
PERFORMANCE REVIEW
EXPLORING THE OREBODY: RESOURCE DEFINITION DRILLING
Operation
Barberton Mines underground
Barberton Mines surface
Evander Mines
ACCESSING THE OREBODY: ON-REEF DEVELOPMENT
Operation
Barberton Mines
Evander Mines
Total
metres
12,825
7,145
–
Number of
boreholes
Total
expenditure
R million
159
72
–
11.3
20.3
–
Total on-reef
development
metres
1,714
60
Average
grade
g/t
2.80
28.86
Potential
resource
target
oz
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 – Shaft one reserve opening
Fairview – 3 Shaft deepening
Fairview – (64 – 68) Level
New Consort – (33 – 45) PC
New Consort – MMR pillar development
New Consort – 3 Shaft
Royal Sheba
Sheba Western Cross
2019
metres
2018
metres
2017
metres
2016
metres
513.6
121.9
–
–
309.3
917.0
87.3
–
–
251.4
49.6
488.1
7.6
–
–
177.7
531.9
74.8
–
–
373.1
–
450
8
–
71
171
451
265
8
–
143
4
540
10,101
27
Equipping
131
64
581
387
–
17
189
133
14,326
15,655
34,701
115,423
1,166,275
26,005
21,953
8,357
648,587
26,752
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
VALUE CREATION THROUGH EXECUTION
Elikhulu
North
Elikhulu Process Plant
Kinross TSF
Kinross Extension TSF
Leslie TSF
Winkelhaak TSF
Elikhulu was commissioned during the first
quarter of the 2019 financial year. During
December 2018, the ETRP circuit was
incorporated into Elikhulu to ensure more
efficient recoveries of gold from the tailings
being processed for the next 13 years and
also to reduce unit costs of production
going forward. The three existing TSFs will
be reclaimed in the following order: Kinross
(three years), Leslie/Bracken (five years)
and Winkelhaak (five years).
Elikhulu is expected to yield approximately
60,000oz 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.
Mineral Resources
Category
Measured
Indicated
Inferred
Total
As at 30 June 2019
Contained gold
Grade
g/t
0.31
0.28
0.34
0.29
Tonnes
gold
11.7
42.5
4.2
58.4
Tonnes
million
37.58
153.41
12.57
203.56
Mineral Resources
Moz
0.38
1.36
0.15
1.89
Tonnes
million
46.24
150.91
12.57
209.72
As at 30 June 2018
Contained gold
Grade
g/t
Tonnes
gold
0.32
0.28
0.34
0.29
14.8
42.3
4.2
61.3
Moz
0.48
1.35
0.15
1.98
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 National Instrument 43-101. Cut-off values are calculated at 0.1g/t applying a gold price
of R700,000/kg (USD1,534/oz and ZAR14.19:USD1). 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.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
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PERFORMANCE REVIEW
Mineral Reserves
Category
Proved
Probable
Total
As at 30 June 2019
Contained gold
Grade
g/t
0.31
0.26
0.27
Tonnes
gold
7.4
38.8
46.2
Tonnes
million
23.62
146.99
170.61
Mineral Reserves
Moz
0.23
1.25
1.48
Tonnes
million
46.0
144.6
190.6
As at 30 June 2018
Contained gold
Grade
g/t
0.32
0.28
0.29
Tonnes
gold
14.7
40.1
54.8
Moz
0.48
1.3
1.78
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
value is calculated at 0.1g/t applying a gold
price of R600,000/kg (USD1,315/oz
and ZAR14.19:USD1). All Mineral Reserves
reported exclude geological structures.
Mineral Reserves are reported as in-situ
tonnes. Any discrepancies in totals are due
to rounding.
Additional effects of mining and recovery
losses have been considered in the cut-off
grade calculations.
The total Mineral Reserve contains
1.48Moz, of which an estimated 692,895oz
will be recovered over a 13-year life of
the plant at an average gold recovery of
46.88%.
The grade tonnage of the Kinross dam was de-risked through a resource definition drilling campaign (1,832m) conducted during 2018. This drilling
also resulted in the upgrade of Probable Reserves to Proved Reserves. All data collected from the resource definition drilling programme was
employed in the updated Mineral Resources and Mineral Reserves for Kinross dam.
EVANDER MINES’ 8 SHAFT PILLAR
An independent feasibility study into the merits of mining Evander Mines’ 8 Shaft pillar and high-grade areas in proximity to the pillar was completed
and the Pan African Resources board of directors approved the project, with first gold produced during August 2019. Evander Mines’ 8 Shaft pillar
will replace the current remnant underground mining and vamping production and is expected to contribute, on average, 30,000oz per annum
over the next three financial years, with approximately 20,000oz forecast for the 2020 financial year.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Evander Mines’ 8 Shaft pillar contains the following Mineral Reserves:
Category
Proved
Probable
Total
Mineral Reserves
As at 30 June 2019
Contained gold
Grade
g/t
8.54
–
8.54
Tonnes
gold
3.2
–
3.2
Tonnes
million
0.38
–
0.38
Moz
0.10
–
0.10
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 value is calculated at 951cmg/t (or 7.93g/t at a 1.2m stoping width) applying a gold
price of R600,000/kg (USD1,315/oz and ZAR14.19:USD1). All Mineral Reserves reported exclude geological structures. Mineral Reserves
are reported as in-situ tonnes. Any discrepancies in totals are due to rounding.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
ROYAL SHEBA
Extensive feasibility work was completed on Barberton Mines’ Royal Sheba project during the year. Due to the group’s disciplined capital
allocation criteria and the capital cost estimates to develop this mine, Pan African Resources will not currently pursue the Royal Sheba project
on a stand-alone basis. The existing Barberton Mines processing plant infrastructure can, however, be upgraded to process ore from this
orebody. The benefits of this approach are the ability to expedite the environmental licensing process, shorten the timeline to production,
enhance returns from mining this orebody and negate the requirement for external capital funding. We look forward to updating the market on
this project in the months ahead.
During the 2019 financial year, an additional 39 holes were drilled into the near-surface expression to confirm the orebody’s extent and volume.
The drilling resulted in an update of the 3D geological model and Mineral Resource estimate as presented above.
The emphasis is now on assessing the merits of using an underground sub-level open-stoping mining method, by developing haulages from the
current surface adits into the orebody. General authorisation in terms of Section 39 of the National Water Act 36 of 1998 was obtained during
May 2019, which allows the group to upgrade the Royal Sheba adit and bridge.
Mineral Resources
Category
Measured
Indicated
Inferred
Total
As at 30 June 2019
Contained gold
Grade
g/t
3.46
3.93
3.19
3.61
Tonnes
gold
8.3
9.1
2.7
20.2
Tonnes
million
2.40
2.33
0.86
5.58
Mineral Resources
As at 30 June 2018
Contained gold
Moz
0.27
0.29
0.09
0.65
Tonnes
million
Grade
g/t
Tonnes
gold
4.11
3.14
1.31
8.56
3.29
3.25
3.22
3.27
13.5
10.2
4.2
28.0
Moz
0.43
0.33
0.14
0.90
Mineral Resources are reported in accordance with the SAMREC Code. Mineral Resources would be the same if reported according
to the guidelines of the CIM’s National Instrument 43-101. Cut-off values are calculated at 1.7g/t applying a gold price of R700,000/kg
(USD1,534/oz and ZAR14.19:USD1). 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. Mineral Resources
reported for the year ending 30 June 2018 include near-surface Mineral Resources that were reported at a cut-off grade of 0.5g/t. In the current
Mineral Resource, these areas are reported at a cut-off grade of 1.7g/t.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
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PERFORMANCE REVIEW
Elikhulu plant – inspecting CIL tanks
Mineral Reserves
Category
Proved
Probable
Total
As at 30 June 2019
Contained gold
Grade
g/t
3.46
3.93
3.70
Tonnes
gold
7.9
9.1
17.1
Tonnes
million
2.29
2.33
4.62
Mineral Reserves
Moz
0.26
0.29
0.55
Tonnes
million
–
5.14
5.14
As at 30 June 2018
Contained gold
Grade
g/t
–
3.38
3.38
Tonnes
gold
–
17.37
17.37
Moz
–
0.56
0.56
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
value is calculated at 1.7g/t applying a gold
price of R600,000/kg (USD1,315/oz and
ZAR14.19:USD1). All Mineral Reserves
reported exclude geological structures.
Mineral Reserves are reported as in-situ
tonnes. Any discrepancies in totals are due
to rounding. Mineral Reserves reported
for the year ending 30 June 2018 include
near-surface Mineral Reserves that were
reported at a cut-off grade of 0.7g/t. In the
current Mineral Reserves, these areas are
reported at a cut-off grade of 1.7g/t.
Additional effects of mining and recovery
losses have been considered in the cut-off
grade calculations.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
VALUE CREATION THROUGH OPTIMISATION
Barberton Mines’ sub-vertical shaft project at Fairview Mine
The Fairview mining operation is currently restricted by the hoisting
capacity of its 3 Decline, which is used to access workings below
42 Level. This decline is currently used to transport employees and
material, and for rock hoisting. The 11-block, or Main Reef Complex
(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 an increased travelling distance, reduced employee face
time and will cause a lack of capacity with which to ensure both ore
replacement and exploration development.
Pan African Resources, with the assistance of DRA Global, 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 transport employees and material to the
working areas, which will allow the 3 Decline to be used exclusively
for rock hoisting, thus increasing overall capacity and production from
the 11-block mining area.
Pan African Resources has also commenced an infill drilling
programme on the 11-block orebody of 10 diamond drill holes.
This is to enhance the confidence of the Probable Mineral Reserve
to that of a Proved Mineral Reserve ahead of the mining face, by
up to 60m ahead of current mining areas. This is equivalent to more
than five years life-of-mine on the 11-block. The results of the drill
holes are considered in the reported Mineral Resource and Mineral
Reserve estimates.
During the current financial year, R5.89 million was spent in
progressing access to the sub-vertical collar position. Developing top
and bottom access for the sub-vertical shaft is progressing according
to plan, with our focus in 2020 on the following:
◗ Completing all preparatory development for the sub-vertical shaft
on both 42 Level and 64 Level at Fairview Mine
◗ Establishing sufficient hoisting flexibility to cater for the additional
tonnages when reaming of the shaft commences in the 2021
financial year.
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PERFORMANCE REVIEW
Mineral Resources
Category
Measured
Indicated
Inferred
Total
As at 30 June 2019
Contained gold
Grade
g/t
10.04
13.05
16.12
13.16
Tonnes
gold
16.2
13.4
28.2
57.8
Tonnes
million
1.62
1.02
1.75
4.39
Mineral Resources
Moz
0.52
0.43
0.91
1.86
Tonnes
million
1.62
1.04
1.75
4.41
As at 30 June 2018
Contained gold
Grade
g/t
10.12
13.51
19.66
14.70
Tonnes
gold
16.4
14.1
34.4
64.8
Moz
0.53
0.45
1.10
2.08
Mineral Resources are reported in accordance with the SAMREC Code. Mineral Resources would be the same if reported according to
the guidelines of the CIM’s National Instrument 43-101. Cut-off values are calculated at 2.08g/t applying a gold price of R700,000/kg
(USD1,534/oz and ZAR14.19:USD1). 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.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
Mineral Reserves
Category
Proved
Probable
Total
As at 30 June 2019
Contained gold
Grade
g/t
8.83
13.95
11.99
Tonnes
gold
6.6
16.8
23.4
Tonnes
million
0.74
1.20
1.95
Mineral Reserves
Moz
0.21
0.54
0.75
Tonnes
million
0.93
1.06
1.99
As at 30 June 2018
Contained gold
Grade
g/t
9.07
14.25
11.84
Tonnes
gold
8.43
15.16
23.58
Moz
0.27
0.49
0.76
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 value is calculated at 7.73g/t applying a gold price of R600,000/kg
(USD1,315/oz and ZAR14.19:USD1). All Mineral Reserves reported exclude geological structures. Mineral Reserves are reported as in-situ
tonnes. Any discrepancies in totals are due to rounding.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
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PERFORMANCE REVIEW
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Barberton Mines’ Project Dibanisa
Fairview Mine
Sheba Mine
VV
Vantage – Goldfields Mining
Area
Royal Sheba Mine
L
M
N
K
Surface
+1 000m
11 Level Adit
y
d
o
b
nt Ore
mitm
e
m
m
m
o
C
Rossiter
Stoping
MSL
-1 000m
eboddydy
RT Orebody
ebod
MMM
F
aa
a
a
i
r
v
i
e
w
1
I
n
c
l
i
i
i
n
n
e
y
yy
d
o
b
e
r
C O
R
R
M
M
MMMM
MRC Shaft
3 H3 H
23 Haulage
haftft
haft
ft
27 Sub-Incline Shahaft
In
In
60 - 62 Level: Miningngng
ZK
Orebody
Proposed
future
development
Fairview 3 Incline
Fairview 3 Incline
Fairview 3 Incline
Fairview 3 Inclin
Fairview 3 Inclin
Faiai
p
p
p
e
O
O
O
r
rr
eeee
64 - 68688-6
68 Level:
bbbb
ooo
d
y
x ux
Le Roux & MRC
D ll
E l
ononion
Exploration Drilling
K Orebody
OO
Z
Bonanza Mine
Royal Sheba
Shaft
Sheba ZK Shaft
Thomas and Joe’s Luck
ThoThomTho
Development
F
G
H
0
500m
0
500m
LEGEND
Mined-out areas
Envelope of potential mineralisation
Dykes
Shafts
current ore flow
proposed ore flow
Tunnels
Project Dibanisa aims to use the current Sheba Mine infrastructure,
both on surface and underground, to effectively extract the Royal
Sheba orebody from 23 Level (Sheba Mine Zwartkoppie (ZK) Shaft).
This enables the concurrent mining of the Royal Sheba orebody
from near-surface workings as well as some 600m beneath surface,
targeting the Measured and Indicated Mineral Resources.
The project involves connecting the Sheba and Fairview workings
on 23 Level by establishing a series of ore-passes from the Sheba
Mine to the Fairview Mine. The combined production of Fairview
and Sheba will then be hoisted from the Fairview infrastructure
(mainly 2 Decline and 1 Decline). The ore will then be processed at
the Fairview plant where a gravity circuit (Knelson Concentrator)
is currently being installed. This will enable the Fairview plant to
effectively process the free gold reefs of Sheba Mine and decrease
the overall cost by reducing the transportation of concentrate from
the Sheba plant to the Fairview BIOX® plant.
Following these modifications and enhancements to the underground
and surface infrastructure, underground ore from Royal Sheba
(23 Level Sheba Mine ZK Shaft) will be extracted through the Sheba
Mine ZK Shaft and processed at the Sheba plant at a throughput of
approximately 12,000 tonnes per month.
Near-surface workings at Royal Sheba will be used to fill the plant
capacity at New Consort. The total project is estimated to be
completed by June 2022.
Project Dibanisa mitigates the need for the high capital requirements
of commissioning a new plant and related infrastructure for the Royal
Sheba deposit. Further, this initiative reduces overall overhead costs
for the operations by consolidating infrastructure.
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PERFORMANCE REVIEW
VALUE CREATION THROUGH PROJECT DEVELOPMENT
Egoli
Egoli’s promising mining feasibility study
was completed and optimisation studies
are being finalised. Development options
for this project will be finalised during the
2020 financial year. The group is currently
reviewing the merits of expediting the Egoli
project and is assessing funding options in
this regard.
The Egoli pay channel is approximately
4.5km in tramming distance from 7 Shaft,
which was used 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.
Inferred Egoli Payshoot Extension
Kinross Payshoot Extension
Current Mining Position
Egoli Payshoot
The Egoli pay channel Mineral 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 in a west-north-westerly direction. Egoli’s Mineral Resources and Mineral Reserves are summarised in
the following tables:
Mineral Resources
Category
Measured
Indicated
Inferred
Total
As at 30 June 2019
Contained gold
Grade
g/t
8.6
9.85
9.68
9.69
Tonnes
gold
3.8
28.9
60.6
93.3
Tonnes
million
0.44
2.94
6.26
9.64
Mineral Resources
As at 30 June 2018
Contained gold
Moz
0.12
0.93
1.95
3.00
Tonnes
million
Grade
g/t
Tonnes
gold
0.41
2.93
6.23
9.57
8.76
9.86
9.70
9.71
3.6
28.9
60.4
92.9
Moz
0.11
0.93
1.94
2.99
Mineral Resources are reported in accordance with the SAMREC Code. Mineral Resources would be the same if reported according to the
guidelines of the CIM’s National Instrument 43-101. Cut-off values are calculated at 689cmg/t (or 5.74g/t at a 1.2m stoping width) applying
a gold price of R700,000/kg (USD1,534/oz and ZAR14.19:USD1). 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.
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PERFORMANCE REVIEW
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ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Mineral Reserves
Category
Proved
Probable
Total
As at 30 June 2019
Contained gold
Grade
g/t
4.21
7.06
6.64
Tonnes
gold
2.6
24.8
27.4
Tonnes
million
0.62
3.51
4.13
Mineral Reserves
Moz
0.08
0.80
0.88
Tonnes
million
0.62
3.51
4.13
As at 30 June 2018
Contained gold
Grade
g/t
4.21
7.06
6.64
Tonnes
gold
2.6
24.8
27.4
Moz
0.08
0.80
0.88
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 value is calculated at 805cmg/t (or 6.71g/t at a 1.2m stoping width) applying a gold
price of R600,000/kg (USD1,315/oz and ZAR14.19:USD1). All Mineral Reserves reported exclude geological structures. Mineral Reserves
are reported as in-situ tonnes. Any discrepancies in totals are due to rounding.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
RISKS TO THE MINERAL RESOURCES AND MINERAL RESERVES
Mineral Resources and Mineral Reserves are estimates of the portion of the deposit that can be mined economically and legally. The estimate of
the amount of gold is a function of set criteria for geological, technical and economic factors. Estimating the grade and/or quantity of the Mineral
Resource is conducted by geologically analysing the volume, continuity and shape of the deposit. Data employed for these analyses includes
geological mapping, core drilling, logging and sampling. Due to the nature of the deposits, it is required that complex geological judgements and
scientific calculations be used to interpret the data and construct models.
Economical and technical factors such as inflationary cost increases and volatile commodity prices impact the cut-off grade employed to report
the economically extractable Mineral Resources and Mineral Reserves. In addition, global markets and geological data from the operations can
result in changes to the estimates of the Mineral Resources and Mineral Reserves reported. The group’s financial position and results could be
impacted by changes to the Mineral Resources and Mineral Reserves.
Elikhulu – tailings remining
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75
PERFORMANCE REVIEW
Risks detailed in the full integrated annual report (refer to
pages 29 to 35) should also be considered.
Type of risk
Risk
Mitigation action
Low
Medium
High
Level of risk
Financial
Volatile commodity price and
foreign currency exchange
rates
Cost inflation
◗ A conservative rand gold price was used to calculate the modifying factors in
comparison to the current prevailing rand gold prices
◗ Successfully concluded a three-year wage deal at Barberton Mines in 2018
◗ Cessation of the large-scale underground operations at Evander Mines’ 8 Shaft
resulted in a reduction in the group’s all-in sustaining cost per kilogramme
◗ Low-cost and low-risk tailings operations in the form of the BTRP, ETRP
and Elikhulu further assist the group in reducing the all-in sustaining cost per
kilogramme
◗ Tailings retreatment accounted for 46.5% of the group’s gold production for the
year ended June 2019
Short to medium
term
Legal
Mining right legal tenure
◗ Barberton Mines submitted its mining right renewal application on 23 August
2018 for a further 30 years. The renewal application is pending approval based on
the appeal lodged towards the decision of the DMR not to process the renewal
application at this time. This internal administrative process does not at all impact
the company’s security of tenure with regard to its mining rights
◗ Evander Mines’ mining right expires on 28 April 2038
◗ A Section 102 application has been in process from 8 December 2017 to
incorporate MP30/5/1/2/2/248 PR and MP30/5/1/2/2/4272 PR into Evander Mines’
mining right MP30/5/1/2/2/126 MR
Operational
Modifying factors
◗ Modifying factors as defined in the Mineral Reserve conversion are based on actual
Limited mining flexibility
Nature reserve
modifying factors achieved 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
◗ Development rates have increased by 72% in the MRC high-grade 11-block
◗ A third high-grade panel in the MRC 11-bock was accessed within August 2019
◗ The Fairview sub-vertical shaft project will improve ore handling efficiencies and
significantly increase face time in the high-grade 11-block
◗ The sub-vertical shaft project is estimated to improve production by approximately
7,000oz to 10,000oz per annum
◗ Development at New Consort’s dow-dip extension of the MMR from 14 Level to
15 Level as well as 38 Level to 40 Level is underway in the 2020 financial year
◗ High variability in gold grades may be experienced in hydrothermal lode gold
deposits
◗ Portions of Barberton Mines’ mining rights overlap the boundaries of a proclaimed
nature reserve, impacting surface infrastructure, surface mining and environmental
rehabilitation
◗ Continuous communication and collaboration with governmental departments to
ensure sustainable mining operations
There are currently no material legal proceedings or material conditions that will impact the Mineral Resources and Mineral Reserves reported
for 2019 or Pan African Resources’ ability to continue mining activities as per life-of-mine plans.
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BARBERTON’S HIGH-GRADE
MINING FUTURE
Our Barberton mines are characterised by discrete, high-grade, shear zone-
hosted vein and lode gold deposits formed in flexures in the regional dip and
strike of major shear zones or faults. These structures generally extend from the
surface down-dip at angles of up to 70o. The orebodies are defined as lensoidal
shapes and have a strike length of between 40m and 80m, with thicknesses
ranging between 1m (for the vein type deposits) up to 10m (for the lode type
deposits). These are the deposits traditionally mined throughout the history of the
Barberton gold field.
Grades in these deposits are known to be highly ‘nuggety’, due to the presence of
free gold, although individual stope sample sections are assayed at over 1,100g/t
over the full width of the orebody. These extreme grades occur in the centre
of the deposits and are flanked by grades between 5g/t and 50g/t. The average
mining grade of these high-grade deposits, over the total width, ranges between
10g/t and 40g/t on a weekly to monthly basis.
Pan African Resources has a strategy of proofing the
down-dip extent of the orebodies by means of deep
drilling within 300m of the current mining horizon
down-dip. Infill drilling of 30m x 30m is then conducted
for five years following the proofing. This effectively
serves to de-risk the strategic approach.
Once the development intersects the mineralisation, the orebody is sampled
on a 2m grid through channel sampling. These samples, along with the infill- and
down-dip drilling, inform the planned grades of the mining unit. During stoping,
the channel sampling procedure is continued and the mining unit grades are
updated on a monthly basis for operational planning purposes.
Barberton Mines – Fairview 11-block stoping
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Existing drilling on both the Proven and Probable Mineral
Reserves, for three of the highest grade orebodies define
life of the orebody as follows:
◗◗ Fairview’s 66 Level Main Reef Complex: 20 years
◗◗ Fairview’s 54 Level Rossiter Reef: 17 years
◗◗ Sheba’s 36 Level ZK Reef: 10 years.
Orebody scheduling does not include the Inferred Mineral
Resources, which are continuously upgraded to the
Indicated Mineral Resource category through the down-dip
extension drilling. The upgraded Inferred Mineral Resource
is scheduled in the life-of-mine plan, thereby extending the
life of linked operations.
Barberton Mines utilises three processing circuits to
process varied forms of gold-bearing material:
◗◗ Free milling/gravity recovery circuit
◗◗ Carbon in leach cyanidation circuit
◗◗ BIOX® with a carbon in pulp, elution and
regeneration circuit.
Pan African Resources recovers over 94% of its gold
production by utilising this combination of metallurgic
processes.
A
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ENVIRONMENTAL SUSTAINABILITY
Pan African Resources views sustainability as a core business priority and critical to the group’s
ability to operate successfully. Sustainability challenges, such as climate change, resource scarcity
and energy efficiency are everyday business realities that impact the mining industry. Managing
these issues underpins our licence to operate.
OUR APPROACH TO SUSTAINABILITY
Ethical governance
Environmental
sustainability
Social
sustainability
Commercial
sustainability
Natural capital
Human capital
Social and
relationship capital
Financial capital
Intellectual capital
Barberton Mines – Fairview 11 Level adit infrastructure
Manufactured capital
A 2017 study conducted by the Fraser Institute of 91 countries with
significant mining activity, ranked South Africa as the tenth most
challenging country in which to own mining interests. Most local
mining companies report regulatory uncertainty, the taxation regime,
political instability, labour relations and employment law as significant
investment deterrents to the sector.
The sustainability of the South African mining industry requires that
local mining companies can operate profitably, attract investors and
compete with global competitors. Difficult operating conditions
and volatile commodity price cycles tend to force out the least
efficient industry performers. Traditionally, labour-intensive deep-
level operations struggle to maintain productivity and competitive
production costs, threatening the international competitiveness of
the mining industry.
Pan African Resources adopts a holistic and long-term approach to
sustainability, acknowledging and acting on the importance of ESG
sustainability while ensuring the commercial viability and sustainability of
the group in creating value for all stakeholders, now and in the future.
Our management teams ensure that all our operational activities
comply with industry regulations and are conducted responsibly to
safeguard our employees and the communities and environment in
which we operate.
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NATURAL CAPITAL
Pan African Resources fully embraces and
commits to its responsibility to effectively
monitor, measure and manage the
environmental impact of all its operations.
COMMITTED TO PROTECTING OUR NATURAL HERITAGE
Pan African Resources recognises the privilege it has been afforded to
operate and mine in some of the oldest and best-preserved deposits
of sedimentary and volcanic rock on the planet.
Our mines are fully committed to operating with due respect within
our natural environment to extract our high-grade geological gold
resources. Furthermore, we take the greatest care to ensure we
return the environment to its natural state through our fully funded
rehabilitation funds.
Historical mining tailings are often considered to be one of the most
significant sources of environmental damage produced by mining
operations. The re-mining and consolidation of these tailings assist
in reducing their environmental footprint. Our new Elikhulu plant
will consolidate the Kinross, Leslie and Winkelhaak TSFs into a single
facility, which will reduce the environmental footprint and impact of
Evander Mines. BTRP in Barberton also fulfils the same function and
is consolidating the Bramber and Harper TSFs through re-mining and
re-depositing tailings material.
Elikhulu’s enlarged Kinross TSF extension is lined to prevent and
limit underground seepage and pollution and represents our
sincere commitment to address the ‘scar tissue’ of tailings that is so
often associated with the mining industry. At the same time, the
consolidated facility allows us to increase our positive socio-economic
contributions, particularly through job creation.
WHY NATURAL RESOURCES ARE MATERIAL TO
PAN AFRICAN RESOURCES
The business of Pan African Resources depends wholly on the
environment and its natural resources; not only those we extract
from the ground, but also land, water and air. As such, we are
committed to being the best possible stewards of these resources
and treating them with the care and responsibility they deserve.
We are dedicated to minimising and, where possible, eliminating the
negative environmental impacts of our operations.
Barberton Mines – Fairview metallurgical plant
2019 NATURAL CAPITAL HIGHLIGHTS
AND CHALLENGES
Highlights
◗ Evander Mines improved its water recycling to 57%
(2018: 30%) of total water used
◗ Barberton Mines conducted river and community
clean-up campaigns including basic education
◗ A Water Management and Conservation plan was
approved for Barberton Mines’ operations
◗ Reduced cyanide consumption at the Elikhulu plant
through active monitoring and regulation of reagent
consumption
Challenges
◗ Decreasing energy consumption and moving to
◗
renewable-energy sources
Illegal miners working near rivers are polluting water
sources in the Barberton catchment area
◗ Employee and community adoption of pro-environmental
behaviours and driving a culture of environmental
sustainability
Looking ahead
◗ Proactively reduce freshwater use and maximise water
recycling
◗ Conduct a feasibility study into a solar-powered plant at
Evander Mines
◗ Continue to develop, refine and enhance our biodiversity
plans
◗ Development and implementation of energy management
plans
◗ Target a 10% annual reduction of reportable
environmental incidents at our Evander operations
◗ Continuation of Evander Mines’ rehabilitation programme
to close old shafts
◗ The implementation and promotion of eco-tourism in
the greater Barberton area to promote environmental
awareness and create employment opportunities
◗ Given the recent changes to the legislation governing
mining in South Africa, we will focus on achieving full
regulatory compliance, particularly as it applies to our
water and air quality licences
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ABRIDGED SUSTAINABILITY
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ENVIRONMENTAL SUSTAINABILITY continued
NATURAL CAPITAL continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
Maintaining zero environmental fines
Evander Mines was issued with an air emission licence penalty relating to financial
years 2014 to 2019, due to not registering the infrastructure and plants according
to requirements. We are currently compliant with the air emission licence and the
penalty was only of an administrative nature
Evander Mines’ rehabilitation programme
Evander Mines has made significant progress during the 2019 financial year, spending
USD4.0 million on the rehabilitation and closure of old shafts
Ensuring all operations have zero reportable
environmental incidents
There were no fines or reportable environmental incidents at Barberton Mines for
the year under review
Five reportable environmental incidents occurred at Evander Mines during the 2019
financial year
Ensuring compliance with water-use licence
conditions to prevent pollution
All operations comply with the conditions of our water-use licence. The licence was
amended for Evander Mines in August 2017 to incorporate Elikhulu
Ensuring compliance with approved mining rights,
prospecting rights and environmental management
programmes
All operations fully comply with the relevant mining and prospecting rights
regulations as well as the environmental management programmes
MANAGEMENT APPROACH
As an organisation operating in an industry with the potential for
significant environmental impact, Pan African Resources places a
priority on preserving the environment and protecting vital natural
resources like air, water, soil, minerals, fuels, plants and animals.
While it is not possible to operate a mine without impacting the
physical environment around the mining site, we make every effort to
keep this impact to a minimum. While we cannot completely prevent
environmental impact, we work to mitigate the effects through
the application of innovative technology, coupled with a group-
wide commitment to environmental stewardship and a culture of
compliance with all applicable environmental laws and regulations.
By fostering good relations with the regulatory authorities such
as the Department of Environmental Affairs and the Department
of Mineral Resources, and contributing wherever possible to the
development of laws and regulations for our industry, we have
established a reputation for environmental awareness, concern
and compliance.
Environmental objectives
Environmental stewardship is a key part of our business strategy and risk management practices. Our environmental objectives include the
following:
Environmental legal compliance
Environmental risk management
Water management
Energy management
Waste management
◗ Achieving zero penalties for environmental breaches
◗ Ensuring compliance with water-use licence conditions and the Environmental Management Plan
◗ Maintaining air pollution levels within legal limits
◗ Constantly evaluating environmental risks associated with our activities, products and services
◗ Taking appropriate action to minimise environmental risks
◗ Reducing water incidents and incidental overflow to minimise the impact on surrounding communities
and the environment
◗ Achieving internal environmental targets to reduce our carbon footprint
◗ Reducing, reusing and recycling waste to minimise the impact on surrounding communities and the
environment
Biodiversity management
◗ Continuously monitoring the tailings and pollution control dams to prevent negative biodiversity impact
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Environmental governance and legislation
The group monitors adherence to mining-related legislation
through a robust SHEQC governance framework that includes
comprehensive environmental guidelines relevant to the
mining industry.
Comprehensive operational procedures are in place and are
updated at least every two years in line with the key elements of
environmental legislation specific to regulating the mining industry:
◗ Mineral and Petroleum Resources Royalty (Administration) Act 29
of 2008
◗ National Environmental Management Act 107 of 1998
◗ National Water Act 36 of 1998
◗ National Nuclear Regulatory Act 47 of 1999
◗ National Environmental Waste Act 59 of 2008
◗ Air Quality Amendment Act 20 of 2014
◗ National Environmental Management: Air Quality Act 39 of 2004
◗ National Environmental Management: Air Quality Amendment
Act 20 of 2014
◗ National Environmental Management: Protected Areas Act 57
of 2003
◗ National Environmental Management: Biodiversity Act 10 of 2004
◗ Conservation of Agricultural Resources Act of 1983
◗ Constitution of the Republic of South Africa Act 108 of 1996
◗ Hazardous Substances Act 15 of 1973
◗ National Heritage Resources Act 25 of 1999
(specific to Barberton operations).
We have implemented a group environmental management system
that aligns with ISO14001. Environmental impact assessments
are conducted at all operations, with impact and aspect registers
maintained for each. These are reviewed annually to ensure legislative
compliance. Risk registers are reviewed quarterly, and the results are
reported to the group SHEQC manager who escalates any material
matters to the SHEQC sub-committee for immediate attention.
The group’s environmental impacts are monitored through a SHEQC
dashboard that collates all relevant environmental information
required to accurately calculate the group’s carbon emissions. We are
fully aware of the dangers of climate change and the importance
of doing our part to address and mitigate its impact, as set out in
our group SHEQC policy. South Africa’s long-pending carbon tax
legislation was promulgated on 27 May 2019.
As a result of these stringent controls, none of the risks outlined
previously are deemed to have had a significant financial or
environmental impact on the group over the year under review, nor
have our operations contributed to, or exacerbated, these risks for
the immediate environments in which we operate.
All Pan African Resources operations have approved end-of-mine
plans and closure plans are in place. Barberton Mines and Evander
Mines’ end-of-mine plans have been approved by the DMR.
Elikhulu plant – CIL tanks
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ABRIDGED SUSTAINABILITY
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ENVIRONMENTAL SUSTAINABILITY continued
NATURAL CAPITAL continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
PERFORMANCE
Key performance indicators
Total water consumption
Total electricity consumption
Unit
(000m3)
(GJ)
Total greenhouse gas (GHG) emissions
Environmental fines and penalties (USD million)
(tCO2e/t milled)
(number)
Barberton
Mines
2,698
499,802
0.1
–
2019
Evander
Mines
10,671
728,699
0.02
0.1
2018
Group
16,675
Group
13,369
1,228,501
1,397,695
0.03
0.1
0.12
–
Fines for reportable environmental incidents
There were no fines or reportable environmental incidents at
Barberton Mines for the year under review.
promulgated under the National Environmental Management
Act. Evander Mines is actively working on reducing the number of
reportable environmental incidents by 10% for the next financial year.
One environmental administrative penalty was incurred at Evander
Mines for an amount of USD0.1 million (2018: nil) due to operating
without an Air Emissions Licence (AEL) as required by the Air Quality
Act of 2004. We are now compliant with the AEL.
Evander Mines recorded five (2018: five) environmental incidents for
the year under review, as reported to the group’s SHEQC committee:
◗ Three incidents related to pipeline spills on two different lines to
the Winkelhaak Tailings dam as a result of attempted pipeline theft
◗ Two environmental incidents related to water overflows from
return-water dams into the Grootspruit River.
The areas in respect of the above incidents have subsequently been
cleaned and rehabilitated. An Environment and Social Management Plan
has been developed for Elikhulu in terms of the applicable regulations
Water
Mines depend on steady water supplies for extracting resources and
beneficiating mined ore. Pan African Resources is in the favourable
position of being able to capture excess discharge water for reuse in
our operations. This water reuse is a key enabler of operational and
environmental sustainability and ensures our mining operations meet
the requirements of water discharge regulations. We contribute to
the sustainability of water as a natural resource by increasing the use
of recycled water in our mining processes.
At Barberton Mines, underground drilling and blasting activities
release groundwater, which is pumped to the surface and recycled for
use in mining or metallurgical processes. A highly effective closed-
loop water-recycling circuit at Fairview and New Consort reuses
the bulk of the released groundwater for other mining processes.
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Excess water is released into special purpose evaporation ponds,
while rainwater is collected in tailings and pollution control dams are
incorporated into the mine water system.
Barberton Mines has implemented an approved Water Management
and Conservation Plan. Water purified to acceptable quality standards
can be reused in mining processes and can safely be released to
communities and municipalities for non-potable purposes. Reducing
the amount of dirty water produced through the mining process
reduces the need for water extraction which, in turn, reduces energy
costs from pumping and refining water.
www.panafricanresources.com/sheqc/gri-and-sustainability/ related
to our tailings storage facilities, as requested by the Church of England
Pensions Board and the Swedish Council on Ethics for the AP
Funds, and backed by the UN-supported Principles for Responsible
Investment. Refer to
page 24 for additional information.
Quarterly inspections and meetings are held between mine
operations, third-party TSF operators and competent persons tasked
with monitoring and compliance. An independent specialist reviews
group facilities and ensures that we comply with the latest legislative
requirements.
Evander Mines is being equipped to continuously reuse recycled
water and reduce the need for freshwater replenishment. This
approach reduces environmental and operational costs. Introducing
state-of-the-art water treatment systems was a necessary first step.
All our mining operations hold approved water-use licences as issued
by the Department of Water and Sanitation. Annual internal and
external audits are performed by each mining operation to ensure
compliance with their water-use licences.
Targets and performance
Total water consumption amounted to 13.4 million m3
(2018: 16.7 million m3), which shows our commitment to reduce
water consumption.
The group’s total electricity consumption decreased to 1,228,501GJ
(2018: 1,397,695GJ), primarily due to the cessation of large-scale
underground operations at Evander Mines.
Tailings storage facilities
The group’s TSFs are located in the Barberton and Evander areas
and the majority of our TSFs are in close proximity to residential
areas. Pan African Resources has appointed specialist third-party
contractors to design, build and operate the TSFs within the group.
Tailings dam management is overseen by an appointed competent
person at each of our TSF sites to ensure compliance with
legislation, DMR requirements and our own internal code of
practice. Pan African Resources implements leading practices in our
tailings dam management to ensure regulatory compliance.
We have provided additional disclosure on our website at
Environmental protection and rehabilitation
The group’s total environmental protection expenditure was
USD4.0 million (2018: USD49.0 thousand). In the current financial
year, Evander Mines incurred rehabilitation expenditure of
USD4.0 million, the majority of which related to the rehabilitation
of the Evander return-water dam (USD1.8 million) and the
rehabilitation in the Winkelhaak area (USD1.1 million) and the
clearing of old hostel infrastructure (USD0.8 million).
The group’s rehabilitation liability is fully funded by means of a
Cenviro Solutions insurance investment product underwritten by
Centriq Insurance Company Limited. These funds are invested in a
portfolio comprising a combination of money market, capital market
and equity instruments. The aim is to provide the group with the
necessary liquidity for the rehabilitation preservation of capital and
the growth of underlying funds. The audit and risk committee reviews
the performance of this portfolio on a quarterly basis.
LOOKING AHEAD
Environmental awareness and protection will always remain a key
focus of Pan African Resources, not just because of our moral
obligation to preserve the natural habitats of the regions in which
we operate, but also because environmentally friendly processes
and behaviours make good business sense. We recognise that the
effectiveness of our environmental efforts is amplified through
effective partnerships with our stakeholders. We will continue
to work to raise awareness among our employees and local
community members and make every effort to grow the culture of
environmental care and positive behaviour.
Elikhulu – TSF – deposition of tailings
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
SOCIAL SUSTAINABILITY
HUMAN CAPITAL
To enable us to attract, develop and retain skilled, motivated and committed employees, we
seek to build and maintain relationships with our employees which are based on trust, mutual
respect and credibility. To achieve our strategic objectives, we focus on ensuring that we have
the necessary skills, culture and employees in place.
2019 HUMAN CAPITAL HIGHLIGHTS
AND CHALLENGES
Highlights
◗ Barberton Mines successfully concluded a three-year wage
agreement during September 2018 to provide certainty of
earnings and sustainable productivity
◗ Safety programmes, motivational talks and other safety
initiatives have been well received by all our employees
at Barberton Mines and Evander Mines, leading to a clear
improvement in safety
Challenges
◗ Ongoing community pressure and unrealistic employment
expectations
◗ Limited lower-level employee opportunities if they are not
appropriately trained and provided with the requisite skills
required to grow
◗ Community unrest in areas surrounding our mining
operations. This is a particular problem at Barberton Mines
due to communities being located close to the mining
operations
Looking ahead
◗ Continue to offer motivational talks and other initiatives
aimed at safety improvement
◗ Enabling safe operations through good leadership
examples and effective line management strategies
◗
Improve on training and talent management systems
◗ Review of human resource policies to ensure that they
are aligned to Mining Charter III
The board and remuneration
committee mandated an independent
remuneration expert to review
the group’s remuneration policies,
consult shareholders and recommend
improvements, where necessary.
WHY EMPLOYEES ARE MATERIAL TO PAN AFRICAN
RESOURCES
Our people are fundamental to the sustainability of our business
and long-term value creation in addition to being key enablers in
the execution of our strategy. Our employees are key to our
business success, which makes it imperative that they are part of
an organisational culture that prioritises safety, diversity, innovation
and performance.
MANAGEMENT APPROACH
We believe that our people have the right to work in a safe and
healthy environment. Mining operations present many risks to our
people’s health and safety and we will continue to work towards an
environment of zero harm.
Our employment policies and procedures are guided by and comply
with labour legislation in South Africa. We review our human
resources policies and procedures on an ongoing basis.
Our recruitment strategies are designed to focus on local
communities in the areas in which we operate. We recruit employees
outside of these areas only when the requisite skills or experience
are not available locally.
We respect human rights and value equality and diversity. Pan African
Resources does not tolerate any form of discrimination or harassment
and we foster a work environment free from discrimination against
gender, age, race, national origin, marital status, sexual orientation,
religious beliefs, disability or any other personal characteristics
protected by applicable law. No human rights-related grievances
or proven incidents of discrimination were filed during the current
financial year. Human rights are specifically addressed by our human
rights policy which focuses on the human rights of our employees,
people in the communities and in our supply chain.
Pan African Resources abides by the human rights conventions of the
International Labour Organisation and South Africa’s Constitution.
The leadership of each operation, as well as the group executive
committee, report to the board in this regard. In the 2019 financial
year, no operations or suppliers were found to be exposed to the
risk of incidents relating to child, forced or compulsory labour.
Our employees and contractors have the right to freedom of
association. Barberton Mines has recognition agreements in place
with the National Union of Mineworkers (NUM) and the United
Association of South Africa (UASA). NUM represents approximately
83% of the bargaining unit employees and UASA represents
approximately 51% of officials, artisans and miners. Evander Mines
employees currently do not belong to a union.
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In terms of mining regulations, each operation has developed an SLP that must be approved by the DMR. During 2019, Barberton Mines
submitted its SLP for the next five years to the DMR and is awaiting its approval. Evander Mines is currently in the process of revising its SLP in
line with its reduced operational size, following the cessation of underground operations in the prior year.
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
Intensified stakeholder engagement to address
general stakeholder unrest being experienced at
our operations
◗ We identified influential stakeholders within our surrounding communities with
whom we regularly engage
◗ Evander Mines has developed and implemented a community engagement policy
Adherence to approved SLP requirements
◗ Evander Mines is currently in the process of revising its SLP in line with reduced
operational size, following the cessation of underground operations in the prior
year
Improving community relations
◗ During the current financial year, we appointed a community liaison officer at
Evander Mines
Succession planning and training of our employees
in specialised positions
◗ Individual development plans have been developed for key employees at Evander
Mines
◗ An external consultant has been appointed to perform a training gap analysis to
further improve our training and development initiatives
PERFORMANCE
Key performance indicators
Employees
– Permanent
– Contractors
% of permanent employees from South Africa
Employee turnover
Human resources development spend
Permanently employed female employees
Total number of permanent employees by age group
20 – 30 years
30 – 40 years
40 – 50 years
50+ years
Total operations
Unit
(number)
(number)
(number)
(%)
(%)
(USD million)
(%)
(number)
(number)
(number)
(number)
2019
3,641
2,148
1,493
96
10.6
1.0
10.4
287
792
507
562
2,148
2018
4,840
2,069
2,771
96
8.61
1.8
9.7
384
748
438
499
2,069
Barberton Mines
Evander Mines
Corporate
Unit
2019
2018
2019
2018
2019
2018
Employment diversity and gender
equality2
Representation of historically
disadvantaged South Africans (HDSAs)
Senior management
Middle management
Junior management
% of workforce South African employees
Number of women employed
Percentage of women permanently
employed
(%)
(%)
(%)
(%)
(number)
(%)
46
48
56
97
178
9.1
50
60
52
98
175
6.8
44
63
85
88
40
43
50
95
97
19
40
100
100
100
5
40
100
100
100
6
22.1
17.8
29.4
35.3
1 The employee turnover excludes retrenched employees.
2 Relates to South African registered companies within the group.
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SOCIAL SUSTAINABILITY continued
HUMAN CAPITAL continued
Employee profile
The group’s total staff compliment has declined to 3,641 people
(2018: 4,840). The decline is attributable to the reduced number of
contractors at our operations following the commissioning of Elikhulu
in September 2018 and the cessation of large-scale underground
operations at Evander Mines. The group’s staff turnover was 10.6%
(2018: 8.6%) excluding retrenched employees demonstrating
the stability of the group’s workforce. The employee relations
environment has been stable over the past financial year with no
authorised industrial action experienced at our operations.
Companies that applied for mining rights before the introduction
of the 2018 Mining Charter require 26% black ownership and have
five years to increase that percentage to 30%.
Following the successful restructuring agreements concluded in the
prior year, Pan African Resources’ BBBEE ownership is calculated
at 26%, comprising 21% in Pan African Resources SA Holdings
Proprietary Limited and 5% from its on-mine employee ownership
schemes. Refer to our website for our company structure.
www.panafricanresources.com/about-overview/company-structure/)
Skills development and training
Pan African Resources believes that ongoing and effective talent
development is essential for its continued competitiveness,
transformation and sustainable growth. Our skills development and
training focuses on investing in our employees to ensure that we have
the necessary skills to meet our strategic objectives and operational
needs.
We deliver these skills through a combination of learnerships,
bursaries, artisan training, Adult Basic Education and Training
and other skills transfer initiatives provided to individuals in the
appropriate demographic groups as defined in the amended Mining
Charter III. The group spent USD1.0 million (2018: USD1.8 million)
on human resources and development during the year. The spending
decline results from lower employee numbers.
Anti-corruption and anti-bribery
Pan African Resources has a zero-tolerance policy for bribery
and corruption by employees, officers, directors, consultants or
contractors, with even the appearance of impropriety deemed
unacceptable.
We conduct internal audits of all of our business units and have
robust internal financial controls and processes in place.
LOOKING AHEAD
During the year ahead, we will align our training and talent
management systems to include a greater focus on human capital
development to ensure that Pan African Resources’ employees and
managers are able to progress their careers within the group.
We will continue to review our human resource policies to ensure
that they are aligned to prevailing legislation and regulations.
Employment diversity and gender equity
Pan African Resources promotes employment diversity and
gender equality. We respect people from diverse backgrounds and
promote a culture in which our employees feel valued, which, in
turn, encourages our employees to contribute to the growth and
sustainability of our company.
Pan African Resources acknowledges that delivering and contributing
to genuine transformation is critical for the sustainability of our
business, the communities in which we operate, and the country
as a whole. We are committed to integrating real transformation
throughout the group, as guided by the MPRDA, the Mining Charters
and our SLPs.
The board has set the following target for its non-executive director
representation:
◗◗ 25% female
◗◗ 40% HDSAs.
After year-end, we further strengthened the Pan African Resources
board with the appointment of two new independent non-executive
directors. We welcome Yvonne Themba and Charles Needham to
the board. Yvonne Themba’s appointment improves our board gender
and employment equity representation for the 2020 financial year.
Subsequent to the appointment of the two new directors, our board
comprises seven directors, of which two are female (29%) and three
are HDSAs (43%).
Permanently employed females have marginally increased to 10.4%
(2018: 9.7%).
Recent Mining Charter developments
Mining Charter III seeks to strike a balance between improving
transformation and ensuring the industry’s viability in a volatile
environment. Regarding ownership, it differentiates between new and
existing mining rights holders.
Existing rights holders can continue to have 26% black ownership
for the duration of their rights, although increased HDSA ownership
is required for licence renewals and transfers. These rights remain
applicable even if a BBBEE shareholder withdraws its stake, which is
often a contentious point following the industry’s legal battle over the
‘once empowered, always empowered’ principle.
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HEALTH AND SAFETY
The health and safety of our employees and contractors is of paramount importance to
Pan African Resources. Mining is a physically and mentally challenging industry and, as such,
mining operations present risks to the health and safety of our people. We, however, continue
our efforts in creating an environment of zero harm.
2019 HEALTH AND SAFETY
HIGHLIGHTS AND CHALLENGES
Highlights
◗ The group’s safety rates have shown significant
improvement
◗ No fatalities
◗
Fairview Mine achieved 1 million fatality-free shifts
on 15 July 2018
◗ Barberton Mines achieved 2 million fatality-free shifts
during June 2019
◗ No Section 54 stoppages were issued by the DMR
at Barberton Mines
◗ An independent safety expert was appointed to
review and audit the operational safety systems to
ensure compliance
◗
Increase in the number of employees undergoing
voluntary testing for tuberculosis (TB)
◗ Dust and noise levels below industry averages
Challenges
◗ Safety also remains the responsibility of each and
every employee and, therefore, reliance on all
employees adhering to safety standards
◗ Encouraging employee compliance with treatment
regimes for occupational diseases
◗ HIV/Aids co-infection remains a challenge
◗
◗
Increase in sporotrichosis cases
Impact of increasing levels of lifestyle diseases
affecting mine employees
Looking ahead
◗ Motivational talks to continue safety improvements
◗ Leadership to act as safety role models
◗ While injury rates are well below industry average,
we will continue to work on improving our safety
rates and achieving our aim of zero harm to
employees
◗ Continued efforts to suppress dust levels
◗ Awareness and education on sporotrichosis
y
t
e
f
a
S
h
t
l
a
e
H
y
t
e
f
a
S
h
t
l
a
e
H
y
t
e
f
a
S
h
t
l
a
e
H
WHY HEALTH AND SAFETY IS IMPORTANT TO
PAN AFRICAN RESOURCES
We strive to create an environment of zero harm by creating a safe
and healthy workplace and managing our activities in a way that
eliminates accidents, minimises health and safety risks and promotes
excellence in the performance of our operations.
We recognise that the better we care for the safety, health, wellness
and environment of our employees, the more likely we are to attract
and retain the highest calibre of people.
MANAGEMENT APPROACH
Our board-approved SHEQC policy serves as the safety blueprint for
our entire organisation. Our health and safety policy and framework
is aligned with the Mine Health and Safety Act. We promote and
support a culture of zero harm and minimal environmental impacts.
The board takes 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 the action
plans required to optimise responses to any incidents and accidents.
The mine general managers are primarily accountable for SHEQC
performance at their sites.
Pan African Resources continues to comply with the mining licence
conditions set by the DMR, the Mine Health and Safety Act (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.
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. Our safety
performance results are reported regularly to the DMR.
Employees at Barberton Mines and Evander Mines are represented
via joint management-worker health and safety representative
committees.
In addition to the vital role played by our employees in our safety
performance, our contractors and suppliers are pivotal to the
achievement of our SHEQC objectives. As such, we encourage their
buy-in to our safety ethos, as well as their active involvement in our
initiatives. This is done through training, written communications
and regular face-to-face meetings. We regularly visit areas utilised
by contractors to ensure their compliance with health and
safety standards.
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ABRIDGED SUSTAINABILITY
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SOCIAL SUSTAINABILITY continued
HEALTH AND SAFETY continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
Maintain zero fatalities at our operations
◗ No fatalities were reported for the year under review
y
t
e
f
a
S
Implement safety programmes to promote a safe
working culture and reduce safety-related injuries
h Continue to drive awareness programmes for
t
l
a
e
H
TB and HIV/Aids
PERFORMANCE
Key performance indicators
Health and safety
Safety
Total recordable injury frequency rate (TRIFR)
Lost-time injury frequency rate (LTIFR)
Reportable injury frequency rate (RIFR)
Fatal injury frequency rate (FIFR)
Fatal injuries
Lost-time injuries
Reportable injuries
Medical and first-aid treatment cases
Health
HIV/Aids tests
TB cases
Diabetes cases
Hypertension cases
Certified silicosis cases
Sporotrichosis cases
Total recordable injury frequency rate*
2019
2018
2017
2016
2015
* Per million man hours.
◗ TRIFR and LTIFR for the group improved to 10.71 (2018: 12.71) per million
man hours and 1.62 (2018: 3.73) per million man hours, respectively
◗ RIFR for the group improved to 0.51 (2018: 1.08) per million man hours
◗ 911 (2018: 3,149) employees were tested for HIV/Aids
◗ 21 (2018: 55) certified cases of TB for the current financial year
were reported
Group
Unit
2019
2018
(Rate/million man hours)
(Rate/million man hours)
(Rate/million man hours)
(Rate/million man hours)
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
(Number)
10.71
1.62
0.51
–
–
19
6
126
911
21
112
649
27
4
12.71
3.73
1.08
–
–
52
15
177
3,149
55
74
455
20
1
10.71
12.71
13.68
14.57
11.14
Safety
The group has experienced an encouraging improvement in its safety
performance, with TRIFR showing an encouraging improvement
over the past four years. The group has recorded no fatalities for
the second consecutive year. We will continue to work to embed a
culture of uncompromising safety at all our operations.
Health
The health and wellness of our employees is a key component
of achieving our operational objectives. By reducing health and
safety-related risks, we are able to support the overall health and
well-being of our employees, which enables improved productivity.
Prevention and managing of TB and HIV/Aids is an area of focus for
the group. Employees diagnosed with lifestyle-related diseases, such
as hypertension and diabetes, are regularly monitored and provided
with educational programmes.
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Barberton Mines – safety notice
Barberton Mines – Fairview 3 Incline station
Elikhulu – carbon measurements
Through increased awareness programmes, the number of certified
diabetes and hypertension cases have increased by 51.4% and 42.6%
respectively. The number of HIV/Aids tests have reduced significantly
following staff reductions in recent years.
Sporotrichosis is an infection caused by a fungus called Sporothrix
Schenckii, which is prevalent in tropical and sub-tropical areas and can
impact miners. Due to its weather conditions and wooden supports,
Barberton Mines is the only operation where this disease is a risk
and this risk is actively managed through the operation’s health and
safety controls. During the year under review, four new cases of
sporotrichosis were reported.
LOOKING AHEAD
Our primary focus for the year ahead is to improve ongoing health
and safety awareness programmes. We intend increasing these
programmes through regular engagement and communication with
employees at all operations. Given the success of the motivational
speaker events at Barberton Mines, these will be expanded in the
coming financial year at our operations.
We recognise that a healthy organisational culture starts at the
top of our organisation. We will, therefore, focus on involving the
group’s leadership in health and safety to a greater extent, effectively
positioning these leaders and executives as role models in the group.
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SOCIAL SUSTAINABILITY continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
SOCIAL AND RELATIONSHIP CAPITAL
Mining activities make a significant contribution to the national economy and create financial
opportunities for the local economies in which they operate. Pan African Resources
recognises its responsibility to be a socially responsible corporate citizen.
2019 SOCIAL AND RELATIONSHIP CAPITAL
HIGHLIGHTS AND CHALLENGES
Highlights
◗ Established a business incubation centre to support and
improve business skills in Evander
◗ Successfully completed the construction of the Renee
Clinic and officially handed it over to the Mpumalanga
Department of Health in September 2018
◗ We enrolled 12 (2018: five) former bursary graduates into
our internship programme at Barberton Mines
Challenges
◗ High expectations for employment and procurement
opportunities from communities surrounding our mining
operations
Illegal mining and its impact on society
◗
Looking ahead
◗ Continued focus on youth and small enterprise
◗
development
Further investment in eco-tourism opportunities in
Barberton
◗ Proactive management of community expectations
through ongoing engagement and education
◗ Construction of the Cathyville Clinic with handover
expected in December 2020
◗ Barberton Mines’ Transformation Trust (BMTT) is in the
process of establishing a business development hub to
provide support for small businesses
WHY COMMUNITIES ARE MATERIAL TO PAN AFRICAN
RESOURCES
As employers and valuable contributors to the nation’s economy,
Pan African Resources has a key role to play in South Africa’s
transformation journey and a moral obligation to deliver meaningful
direct and indirect social benefits for local communities. Through
local community investments, we support initiatives that benefit
communities and promote their sustainable development.
Understanding and proactively managing the impacts of mining on
communities is integral to the success of our operations.
MANAGEMENT APPROACH
Pan African Resources operates mines in the Barberton and Evander
regions of the Mpumalanga province of South Africa. Each of our
operations has developed programmes aimed at optimising the
benefits we offer communities by creating shared value, while at the
same time anticipating and mitigating any potential negative social
impacts of our activities. Our approach centres on:
◗ building strong relationships with community members and leaders
◗ upholding fundamental human rights
◗
investing in meaningful community upliftment and empowerment
projects
◗
catalysing sustainable development
◗
respecting cultures, customs and values
◗ engaging in open and inclusive dialogue.
We recognise that continuous stakeholder and community
engagement is key to cultivating a safe and healthy environment for
all. We are working towards building better relationships with our
communities over time and inviting those stakeholders to engage
with us through established community forums about the issues they
experience, so that we can take steps to resolve these collaboratively.
Our mine representatives attend monthly and quarterly community
forum meetings to address community concerns.
The community steering committee, established by the Elikhulu team
to represent Evander Mines and all relevant community stakeholders,
continues to engage with the Evander community to address
grievances and concerns. Mine representatives attend monthly and
quarterly human settlement and LED meetings of Govan Mbeki
Municipality.
The Mining Charter and social and labour plans
The Mining Charter III sets out targets for the mining industry in
terms of social development and community upliftment. We comply
with the requirements of the MPRDA and submit annual progress
reports on our SLPs to the DMR. To minimise any negative social
Emjindini Senior Secondary School science laboratory – official handover of the
laboratory took place in 2013/2014
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Newly constructed Renee Clinic at Emjindini Trust –
official handover of the clinic took place in September 2018
impacts from our mining operations, we monitor, measure and
manage our social and economic impact in line with approved SLPs.
All SLP processes are conducted through recognised municipal
structures and we review our SLP spend regularly, based on our
available financial resources and legislative requirements. In the 2019
financial year, no fines or sanctions were received for non-compliance
with social or economic laws and/or regulations.
Corporate social investment
Corporate and social responsibility is the group’s overall contribution
to society, including its role as social investor, employer and capacity
builder. We continue to drive various community-focused development
projects in the areas and communities in which we operate. The group
also promotes responsible supply chain management by encouraging
our suppliers to support LED projects where possible.
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
Implementation of our operations’ SLPs
◗ We invested USD1.9 million (2018: USD1.1 million) in CSI, LED projects and
bursaries. We contributed USD0.2 million (2018: USD0.3 million) towards
full-time bursaries for 26 (2018: 31) students
◗ Handed the Renee Clinic over to the Mpumalanga Department of Health
in September 2018
Improving relations through regular engagement
with communities surrounding our mining
operations
◗ Our operations have developed and rolled out various campaigns to create
awareness of their impact and contribution to the local communities through
local newspaper publications, radio interviews and social media platforms
PERFORMANCE
Key performance indicators
Barberton Mines
Evander Mines
Corporate offi ce
Group
2019
USD thousand
2018
USD thousand
2019
USD thousand
2018
USD thousand
2019
USD thousand
2018
USD thousand
2019
USD thousand
2018
USD thousand
CSI
LED
Bursaries
Total
256.9
1,046.4
190.9
1,494.2
194.6
365.8
241.2
801.6
159.4
57.1
32.4
248.9
7.8
225.7
23.3
256.8
165.4
–
–
165.4
–
–
–
–
581.7
1,103.5
223.3
1,908.5
202.4
591.5
264.5
1,058.4
Corporate social investment and local economic
development
The group has maintained its contributions to CSI, LED projects and
bursaries as required by legislation. The group spent USD1.9 million
(2018: USD1.1 million) on CSI, LED projects and bursaries.
Illegal mining
Illegal mining activities are a constant challenge at all Barberton mining
facilities, particularly in and around the mountain range separating
Fairview Mine and Sheba Mine. During recent years, the influx of
illegal immigrants from neighbouring countries to the Barberton
region, especially from Lesotho, Mozambique and Zimbabwe, has
led to a significant increase in the number of foreign nationals being
arrested for illegal mining at Barberton Mines. In addition, it has
also been found that local youths are increasingly abandoning their
education to join the illegal miners in their illicit activities.
During the 2019 financial year, we focused on clamping down on
illegal mining to assist in addressing these social challenges. As a result,
2,900 suspected criminals have been arrested for the theft of gold-
bearing material and other commodities such as copper cable and
scrap metal at Barberton Mines and Evander Mines. We recognise,
however, that this is an ongoing issue that has to be constantly
monitored. We will continue to work with our security contractors
and the South African Police Service to inhibit illegal mining and
criminal activities and limit their impact on the safety and moral fibre
of local communities and our operations.
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SOCIAL SUSTAINABILITY continued
SOCIAL AND RELATIONSHIP CAPITAL continued
Supporting our communities through our transformation
trusts
Pan African Resources’ investment in communities through the
group’s transformation trusts amounted to USD1.3 million for
the current financial year (2018: USD1.0 million). This included
contributions from gold mining operations and suppliers.
Wherever possible, the group promotes responsible and ethical
supply chain management by encouraging suppliers to support
local economic development. Barberton Mines and Evander Mines
encourage their suppliers to contribute up to 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.
The BMTT is facilitating an innovative small enterprise development
programme for entrepreneurs in the community. This will assist
existing small, medium and micro-sized enterprises (SMMEs)in the
immediate communities surrounding Barberton Mines to grow and
become regionally competitive, self-sustainable businesses.
The BMTT is also in the process of establishing a business
development hub to provide support for small enterprises. The hub
will provide a host of services typically required by any developing
business that wishes to provide services to Barberton Mines and
other businesses or industries in the region. The initiative will identify
up to 100 community-based businesses and coach them through a
four-phase development plan.
Preferential procurement
Our primary procurement objective is to control costs, achieve
savings and manage inventory across operations through
decentralised sourcing. In addition, we are committed to increasing
spend with black-owned and black-women-owned businesses, as well
as uplifting the communities where we operate through proactive
projects and strategic sourcing.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Barberton Museum – relics of historic mining in the Barberton area
Our operations promote responsible and ethical supply chain
management by encouraging suppliers and contractors to support
local economic development through the employment of community
members and sourcing local products where possible.
Contributions by suppliers to our transformation trusts also count
towards their BBBEE scorecard achievements.
The table below shows the allocation of procurement spend for the
group’s operations, relative to the Mining Charter targets:
Capital goods
Services
Consumables
Mining
Charter
target
%
40
70
50
Barberton Mines
Evander Mines
2019
%
87.8
94.1
88.4
2018
%
91.2
88.6
85.3
2019
%
90.7
58.7
57.7
2018
%
80.5
68.0
60.1
Barberton Mines procured USD12.7 million from black-women-owned businesses in the year under review.
LOOKING AHEAD
We will continue focusing on youth and small enterprise development, while proactively managing community expectations through ongoing
engagement and education.
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OUR COMMERCIAL SUSTAINABILITY
MANUFACTURED CAPITAL
Substantial financial investment in the purchase, development and maintenance of
infrastructure, plant and equipment has provided the capacity to generate sustainable
long-term returns. We are aware of our responsibility to maintain, refurbish and replace our
manufactured capital to ensure the safety of our employees and deliver optimum results.
Pan African Resources owns an attractive portfolio of underground and surface mining assets:
Barberton Mines
Fairview
Mine
Sheba
Mine
New Consort
Mine
BIOX®
plant
BTRP
Evander Mines
Elikhulu
8 Shaft pillar
mining
WHY MANUFACTURED CAPITAL IS MATERIAL TO
PAN AFRICAN RESOURCES
Infrastructure and equipment are essential to extracting resources,
processing ore and transporting the concentrate. We maintain these
assets carefully to extend the life of our operations and improve our
commercial sustainability.
MANAGEMENT APPROACH
At both group and operational levels, management regularly inspects
all tangible assets for 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
◗ Vehicles and equipment
◗
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
its most pressing operational challenges, which are:
◗ Providing safe environmental working conditions
◗ Maintaining mining flexibility
◗
Improving face time, thus enhancing productivity.
All engineering and equipment standards comply with original equipment
manufacturer guidelines and the Health and Safety Act, as well as our
own standard operating procedures and codes of practice.
Equipment reaching its expiration date is generally replaced with
similar or improved technology equipment in keeping with our
internal equipment standards and requirements.
2019 MANUFACTURED CAPITAL
HIGHLIGHTS AND CHALLENGES
Highlights
◗ Elikhulu was successfully commissioned ahead of schedule
◗
Incorporating ETRP’s throughput capacity of 0.2 million
tonnes per month into Elikhulu was completed in
December 2018
Improved underground mining flexibility at Fairview Mine’s
high-grade 272 and 358 platforms
◗
◗ Commenced development of the Evander Mines’
8 Shaft pillar
Challenges
◗ Although New Consort Mine is achieving its expected
tonnes, its financial performance is below expectation due
to its lower grade
Looking ahead
◗ Evander Mines has initiated a feasibility study into the
merits of a solar-powered plant to supplement Elikhulu’s
power consumption
◗ Ongoing infrastructure upgrades, including a gravity circuit
at the Fairview plant to recover the free gold
◗ Consort and Sheba plants upgraded to treat low-grade
◗
surface sources
Further investigate Project Dibanisa, which would link the
Sheba Mine to Fairview Mine’s infrastructure, saving costs
and freeing up the Sheba Mine infrastructure for the Royal
Sheba project
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ABRIDGED SUSTAINABILITY
REPORT
OUR COMMERCIAL SUSTAINABILITY continued
MANUFACTURED CAPITAL continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
◗ Development of Fairview’s sub-vertical shaft
◗ Developing top and bottom access for the sub-vertical shaft is progressing
to improve mining flexibility, productive time at
working faces and hoisting capacity
◗ Establish additional platforms at Fairview’s
11-block for mining flexibility
◗ Incorporation of ETRP’s throughput into
Elikhulu’s processing capacity
◗ Assess the viability of mining Evander Mines’
8 Shaft pillar
according to plan
◗ Improved underground mining flexibility at Fairview Mine’s high-grade 272 and
358 platforms
◗ ETRP’s throughput was incorporated into Elikhulu’s processing capacity in
December 2018
◗ Completion of the feasibility study into the merits of mining the Evander Mines’
8 Shaft pillar and commenced with its development
PERFORMANCE
Key performance indicators
Unit
2019
USD million
2018
USD million
Total capital expenditure
Barberton Mines
Evander Mines
Elikhulu
Corporate
Production
Barberton Mines
Evander Mines
56.7
16.2
2.7
37.7
0.1
(oz)
(oz)
99,363
73,079
128.4
16.4
14.1
97.8
0.1
90,629
69,815
Evander Mines
Elikhulu was successfully commissioned during September 2018, with
ETRP’s throughput incorporated into Elikhulu’s processing capacity in
December.
The Evander Mines’ 8 Shaft pillar will replace the current remnant
underground mining and vamping production and will contribute
approximately 20,000oz in the 2020 financial year.
Barberton Mines
Barberton Mines benefited from increased underground mining
flexibility and higher ore grades with the 272 and 358 platforms
in production in early 2019.
Fairview Mine has seen an increase in free gold being mined, thus
we have invested in a gravity circuit to improve free gold recovery
from this plant. The R18.0 million (USD1.3 million) investment has a
repayment period of approximately two years, emphasising the added
value this manufactured capital will provide to Barberton Mines.
Organic growth
Group growth strategies are supported by robust life-of-mine
plans. Exploration drilling and activities to access and develop our
orebodies were 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
Barberton Mines
8 Shaft pillar mining
Royal Sheba project
Egoli project
New Consort exploration project
Sub-vertical shaft project at Fairview
Project Dibanisa
LOOKING AHEAD
To remain competitive, deliver on our production guidance and
position Pan African Resources for the long term, we continually
seek specific opportunities to enhance the performance of our
manufactured capital and improve the overall efficiency and costs to
optimise our operating model.
A dynamic exploration drilling programme is underway at Barberton
Mines to increase minable areas by utilising our existing infrastructure
to access these additional underground resources.
At Elikhulu, our focus is on further optimising operations. We are also
embarking on optimisation exercises aimed at improving production
and reducing water consumption.
The board of directors approved the development of Evander Mines’
8 Shaft pillar project, with first gold produced in August 2019.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
95
ABRIDGED SUSTAINABILITY
REPORT
Barberton Mines – Fairview smelting operation
2019 INTELLECTUAL CAPITAL
HIGHLIGHTS AND CHALLENGES
Highlights
◗ The successful manner in which the construction of
Elikhulu was completed, demonstrates our team’s ability
to conceptualise, plan and complete large projects
Improved throughput and recoveries through the
Barberton Mines regrind mill
◗
◗ Successful upgrades of IT infrastructure and improved
◗
cybersecurity
Installed improved technology at the BIOX® plant to
monitor bacterial health
Challenges
◗
◗
Improving resource utilisation while lowering costs
Identifying the most appropriate digital opportunities
to enhance business processes
Increasing risk of cybercrime
◗
◗ BIOX® process is susceptible to hydrocarbon pollution
Looking ahead
◗ The group will continue to invest in people, systems and
technologies that make operations more efficient and
cost effective
INTELLECTUAL CAPITAL
It is imperative that Pan African Resources
continually innovates across every aspect of
its business to ensure the sustainability of
its operations. Continuous innovation will
enhance our performance, ensure the safety
of our people, and deliver value for all our
stakeholders.
WHY PROCESSES, SYSTEMS AND TECHNOLOGY ARE
MATERIAL TO PAN AFRICAN RESOURCES
While Pan African Resources remains reliant on human resources,
technology is transforming the workplace in all industries, including
mining. We recognise the importance of responding swiftly to this
evolution through targeted investments in people, technologies and
data-driven systems.
At the same time, we are aware that in an increasingly technological
world, we face a higher risk of exposure to cybercrime and related
risks. We need to take all steps necessary to protect our interests
and those of our stakeholders from these risks.
MANAGEMENT APPROACH
Management’s key focus areas for technology and processes are to
improve safety performance, deliver quality ounces, optimise the
performance of Elikhulu and identify and advance value-accretive
growth opportunities.
Risk management is integral to achieving safe mining systems and
efficient operations. Potential new processes and technologies are
scrutinised through a risk assessment process and, if adopted, are
applied in line with detailed risk-based management plans.
The board is ultimately responsible for technology and information
governance, which is guided by an information technology (IT)
charter and protection of personal information policy.
Each operation has formal business continuity and disaster
management plans in place, which are directly overseen by mine
general managers.
PERFORMANCE
Balancing underground and surface mining
As underground mining has become riskier and less profitable, Pan
African Resources has increased its focus on low-risk, low-cost and
efficient gold tailings processing. Our production is now more evenly
split between underground mining and surface operations with
an 53:47 split for the current year. This is a significant improvement
from 2018 when underground mining accounted for 76% of our total
gold output.
Barberton Mines – Fairview Mine 42 Level onsetter station
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ABRIDGED SUSTAINABILITY
REPORT
OUR COMMERCIAL SUSTAINABILITY continued
INTELLECTUAL CAPITAL continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
A bit about BIOX®
BIOX® is an easier and safer
process than other refractory
processing technologies.
Barberton Mines uses
tank bioleaching, a bio-
hydrometallurgical process
wielding a host of archaea
and bacteria, to oxidise the
iron and sulphur from the
refractory crystal matrix to
expose gold for subsequent
cyanide recovery.
The bacteria used in the
BIOX® technology require
simple nutrient additives.
They thrive on a stable
diet and in a controlled
temperature of approximately
42°C. Provided that the
bacteria’s environment is
maintained at a consistent
level, there is little risk to the
technology’s efficacy.
To protect against power
interruptions that might
impact on this environment,
reliable backup generators
are in place.
BTRP has been a major milestone for Pan African
Resources as it has demonstrated its capacity to
add significant low-cost ounces to the group’s
production profile. In 2018, a regrind mill was
installed at BTRP to improve throughput and
recoveries of course fraction material from the
Harper and Vantage dumps. The mill has proven
successful in 2019, and has already increased
tonnages and improved recoveries, restoring
BTRP to 20,000oz of gold per year at an all-in
sustaining cost of USD552/oz.
separate compounds before analysis with the MS
instrument, giving them access to mass spectral
data. This analysis facilitates the effective control
of plant conditions and optimal bacterial health,
to ensure the highest possible rate of sulphide
oxidation.
The plant has had no serious hydrocarbon
incidents since the installation of the GC, and now
the GCMS, and the recovery rate has improved
to more than 98%.
BIOX® processing
The BIOX® process exposes the gold in
sulphide minerals for subsequent cyanidation
and raises the overall recovery of gold ounces.
Barberton Mines is the birthplace of BIOX®,
an environmentally friendly process that uses
bacteria to release gold from the sulphide that
surrounds it. Given its established expertise,
Barberton Mines is used as a training facility for
BIOX® plants globally. The BIOX® process only
works with specific ores, such as those found at
Barberton and offers numerous advantages. For
example, BIOX®:
◗
◗ delivers higher gold recovery rates
◗
is environmentally friendly
incurs significantly lower capital costs to
develop and operate
is a robust technology that is well suited to
remote locations
◗
◗ meets daily operational requirements suited to
semi-skilled labour and on-the-job training
◗ offers opportunity for continuous
improvement through ongoing process
development.
Gas chromatography mass spectrometry
Maintaining the BIOX® plant at optimum
bacterial health increases gold recovery. During
the current financial year, we invested in gas
chromatography mass spectrometry (GCMS)
technology to analyse the health of bacterial
cultures at the BIOX® plant. GCMS is an analytical
method that combines the features of gas-liquid
chromatography and mass spectrometry to
identify different substances within a test sample.
The gas chromatography (GC) instrument is
effective in separating compounds into their
various components, while the mass spectrometry
(MS) instrument provides specific results. Our
laboratory analysts use the GC instrument to
INFORMATION AND TECHNOLOGY
Underground safety monitoring
Our underground operations at Barberton Mines
use advanced technology to monitor water
and oxygen levels, lighting, ventilation systems,
temperatures and air circulation. Automated
switch control devices activate water pumps and
fans before employees commence underground
work, while fridge plants ensure that underground
working temperatures are maintained at
comfortable levels. Best practice in this field
requires that underground temperatures never
exceed 32.5oC and we make every effort to
maintain our underground temperatures below
31.5oC.
While the abovementioned automated
technology plays a massive role in ensuring the
efficiency of our underground operations, we
acknowledge that there can be risks associated
with automation and mechanical systems. As such,
operators and supervisors have the ability to
manually override these systems in emergency
situations.
Information technology
We continue to see an improvement in
productivity and efficiency in the administrative
and management functions at Barberton Mines.
This is a direct result of faster, more reliable
connectivity and improved analysis of mining data.
We previously made the decision to move away
from ADSL connectivity and considered fibre as
an alternative option. Fibre bandwidth restrictions
in the Barberton area, however, forced us to
reconsider this and we have now transferred
most of our connectivity to microwave
technology. This affords us significantly faster and
more stable connections and the combination of
the two technologies should ensure that we have
at least some connectivity at all times.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
97
ABRIDGED SUSTAINABILITY
REPORT
GROUP PROGRESS AGAINST 2019 TARGETS
Substantively achieved
Moderate progress
Not achieved
Our focus for 2019
What we achieved
Self-assessment
Balancing underground and surface mining and
improving processes
◗ Our Elikhulu tailings retreatment project is delivering low-cost ounces
◗ ETRP’s throughput was incorporated into Elikhulu’s processing capacity
in December 2018
◗ BTRP significantly improved production following the successful commissioning
of the facility’s regrind mill in May 2018
Improving technology
◗ Monitoring technology installed at Elikhulu to optimise plant operation
We will continue to encourage an entrepreneurial and innovative
culture across all our operations as this type of culture is essential
to identifying and exploiting opportunities for the benefit of all our
stakeholders.
We are in the process of improving our biometrics system with a
view to better managing employee record keeping and monitoring
attendance and overtime. Once completed, the enhanced system
will feed into the payroll and human resource processes to improve
accuracy, reliability and reporting.
Cybersecurity
The potential for cybercrime and illegal systems access is an ever-
present risk that Pan African Resources recognises it needs to
proactively prevent. Our entire IT and communications network
is secured by means of password protection and verification, so
that users wishing to access the network require authorised access
certificates. We conduct regular penetration tests to identify network
or system vulnerabilities and immediately address all issues found.
All Pan African Resources data is backed up onto an external, off-site
server located at a data-recovery site. Should our central server be
compromised in any way, or experience a fault, we are able to restore
full server functionality with limited downtime using the constantly
updated image on the backup server.
LOOKING AHEAD
Challenging the way things have always been done is a priority
and a value instilled in our culture. By developing new solutions,
encouraging new ways of thinking and finding new ways of working,
we will continue to dramatically improve our business
and competitiveness.
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GOLD: AN INVESTMENT
FOR THE AGES
A GLIMPSE OF GOLD
Over the past five millennia, gold has earned a place as one of the planet’s
most precious and sought-after metals. Throughout history, mankind has
pursued this often elusive source of wealth and prestige. Gold is used for
creating jewellery, as a form of currency and, ultimately, a self-regulating asset
that underpins modern economies.
Today, gold remains a key economic component. The precious metal is typically
purchased and held as a hedge against inflation given the fact that, as a tangible
asset, its value almost always increases during times of economic crisis or
uncertainty. As a result, gold’s appeal as an investment has grown significantly in
recent times, as rising geopolitical tensions and a growing mistrust of modern
financial systems drive an increasingly volatile global economy.
THE THREE MAIN REASONS INVESTORS HOLD GOLD
While modern markets offer a plethora of options for investors, gold remains
a highly sought-after investment opportunity, whether in its physical form, or
indirectly through stocks, shares and tradeable investment instruments. Despite
many ups and downs throughout history, gold has never lost its sheen for canny
investors:
Gold is scarce
Gold is a tangible asset that remains relatively scarce. Where it is found, it
is often difficult and expensive to access. As such, it maintains its value as a
durable resource and a safe haven for investment.
Gold protects global economic value
Gold is seen as a physical store of value during times of economic deflation
or even extreme inflation. To some, it is still considered a highly valued
global currency.
Gold is often ‘contrarian’
The price of gold often moves in the opposite direction to equity and bond
markets. In most instances, when an investment portfolio is losing value
because of the poor performance of shares, any gold holdings within that
portfolio will limit overall losses through better performance. This makes gold
an excellent source of asset diversification.
SO – WHAT DRIVES THE GOLD PRICE?
The most impactful factors driving price shifts are:
Monetary policy – the policies of leading economic powerhouses like the USA,
UK, Europe and China are probably the biggest influencers of gold prices. In
low interest rate environments, where investors are faced with nominal gains
on money instruments, gold can offer a more appealing proposition.
Economic news and data – as mentioned earlier, gold is considered a good
physical store of value. So, when economies and countries are seen to be faltering,
investors often look to gold as a safe haven, thereby pushing up the price.
Supply and demand – gold is still extensively used for jewellery manufacturing, as
well as various industrial and manufacturing purposes. As consumers and industries
increase or decrease their demand for gold, the price responds accordingly.
KRUGERRAND OPENS DOORS TO
PHYSICAL GOLD OWNERSHIP
Launched in 1967, the South African
Krugerrand was the very first coin in the world
created specifically for investment purposes. At the
time it was conceived, South Africa was the biggest gold
producer in the world, and the production of the Krugerrand
was considered the perfect way for the country and its
economy to capitalise on this position. It offered
investors a physical means of privately owning gold.
So popular was it with investors that, at one
time, Krugerrands accounted for nearly 90%
of the global gold coin market.
Barberton Mines – gold bar
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HOW TO INVEST IN GOLD
Gold is an immensely versatile asset because it offers a
variety of investment options. The most popular of which
of are:
Shares in gold mining companies
Direct investing in gold mining companies is the
first choice for many knowledgeable investors. Why
‘knowledgeable’? Because gold mining companies are
not always valued in direct correlation to the gold price,
often due to their internal operational and development
cycles in relation to their markets That said, gold
mining and exploration remains potentially lucrative for
informed investors, particularly given gold’s safe-haven
role in increasingly erratic global markets.
Futures contracts
These are standardised contracts that trade on formal
exchanges. They allow the contract holder to buy or
sell the underlying asset at a stated future time and at
a specified price.
Gold ETFs
The first gold Exchange Traded Fund (ETF) was launched
15 years ago in 2004 and became a most popular form
of gold investment. ETFs enable investors to profit from
gold without physically owning the commodity.
Collectors’ coins
These gold coins are popular with a variety of investors
as, in addition to their high material worth, they also
deliver numismatic value. Knowledgeable investors can
leverage significant long-term returns.
T
R
A
N
S
P
A
R
E
N
C
Y
Gold bullion coins
Gold bullion coins are usually issued by countries or
commercial businesses. Popular examples include
the Britannia, the South African Krugerrand and the
American Gold Eagle. These coins typically offer little
value as collectors’ items and are priced purely on the
weight of gold used in their manufacture.
A
N
D
Gold bullion bars
Gold bars are one of the easiest ways to invest in solid
gold. An investment in bullion bars means the investor
typically receives and holds the actual gold bar, which can
range in weight from around 10 grams to a kilogramme
or more. While physical gold is still accepted as currency
in some countries, gold bullion bars are not as liquid
as gold shares or ETFs, as investors must physically sell
bullion for monetary reward.
While gold is an asset like any other and
can often be fairly volatile in terms of its
price, it remains a key component of many
world economies and, as such, should be
an integral part of any well-structured
and balanced investment portfolio.
A
C
C
O
U
N
T
A
B
I
L
I
T
Y
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100
TRANSPARENCY
AND ACCOUNTABILITY
BOARD OF DIRECTORS
NON-EXECUTIVE DIRECTORS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
KEITH SPENCER (69)
Chairman
HESTER HICKEY (65)
Non-executive and lead
independent director6
THABO MOSOLOLI (49)
Non-executive
ROWAN SMITH (55)
Non-executive
BSc Eng (Mining)
CA(SA), BCompt (Hons)
BCom (Hons), CA(SA)
BSc (Hons), BCom (Hons)
Date of appointment
8 October 2007
Date of appointment
12 April 2012
Date of appointment
9 December 2013
Date of appointment
8 September 20141
Significant directorships
◗ Northam Platinum Limited
◗ Cashbuild Limited
◗ Barloworld Limited
◗ African Dawn Capital Limited
(resigned on 31 August 2019)
Significant directorship
◗ Chief operating officer of Sun
International (for the South African
operations)
Significant directorships
◗ Adviser to Athena Capital
◗ Director of Hlanganani Capital
Skills and experience
Keith is a qualified mining engineer with
48 years’ practical mining experience. Since
1986, Keith has held senior positions in
some of the largest gold mines in the world
including the positions of:
◗ Managing director of Driefontein
Consolidated
◗ Chairman and managing director of
Deelkraal Gold Mine
◗ Director on the boards of gold mines
belonging to Gold Fields, South Africa
◗ Operations director of Metorex
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
served as chairperson of SAICA
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 continues to operate
MFT Investment Holdings, a family-
owned investment company strategically
placed to capitalise on BBBEE investment
opportunities
Skills and experience
Rowan has nearly three decades of
experience in the resources and investment
banking industries. He was a founding
shareholder and managing director of
Shanduka Resources. Before Shanduka, he
was a director of Investec Bank’s mining
finance team in Johannesburg. He also
worked for Swiss-based Société Générale
de Surveillance in Geneva. Rowan started
his career as a valuation geologist at
Harmony Mine
Independent
Independent
Independent
Independent
Experience
◗ Technical and operational
◗ Risk management
◗ Environmental and sustainability
◗ Business and strategy
◗ Leadership
Committee membership
2
Finance and accounting
Experience
◗
◗ Risk management
◗ Governance and regulation
◗ Business and strategy
◗ Leadership
◗ Taxation
Experience
◗
Finance and accounting
◗ Governance and regulation
◗ Business and strategy
◗ Leadership
Experience
◗ Technical and operational
◗ Environmental and sustainability
◗ Business and strategy
◗ Leadership
Committee membership
Committee membership
Committee membership
Chairman of the SHEQC committee
Chairperson of the audit and risk committee
Chairman of the social and ethics committee
Chairman of the remuneration committee3
Board and committee meeting attendance
7/7
5/5
2/2
4/4
7/7
5/5
4/4
7/7
5/5
2/2
1/1
3/7
2/2
1 Resigned from the board with effect from 3 April 2019.
3 Resigned from the remuneration committee with effect from 3 April 2019.
5 Appointed to the audit committee with effect from 17 July 2019.
2 Resigned from the audit committee with effect from 10 September 2019.
4 Appointed as chairperson of the remuneration committee with effect from 17 July 2019.
6 Appointed as lead independent director with effect from 4 April 2019.
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101
TRANSPARENCY
AND ACCOUNTABILITY
Audit committee
Remuneration committee
SHEQC committee
Social and ethics committee
Board meetings
EXECUTIVE DIRECTORS
YVONNE THEMBA (54)
Non-executive
CHARLES NEEDHAM (65)
Non-executive
COBUS LOOTS (41)
Chief executive officer
GIDEON (DEON) LOUW (57)
Financial director
BA, MBA
Articles of Clerkship-Accounting, Dip in
Mining Taxation
CA(SA), CFA® Charterholder
CA(SA), CFA® Charterholder, H-Dip
(Tax Law), AMCT (UK)
Date of appointment
17 July 2019
Date of appointment
17 July 2019
Date of appointment
26 August 2009
Date of appointment
1 March 2015
Significant directorships
◗ Adopt-A-School Foundation non-profit
organisations
◗ Canadoce Investments Close
Corporation
◗ Bo Themba Projects Proprietary Limited
◗ Clique Marketing Proprietary Limited
◗ Pfortner Solutions Proprietary Limited
◗ Mathomo Packhouse Proprietary Limited
◗ Talamati Asset Managers Proprietary
Limited
◗ Talamati Capital Managers Proprietary
Limited
◗
Jula Investments Proprietary Limited
◗ Varsbegin Proprietary Limited
Skills and experience
Yvonne Themba is currently the executive
director of BoThemba Projects. She
was previously responsible for human
capital at Phembani Group and Shanduka
Group. She headed the group corporate
communications department at African Life
Assurance Limited and the corporate social
investment and corporate communications
department at Sanlam. Prior to that she
was deputy director of the Life Officers’
Association
Imagined Earth Proprietary Limited
Significant directorships
◗ Alphamin Resources Corporation
◗ Divitiae Holdings Limited
◗
◗ Kinsenda Copper Company SARL
◗ METPROP Proprietary Limited
◗ MetQuip Proprietary Limited
◗ Orpheus Property Holdings Proprietary
Limited
◗ Ruashi Holdings Proprietary Limited
Skills and experience
Charles is currently the chairman of
Kinsenda Mining Company and Alphamin
Resource Corporation (listed on the
Toronto Stock Exchange), and consults to
Metorex, a subsidiary of the Jinchuan Group.
Previous experience includes 31 years at
Metorex, with a spread of mining operations
in Namibia, South Africa, Zambia and the
Democratic Republic of the Congo. Charles
progressively held the positions of group
accountant, financial director and ultimately
chief executive officer, while at Metorex
Skills and experience
Cobus has many years of experience in
the African mining sector. He qualified as
a chartered accountant with Deloitte &
Touche in South Africa. Prior to joining
Pan African Resources, 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 to the South
African government. 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
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 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 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
Independent
Independent
Not independent
Not independent
Experience
◗ Technical and operational
◗ Risk management
◗ Governance and regulation
◗ Environmental and sustainability
◗ Business and strategy
◗ Leadership
Committee membership
Experience
◗
Finance and accounting
◗ Technical and operational
◗ Governance and regulation
◗ Business and strategy
◗ Leadership
Committee membership
5
Chairperson of the remuneration committee4
Experience
◗ Technical and operational
◗
Finance and accounting
◗ Business and strategy
◗ Leadership
◗ Technology
◗ Taxation
Finance and accounting
Experience
◗
◗ Risk management
◗ Business and strategy
◗ Leadership
◗ Technology
◗ Taxation
Committee membership
Committee membership
7/7
5/5
2/2
4/4
7/7
5/5
1/2
1/1
Refer to www.panafricanresources.com/the-team for the executive and operations management team.
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BOARD OF DIRECTORS continued
BOARD COMPOSITION
Our board has a balance of knowledge, skills, experience, diversity and
independence to objectively and effectively discharge its governance role and
responsibilities.
The diversity statistics below reflect the composition of our board and include
Rowan Smith who served on our board up to his resignation, effective from
3 April 2019. These statistics exclude Yvonne Themba and Charles Needham
who were appointed to our board on 17 July 2019.
DIVERSITY OF EXPERIENCE
Our board reflects a considerable amount of experience in mining, business
and related activities and collectively has a wealth of industry knowledge.
DIVERSITY OF TENURE
In terms of the JSE Listings Requirements and the group’s constitutional
documents, one-third of directors, excluding any director appointed since
the previous AGM, must retire from office at each AGM on a rotational
basis. Non-executive directors’ performance is continually assessed and their
independence reviewed if their tenure exceeds nine years.
Three to six years
Six to nine years
Above nine years
50%
17%
33%
Finance and accounting
Technical and operational
Risk management
Governance and regulation
Environmental and sustainability
Business and strategy
Leadership
Technology
Tax
67%
50%
50%
33%
33%
100%
100%
33%
50%
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. Based on this assessment, the board is satisfied that its
non-executive directors are independent. The board comprises a balance
of executive and non-executive directors, with a majority of non-executive
directors. The board’s non-executive directors are independent.
Independent non-executive directors 67%
GENDER AND EMPLOYMENT EQUITY DIVERSITY
To enable the board to discharge its duties and responsibilities effectively,
the board considers the benefits of all aspects of diversity in its composition,
specifically including, but not limited to, gender and employment equity
diversity.
Gender
2019
2018
0
20
40
60
80
100
Female Male
Historically disadvantaged South Africans
2019
2018
0
HDSAs
20
40
60
80
100
PERFORMANCE AGAINST OUR BOARD GENDER AND DIVERSITY
TARGETS
On 17 July 2019, subsequent to our financial year-end, we strengthened our
board with the appointment of two new independent non-executive directors.
With the appointment of Yvonne Themba, the gender and employment equity
representation on our board improved for the 2020 financial year. Refer to
page 86 for the board’s gender and diversity targets.
Executive directors
33%
Gender
2020
2019
DIVERSITY OF AGE
Executive directors retire from their positions and the board at the age
of 65. Non-executive directors, 70 years or older, retire at each AGM and are
proposed for re-election, if recommended by the board.
0
20
40
60
80
100
Female Male
Historically disadvantaged South Africans
40 to 50 years
50 to 60 years
Above 60 years
33%
33%
34%
2020
2019
0
HDSAs
20
40
60
80
100
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019TRANSPARENCY AND ACCOUNTABILITY
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
103
TRANSPARENCY
AND ACCOUNTABILITY
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.
We review our corporate governance practices regularly and have
adopted King IV™ as the recognised corporate governance code to
ensure that we act in the best interest of our stakeholders, comply
with applicable laws and regulations and quickly adapt to changes in
our regulatory environment.
GOVERNANCE FRAMEWORK
The board is ultimately responsible for the group’s governance
structure and framework and is supported by its four sub-
committees. 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 the operations
committee (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 Companies Act 2006, the South African
Companies Act1, the AIM Rules of the LSE, the JSE Listings Requirements
and King IV™. In addition, the board has considered the principles of
corporate governance contained in the UK Corporate Governance
Code and the guidance published by the Financial Reporting Council
(FRC) concerning risk management and internal controls.
Governance framework
Shareholders and other
stakeholders
Board of
directors
Board
committees
Nomination
committee
Remuneration
committee
(Remco)
SHECQ
committee
Audit and risk
committee
Social and ethics
committee
Executive committee (Exco)
Operations committee (Opsco) and management committee (Manco)
1 South African Companies Act applicable to the South African entities.
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TRANSPARENCY
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CORPORATE GOVERNANCE continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
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. Further, to ensure compliance with the UK Bribery Act,
a separate anti-bribery and anti-corruption policy is in place, which
is communicated to all employees and to mine contractors, and to
which they are all expected to fully comply. 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, the group’s 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 financial year.
THE BOARD LEADERSHIP AND COMMITTEES
The board
The board is responsible and accountable for the performance and
affairs of the group and has full control over the group‘s 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 communities in which the
group operates, while acting in accordance with its own code of
conduct. The group’s committees assist the board in discharging its
responsibility regarding corporate governance. All committees have
satisfied their responsibilities during the year, in compliance with their
respective charters, which have been independently reviewed in the
current financial year. A copy of these charters is available from the
company secretary on request.
As at the reporting date, Pan African Resources’ unitary board
comprised five directors, of whom three were independent non-
executive directors and two executive directors. Subsequent to
the group’s financial year-end, two new independent non-executive
directors were appointed on 15 July 2019. As of this date, the board
comprised five non-executive directors and two executive directors.
The executive directors are the chief executive officer and the financial
pages 100 and
director. Brief CVs of all directors are provided on
101. King IV™ recommends that the governing body (board) should
comprise the appropriate balance of knowledge, skills, experience,
diversity and independence for it to discharge its governance role and
responsibilities effectively. The board is satisfied that the balance of
knowledge, skills, experience and diversity on the board is sufficient.
The board acknowledges the requirement for race and gender
representation in its composition. The group has an approved diversity
policy to promote race and gender diversity at board level.
Social and ethics committee
At the reporting date, the social and ethics committee comprised of
one independent non-executive director, the financial director and
the chief operating officer.
Subsequent to year-end, the committee was re-constituted. The
chief operating officer resigned from the committee, effective from
15 July 2019, and two non-executive directors were appointed.
As of this date, the social and ethics committee comprised two
non-executive directors and one executive director. Refer to
pages 100 and 101 for the profile of each of the committee
members.
The committee is responsible for meeting its statutory duties in
accordance with King IV™ and the JSE Listings Requirements.
The primary purpose of the committee is to oversee the group’s
activities in sustainable social development, which include, inter alia,
public safety, HIV/Aids, environmental management, corporate social
investment, consumer relationships, labour and employment, the
promotion of equality and ethics management.
Audit and risk committee
All members are independent non-executive directors elected by the
shareholders at the AGM – refer to
pages 100 and 101.
This committee reports directly to the board and has several
responsibilities and duties, which have been set out in the audit
committee report on
four 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.
page 131. The committee meets at least
Remuneration committee
All members are independent non-executive directors – see
pages 100 and 101. The remuneration review, which includes the
remuneration policy and remuneration implementation report, is
included on
◗ Monitoring and reviewing the setting and administering of
pages 112 to 125. The committee’s functions include:
remuneration at all levels in Pan African Resources
◗ Monitoring and reviewing the establishment of a remuneration
policy
◗ Ensuring that the remuneration policy is put to a non-binding
advisory vote at the AGM
◗ Reviewing the outcome of the implementation of the
remuneration policy to ascertain whether the set objectives are
being achieved
◗ Ensuring a mix of fixed and variable pay, in cash, shares and other
elements, to meet the group’s needs and strategic objectives
◗ Satisfying itself as to the accuracy of recorded performance
measures that govern the vesting of incentives
◗ Ensuring that all benefits, including retirement benefits and other
financial arrangements, are justified and correctly valued
◗ Considering the results of the evaluation of the performance of
the chief executive officer, financial director and other executive
directors, both as directors and as executives in determining
remuneration
◗ Selecting an appropriate comparative group when comparing
remuneration levels
◗ Regularly reviewing incentive schemes to ensure continued
contribution to shareholder value and that these schemes are
administered in terms of the rules
◗ Considering the appropriateness of early vesting of share-based
schemes at the end of employment
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TRANSPARENCY
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◗ Advising on the remuneration of non-executive directors
◗ Ensuring accurate, transparent and complete remuneration
◗ Monitoring and reporting to the board on the group’s performance
◗ Establishing an organisational structure that enables the execution
disclosure in the integrated annual report.
of the group’s strategy
Executive committee
Members of the Exco include the chief executive officer, financial
director and the executive of operations and human resources.
The Exco is responsible for managing the group’s operations,
developing strategy and implementing the board’s directives. Its
responsibilities include:
◗ Leading executives, management and employees
◗ Developing the strategy of the group
◗ Development, management and submission of the annual budget
for the board’s approval.
Nomination committee
Non-executive directors on the board perform the function and
responsibility of the nomination committee.
ACCOUNTABILITY
The board takes overall responsibility for the success of Pan African
Resources. The role of the board is to exercise leadership and sound
judgement in directing the group to achieve sustainable growth and
act in the best interest of shareholders.
In line with best practice, the responsibilities of the chairman and the
chief executive officer are separate. 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.
The 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
and proper consideration of key matters
◗ 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 in order to build trust and confidence in the group
◗ Presiding over the AGM.
The chief executive officer’s responsibilities include:
◗ Developing the group’s long-term strategy for board
consideration and approval
◗ Monitoring and managing the 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
◗ Ensuring the group complies with all relevant laws and corporate
governance principles
◗ Ensuring constructive relationships with critical stakeholders.
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 financial
year in compliance with its charter. A copy of the board charter
is available from the company secretary on request. The group’s
charters were independently reviewed in the current financial year
for compliance with King IV™.
Lead independent director
The board has appointed, Hester Hickey, an independent non-
executive director as the lead independent to fulfil the following
functions:
◗ To lead in the absence of the chairman
◗ To serve as a sounding board for the chairman
◗ To act as an intermediary between the chairman and other
members of the governing body, if necessary
◗ To deal with shareholders’ concerns where contact through
normal channels has failed to resolve concerns, or where such
contact is inappropriate
◗ To strengthen independence on the governing body if the
chairman is not an independent non-executive member of the
governing body
◗ To chair discussions and decision-making by the governing body
on matters where the chairman has a conflict of interest
◗ To lead the performance appraisal of the chairman.
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 at
each AGM on a rotational 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, Hester Hickey and
Thabo Mosololi retire by rotation and offer themselves for re-election.
In addition, in accordance with the group’s constitutional documents,
any director appointed since the conclusion of the previous AGM
must retire at the next AGM and may make him/herself available
for re-election, provided he/she remains eligible as required by the
constitutional documents and in compliance with the AIM Rules and
JSE Listings Requirements. Accordingly, Yvonne Themba and Charles
Needham will retire at the upcoming AGM and, being eligible, will
offer themselves for re-election.
A brief CV of each director standing for re-election at the AGM is
contained on
pages 100 and 101.
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CORPORATE GOVERNANCE continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
THE CHAIRMAN
The board is comfortable that the chairman is able to perform the duties of his office effectively. Keith Spencer, an independent non-executive
director, is the standing chairman of the company.
The chairman provides independent board leadership and guidance and facilitates suitable deliberation on all matters requiring the board’s
attention. He further ensures that the board operates efficiently and collectively.
BOARD ACTIVITIES
The key focus areas and issues discussed during the financial year are tabled below:
Focus areas
Key issues discussed in 2019
Strategy and
operational execution
◗ Discussed the Egoli project and agreed on a strategy to progress the project
◗ Discussed progress on the study of and implementation plan for pillar extraction at Evander Mines’ 8 Shaft
◗ Approved payment of the Elikhulu incentive
◗ Approved the group’s plan to increase its strategic focus on security
◗ Reviewed and considered potential acquisitions during the course of the year
◗ Monitored rehabilitation initiatives implemented at Evander Mines
◗ Approved the development of Evander Mines’ 8 Shaft pillar extraction
◗ Approved the identification of the material matters process
◗ Approved the identified material matters
Risk management
◗ Considered the impact of the new Mining Charter on investment in South Africa and its impact on the group
◗ Monitored safety performance and improvement measures implemented at operations
◗ Monitored progress on Elikhulu’s construction and ramp up
◗ Monitored progress on the incorporation of ETRP’s throughput capacity of 0.2 million tonnes per month into Elikhulu
◗ Monitored group cash flow performance, projections and debt covenant compliance
◗ Monitored the group mining licence and related regulatory compliance
◗ Oversight of the group’s hedging activities
Governance
◗ Considered the King IV™ Report and listings requirements (JSE and AIM)
◗ Considered other relevant regulations and requirements applicable to the group
◗ Approved the 2018 financial year integrated annual report, annual financial statements and associated Stock Exchange News
Service announcements
◗ Approved the December 2018 interim results
◗ Approved the going concern basis of accounting for the preparation of the June 2018 annual financial statements and December
2018 interim results
◗ Ratified the appointment of PwC as the group’s auditor subject to approval by shareholders at the next AGM and Questco Corporate
Advisory Proprietary Limited as the group’s JSE adviser
◗ Assessed the performance of the audit and risk committee, the company secretary, the board and the financial director
◗ Ratified the audit and risk committee minutes of meetings
◗ Ratified the remuneration committee minutes of meetings
◗ Approved the 2019 financial year budgets for the group
Stakeholder
engagement
◗ Monitored engagement with unions, the workforce and community-related matters
◗ Certain non-executive directors attended the inaugural gold pour of Elikhulu
◗ Obtained all requisite approvals from the AGM and general meetings held during the financial year
◗ Non-executive directors visited the Barberton operation for a board meeting and review
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107
TRANSPARENCY
AND ACCOUNTABILITY
COMMITTEE ACTIVITIES
The table below details the key issues discussed during the year under review:
Committee
Members
Key issues discussed in 2019
Audit and risk
committee
◗ Hester Hickey (chairperson)
◗ Thabo Mosololi
◗ Keith Spencer
Invitees
◗ Cobus Loots (chief executive officer)
◗ Deon Louw (financial director)
◗ External auditor, internal auditors and
financial executives
Remuneration
committee
◗ Rowan Smith (chairman)
◗ Thabo Mosololi
◗ Keith Spencer
Invitees
◗ Cobus Loots (chief executive officer)
◗ Deon Louw (financial director)
◗ André van den Bergh (chief operating
officer)
Safety, health,
environment, quality
and community
(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
◗ Recommended the group’s integrated annual report for June 2019
◗ Recommended the interim report for 31 December 2018 to the board for
approval
◗ Reviewed the internal and external audit reports
◗ Monitored the group’s risk appetite and tolerance levels
◗ Approved the internal and external audit fees
◗ Monitored the external auditors’ independence
◗ Monitored the internal audit programme and reviewed the internal audit findings
◗ Evaluated the financial director and the finance department
◗ Recommended the appointment of PwC as the external auditor of the group
to the board for shareholder approval
◗ Monitored the RCF restructure process
◗ Approved the change in the presentation currency
◗ Monitored the ESG strategy and compliance
◗ Monitored King IV™ compliance
◗ Considered the latest letter on the JSE’s Proactive Monitoring Process
◗ Ensured that salary adjustments were in line with the group’s remuneration
philosophy and within the industry peer benchmarks provided by the PwC
Remchannel market analysis and other sources
◗ Oversight of an independent review of the group’s remuneration framework
and policies and alignment with shareholder expectations
◗ Regularly reviewed, monitored and ensured compliance in terms of stipulated
employment equity targets and other requirements
◗ Engaged with key shareholders regarding the group’s remuneration policy and
framework
◗ 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
◗ Monitored the progress of CSI and LED projects
◗ Reviewed and approved the social and ethics charter
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TRANSPARENCY
AND ACCOUNTABILITY
CORPORATE GOVERNANCE continued
Barberton Mines – BTRP CIL tanks
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
INDEPENDENT ADVICE
All independent non-executive directors have unrestricted access
to management and the group’s external auditor. Furthermore, 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.
BOARD AND COMMITTEE MEETINGS
The board meets quarterly with additional meetings, as and when
required. Attendance at board and committee meetings is set out on
pages 100 and 101. In addition, ad hoc meetings and calls are held
regularly. Not all these interactions are recorded, however, formal
engagements are recorded on
pages 100 and 101.
BOARD EVALUATION
An annual effectiveness self-evaluation is undertaken in respect of the
board and its sub-committees. 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 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.
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 that 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. Dealings in the company’s securities by the chief
executive officer are approved in writing by the chairman of the
board. There were no contraventions of this policy during the year.
NEW APPOINTMENTS
The board identifies, interviews and proposes potential new
candidates. 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
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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.
Each operation has formal business
continuity and disaster management plans
in place, which are the responsibility of the
respective general managers.
COMPLIANCE
The group complies with all applicable legal
acts and regulations 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 audit function provides a
further layer of compliance. 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
government during the year under review.
informed of AIM and JSE rules with the assistance of the UK-based 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.
ONGOING DEVELOPMENT
Directors who are chartered accountants comply with SAICA’s continued professional
development requirements. The UK-based Nomad and company secretary ensure directors
remain up to date with AIM regulations, while the South African sponsor ensures the same
regarding the JSE Listings Requirements. The company secretary and the chairman of the
audit and risk committee are responsible for keeping the board abreast of new legislation,
recommendations and best practice.
KING IV™
Following the release of the King IV™ Report in November 2016, the board has familiarised
itself with its requirements. Pan African Resources benchmarked its governance practices
against the principles of King IV™ and has included its 2019 King IV™ checklist on the
group’s website at:
http://www.panafricanresources.com/wp-content/uploads/Pan-African-Resources-King-IV-2019.pdf.
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, UK 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 and risk 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.
ADVISERS
The group has several advisers including Numis Securities Limited, Questco Corporate
Advisory Proprietary Limited, Peel Hunt LLP and BMO Capital Markets Limited who provide
advice regarding legislative requirements. Questco Corporate Advisory Proprietary Limited is
the group’s South African appointed sponsor in accordance with the JSE Listings Requirements
and is responsible for ensuring that the company is guided and advised on the application
of JSE Listings Requirements. The other advisers are UK-based and provide guidance on
UK-related legislative requirements. South African and UK law firms are also regularly used to
provide advice on specialised matters.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019TRANSPARENCY AND ACCOUNTABILITY 110
TRANSPARENCY
AND ACCOUNTABILITY
CORPORATE GOVERNANCE continued
The table below is a record of these payments:
Payments to the South African government 2019
Royalties payments
Income taxation payments/(refunds)
Value-added taxation (VAT) payments/(refunds)
Withholding taxation
Pay as you earn income tax (PAYE)
Skills Development Levy (SDL)
Unemployment Insurance Fund (UIF)
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Barberton
Mines
USD thousand
Evander
Mines
USD thousand
Corporate
USD thousand
Total
USD thousand
476.6
3,774.5
(11,226.2)
31.9
6,504.9
392.5
470.9
425.1
173.3
–
(15,952.9)
–
1,204.8
51.6
45.1
(14,478.1)
–
72.5
645.4
–
831.9
37.4
4.3
1,591.5
649.9
3,847.0
(26,533.7)
31.9
8 541.6
481.5
520.3
(12,461.5)
Payments to the South African government 2018
Barberton
Mines
USD thousand
Evander
Mines
USD thousand
Phoenix
Platinum
USD thousand
Corporate
USD thousand
Total
USD thousand
Royalties payments/(refunds)
Income taxation payments/(refunds)
VAT payments/(refunds)
Withholding taxation
PAYE
SDL
UIF
Capital gains taxation
535.4
798.4
(5,057.5)
74.5
6,640.5
408.3
507.8
–
3,907.4
(1,285.1)
(39.6)
(22,753.9)
–
5,788.1
328.3
381.0
–
(17,581.2)
–
–
65.2
–
33.2
0.9
0.3
–
99.6
–
87.0
469.0
772.5
820.1
39.7
4.4
1,538.2
3,730.9
(749.7)
845.8
(27,277.2)
847.0
13,281.9
777.2
893.5
1,538.2
(9,843.3)
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.
RISK GOVERNANCE
The board is responsible for the management of risk and a formal risk governance process is in place, ensuring the board adequately discharges
its responsibility. The board regularly reviews the risk reports from operations, ensuring the appropriate risk management programmes and
monitoring of progress against key risk indicators are being effectively implemented and managed. The group’s management approach and key
risks are set out on
pages 29 and 30.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Elikhulu plant – acid wash column
111
TRANSPARENCY
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ACTS AND CODES
South Africa (Corporate)
◗ South African Companies Act 71 of
2008 – applicable to South African
entities
◗ JSE Listings Requirements
◗ King IV™
◗ Labour Relations Act of 1995
United Kingdom (Corporate)
◗ Companies Act 2006
◗ AIM
◗ The UK Corporate Governance
Code
◗ The Bribery Act 2010
Minerals and energy (South Africa)
◗ Minerals and Petroleum Resources
Act of 2008
◗ National Energy Act of 2008
◗ Precious Metals Act of 2005
◗ Broad-based socio-economic
empowerment charter for the
mining and minerals industry 2018
Safety, health and environment
(South Africa)
◗ 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 of 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
STAKEHOLDER ENGAGEMENT
The board’s aim is to uphold the highest standards of conduct and it expects all employees to do the same. We understand that the group’s
long-term sustainability is dependent on our understanding of the needs and views of our stakeholders. A summary is set out below on how
the board engages with its stakeholders. Refer to
pages 27 and 28 for an understanding of who our stakeholders are and what matters are
of relevance to them.
Stakeholder group
Governance responsibility
Governance activities during 2019
Providers of capital
Board, Exco
◗ Attendance of the inaugural gold pour at Elikhulu by certain non-executive
Employees
Unions
Board, SHECQ committee, remuneration
committee and operations management
Board, SHECQ committee and operations
management
directors
◗ Attendance at the AGM by non-executive directors and participation of
executive directors by conference call
◗ Executive directors attend and present at results roadshows
◗ Monitored safety performance and improvement measures implemented at
operations
◗ Monitored engagement with unions and the workforce
Communities
Board, SHECQ committee
◗ Monitored engagement in respect of community-related matters
Government and
regulatory bodies
Board, Exco, audit and risk committee,
SHECQ committee
◗ Evaluated regulatory impacts on health, safety and environmental matters
◗ Considered the impact of the new Mining Charter on investment in South
Africa and the group
◗ Monitored the group mining licence and related regulatory compliance
Listing exchanges
Board, Exco
◗ Engagement with the LSE and JSE through the company’s appointed Nomad
and sponsor
◗ Direct engagement with the JSE’s Issuer Regulation Department on IFRS
disclosures
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TRANSPARENCY
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
REMUNERATION POLICY AND IMPLEMENTATION
BACKGROUND STATEMENT
MESSAGE FROM THE CHAIRMAN OF THE REMUNERATION
COMMITTEE
Dear Pan African Resources’ stakeholders
I am pleased to present the 2019 financial year’s Remco report on
behalf of our Remco and the board. This report presents a brief
review of Remco’s activities during the past year.
In the current financial year, management addressed key milestones
that were critical to the future sustainability of Pan African Resources
and were also required to deliver into our production guidance for
the 2019 financial year. In addition, management delivered into the
board strategy of repositioning Pan African Resources as a more
sustainable, lower cost and higher margin producer.
Commendably, Barberton Mines achieved its production guidance
of approximately 100,000oz during the year, and Elikhulu was
successfully commissioned during the first half of the 2019 financial
year, producing 46,201oz in the period from September 2018 to
30 June 2019. The complexities and difficulties in conceptualising,
funding and then delivering into a project like Elikhulu were
successfully managed by our team, with recent publicity referring to
material delays and cost overruns on other large industrial projects,
demonstrating the risks involved in executing ventures of this nature.
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.
Our group’s performance over the last year bears testament to
the efforts and acumen of our senior management team. We look
forward to the year ahead and further progress in positioning Pan
African Resources 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 our 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 (Remchannel
report/market analysis) and other independent benchmarking
sources to ensure compensation levels and structures remain up to
date with best practice in executive compensation.
The Remchannel market analysis is a report compiled from an
extensive and detailed internet-based survey, customised for the
differences in various sectors and the complexities of remuneration
practices. This report is an independent survey used by management
to inform remuneration policies.
The current Remchannel market analysis concluded that Pan African
Resources generally remunerates its executives between the 25th
and 50th percentile. Remco will continue to strive towards fairly
remunerating the group’s employees at a level which approximates
market-related benchmarks, to ensure the retention of key skills
and so that the group is able to attract top candidates for senior
management positions.
INDEPENDENT REVIEW OF REMUNERATION
To ensure that Pan African Resources’ remuneration policies and
practices remain in line with market practice, Remco mandated PwC
Remchannel to perform an independent review of the remuneration
levels and remuneration structures of non-executive directors,
corporate executives and senior corporate management (the
PwC review). The purpose of the review was to compare current
remuneration levels and structures with best practice in the mining
sector, and to make recommendations on improvements to Pan African
Resources’ remuneration levels, policies and structures, where required.
As part of this review, PwC also engaged with the group’s large
institutional shareholders in order to obtain their views/concerns on
current remuneration policies and the implementation of these policies.
Based on the recommendations of the PwC review and the
requirements of our shareholders, Remco introduced changes to the
existing short-term incentive (STI) scheme as well as the introduction
of a new long-term incentive scheme (Pan African Resources’ Senior
Management Share Scheme (PARSMSS)) for senior corporate
management.
IMPLEMENTATION OF THE NEW PAN AFRICAN
RESOURCES SENIOR MANAGEMENT SHARE SCHEME
(PARSMSS)
Remco has now simplified the long-term incentive structure for
senior employees. For these employees, the Pan African Share
Appreciation Bonus Plan (PASABP) and the Pan African Corporate
Option Scheme (PACOS) have been terminated. These schemes have
been replaced by the PARSMSS for senior corporate executives.
Details of the PASABP, PACOS and PARSMSS schemes are included
later in this report on
page 121.
SHORT-TERM INCENTIVE SCHEME
The group’s short-term incentive scheme remains in place, with its
senior management participants (other than executive directors)
receiving up to 60% of their total annual remuneration as short-term
incentives should they meet predetermined criteria based on:
◗ ounces of gold produced, within cost and safety parameters
◗
tangible individual KPIs, linked to deliverables critical to the group’s
performance and success.
After consultation with shareholders and taking cognisance of the
findings of the PwC review, Remco amended certain of the short-
term incentive provisions. These changes are detailed later in this
report.
ANNUAL ASSESSMENT
Remco reviewed general remuneration levels and structures across
the group and is satisfied that current procedures adequately ensure
that employees’ performance objectives are defined, 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.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
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 levels and structures.
113
TRANSPARENCY
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Barberton Mines – BTRP plant
OTHER AREAS OF REMCO’S FOCUS
Internal and external matters considered by Remco during the
current financial year include:
◗
◗
ratification of salary increases for operations
approval of salary increases for corporate non-managerial staff
and certain managerial staff
amendments to selected executives’ contracts
reviewing corporate office staffing and corporate costs
amendments to the STI scheme and setting STI parameters for
the 2019/2020 financial year
revising the long-term share option scheme for senior corporate
executives and introducing the PARSMSS scheme
reviewing non-executive directors’ remuneration
reviewing and monitoring the performance of senior executives,
together with the Pan African Resources board.
◗
◗
◗
◗
◗
◗
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
benchmarking and enhancing our practices and policies to entrench
a high-performance culture across the group. Remuneration should
drive sustainable growth, aligned with our business strategies and
shareholder aspirations.
Remco appreciates feedback from our stakeholders and notes that the
group’s 2018 financial year remuneration policy was only endorsed by
51.1% of shareholder votes at the AGM. Our revised remuneration
policies and structures are aimed at complying with King IV™
requirements, while narrowing the alignment between key personnel
rewards, 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 material individual shareholders.
We can assure our stakeholders that we will continue to shape the
remuneration policy to ensure that it fairly rewards and assists in
propelling Pan African Resources into a sustainably golden future.
Yours faithfully
Yvonne Themba
Remco chairperson
18 September 2019
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REMUNERATION POLICY AND IMPLEMENTATION continued
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
Reinforcing
leadership,
accountability, teamwork
and innovation
Supporting the
corporate values and
desired culture
Supporting
the attraction,
retention,
motivation and
alignment of the
talent we require
to achieve our
business goals
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 2019 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 193 to 196.
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 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 importantly, the contribution of key individuals. The group’s key remuneration
objectives are shown above.
The group’s remuneration policy provides a framework for remuneration to attract, retain and motivate employees to achieve the strategic
objectives of the organisation within its risk appetite and risk management framework.
The remuneration framework recognises the following principles:
Objectivity in
short-term
incentives
Objectivity in
long-term
incentives
Alignment to
shareholders
Application
of discretion
Comprising an annual
incentive which rewards
management for matters under
their control and 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 and its performance
against its peers. 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 aspirations of
our shareholders
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 has, however, taken note of concerns raised by our shareholders and, going forward, no incentives/
discretionary bonuses will be paid to employees for successfully concluding transactions or projects. The only exception to this resolution would
be in the event of a takeover or change in control of Pan African Resources, where Remco retains discretion in this instance.
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TRANSPARENCY
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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 executives 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 chairperson
is Yvonne Themba (appointed 17 July 2019) who replaced Rowan Smith, and the membership and attendance of Remco is shown on
pages 100 and 101.
The chief executive officer, financial director and the chief operating officer attend Remco meetings. 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
Amendment to STI and LTI schemes
◗ Amendment to the current senior management STI scheme to include stretch targets
as well as gatekeeper clauses to ensure STI payment will only occur when specific
performance and financial criteria are met
◗ Introduction of a new LTI scheme for senior corporate management (PARSMSS) to be in
line with current best practice as well as to align senior management’s interests with those
of shareholders
◗ Malice/malfeasance provisions strengthened for both STI and LTI schemes
Compliance with Mining Charter and employment equity
requirements related to management and employees
The group regularly reviews, monitors and ensures compliance in terms of stipulated
employment equity targets and other requirements
Setting appropriate STI parameters for 2019/2020
Ensuring appropriate parameters are set for the upcoming financial year. Approved the
implementation of below-target, on-target and stretch targets for the 2019/2020 financial year
Salary adjustments and benchmarking
Ensuring that salary adjustments were in line with the group’s remuneration philosophy and
aligned with industry peer benchmarks provided by the PwC Remchannel market analysis
and other independent sources
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, PwC Remchannel was appointed to conduct a benchmarking exercise on total
remuneration (guaranteed pay, short-term incentives and long-term incentives) of the group’s non-executive, executive directors and senior
management. This review was performed against a comparator group (both local and international) constituted by PwC Remchannel, which
compares Pan African Resources’ incentive levels to their comparator matrix, the South African mining and also the South African national
sectors to provide Remco with a detailed view of the current South African executive remuneration environment.
The board approves remuneration proposals from Remco and submits them to shareholders for endorsement at the AGM.
ENGAGEMENT WITH SHAREHOLDERS
Remco engages with key shareholders on an annual basis regarding the group’s remuneration structures. Remco commits to engage with
shareholders in the event that either the remuneration policy or the implementation report, or both, are disapproved by 25% or more of
the votes exercised.
In the past financial year, Remco engaged certain large institutional shareholders regarding their concerns on the company’s remuneration
policies and the implementation thereof. We value these constructive engagements and, as such, we have addressed many of these concerns
and implemented further improvements to our remuneration policies and structures.
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REMUNERATION POLICY AND IMPLEMENTATION continued
PART ONE: REMUNERATION POLICY continued
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, quarterly and monthly at operations
depending on the level of employee
◗ PARSMSS (effective 1 July 2019) for senior group
executives/executive directors
◗ PACOS (effective 1 July 2018) for senior group executives/
◗ Measured objectively against the group’s performance and
executive directors
personal contributions
Chief executive officer, financial director, chief operating
officer and Opsco
Production and safety KPIs
Production and safety KPIs account for 60% of the
assessment based on:
◗ the group’s gold ounces sold/produced
◗ cost of production
◗ safety targets (objective measurement based on the
group’s actual achievements against set business plans for
the financial year)
◗ PASABP
◗ Employee share ownership programme (Barberton Mines
and Evander Mines)
◗ Share incentive scheme for executive directors
The main objectives of the long-term incentives are to:
◗ appropriately incentivise select employees who are
employed at a managerial level within the group
◗ ensure retention of key skills required for the group’s
ongoing profitable performance and growth
◗ align management interests with those of shareholders
Stretch targets on production
Stretch targets have been introduced to incentivise performance in excess of budgets. If participating management exceeds
gold production targets for a financial year, they become entitled to an increase in the production bonus component of their
annual STI
For achieving 105% of budgeted gold production (maximum stretch), participating management’s production KPI achievement
will be increased from the previous maximum of 100% to 140%, with a pro rata increase between 100% and 105% specific to
the gold production KPI
An executive previously entitled to an STI of 50% of TGP could therefore, if full stretch of 105% of gold production is achieved,
earn an STI of 56% of TGP
For the portion of STI that relates to stretch performance, the executive will be required to acquire Pan African Resources
shares on market, with a condition that these shares are to be held for a minimum period of two years, post-acquisition
Personal KPIs
Personal KPIs account for 40% of the 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
Manco (Management committee on operations)
Production and safety KPIs account for 60% of the assessment based on:
◗ operational specific gold ounces sold
◗ cost of production
◗ safety targets (objective measurement based on the group’s actual achievements against set business plans for the financial
year)
Personal KPIs account for 40% of the 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
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TRANSPARENCY
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EMPLOYEE REMUNERATION COMPONENTS
Performance management
R
e
t
e
n
t
i
o
n
a
n
d
a
t
t
r
a
c
t
i
o
n
Guaranteed package
(including benefits)
S
h
o
r
t
-
t
e
r
m
i
n
c
e
n
t
i
v
e
s
Long-term incentives
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
Remuneration is currently disclosed in United States dollar (USD), however, all non-executive directors, executive directors and employees are
remunerated in rand and no compensation is 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 annual financial statements on
pages 193
to 196.
Elements
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
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REMUNERATION POLICY AND IMPLEMENTATION continued
PART ONE: REMUNERATION POLICY continued
Elements
Key features
Purpose
Eligibility
Factors considered
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
◗ Exco, Opsco and Manco
are paid annually
◗ HODs are paid quarterly
◗ 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
◗ 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
◗ Collective bargaining
◗ Eligibility to participate in
employees
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
Long-term incentives
◗ Alignment to
◗ Discretionary remuneration
◗ Exco and others
◗ Seniority and level of
approved by the board
responsibility
shareholders’ investment
horizon and aspirations
◗ Equity linked
◗ Measured objectively
against the group’s
performance and/or
personal contribution
designed to drive and reward
long-term growth with
sustained company value
and align the interests of
shareholders and participants.
These include share 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 those
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
◗ Paterson Grading C level
and below on operations
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TRANSPARENCY
AND ACCOUNTABILITY
RISK MANAGEMENT AND REMUNERATION
Pan African Resources recognises the need to fairly remunerate
employees to attract, incentivise and retain talent. It is, however,
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 senior management employees’
KPIs include specific performance elements 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.
In the past, 30% of executive directors’ short-term incentives were
deferred and only paid after two years. Going forward, 30% of their
post-tax STI incentive is to be used to acquire Pan African Resources
shares, on market, at the first opportunity to do so (taking cognisance
of closed periods). These shares are required to be held for a
period of two years from the date of acquisition, with clawback and
malfeasance (malice) provisions being applicable.
Remco also implemented STI gatekeeper conditions going forward to
protect the company from incentive payments that are unaffordable
in the specific circumstances. This will ensure that no incentive is paid
without a reasonable (minimum) level of financial performance being
achieved.
These STI gatekeepers are:
◗ Unacceptable or unprofessional personal behaviour, resulting in
a disciplinary judgement against the accused
◗ The company is in an operational loss-making situation
◗ Material non-compliance with regulations, with the executive
being guilty of serious misconduct or negligence.
Remco also strengthened malice/malfeasance conditions for senior
management STIs.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Remco advises the board on non-executive directors’ fees. Non-
executive fees are also reviewed by the company secretary for
reasonability. In determining their fees, Remco considers the directors’
responsibilities throughout the year, scarcity of skills, the group’s
performance, market-related conditions and local and international
comparative remuneration levels. 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. Non-executive directors’ remuneration is
subject to regulations which include the South African Companies
Act, the Companies Act 2006, JSE Listings Requirements, King IV™
and the UK Code.
In the past year, Remco appointed PwC Remchannel to benchmark
the remuneration of Pan African Resources’ non-executive directors
of relative to a comparator group of companies (both local and
international).
EXCO, OPSCO AND MANCO REMUNERATION
Remco is responsible for making recommendations to the board on
the remuneration of the chief executive officer, financial director and
senior corporate management. Remuneration of executive and senior
management is reviewed on an annual basis in relation to the group’s
operational, financial and strategic performance as well as 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, either all or a portion of
discretionary awards are forfeited. An annual benchmarking exercise,
conducted by PwC Remchannel market analysis (supplemented with
other benchmarking sources), is used to determine a fair market-
related remuneration package. Individual KPIs are agreed on annually
and contain the elements disclosed on
page 120.
Remuneration comprises fixed and variable (short-term and
long-term incentives) remuneration components. STIs have certain
parameters, disclosed on
based culture.
page 120 to ensure a performance-
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.
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TRANSPARENCY
AND ACCOUNTABILITY
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
REMUNERATION POLICY AND IMPLEMENTATION continued
PART ONE: REMUNERATION POLICY continued
VARIABLE REMUNERATION CONDITION
Position
2018 maximum variable remuneration as a % of total remuneration
Qualification criteria at 100% achievement
Chief executive officer
Up to 110%
Financial director
Up to 80%
Chief operating officer
Up to 60%
Senior managers at
corporate level
Up to 50%
Senior managers at
operational level
Up to 50%
60% based on the following production parameters:
◗ Total group gold sold – weight 50%
◗ Total group cost per kilogramme of gold produced – weight 30%
◗ Group safety record – weight 20%
Stretch targets on production
See remuneration framework on
page 116 for details
40% based on personal KPIs determined by Remco and the board. KPIs relate to
predetermined short-term value drivers designed to maximise shareholder value
The approved annual incentive is subject to 30% of after-tax proceeds being used to acquire
Pan African Resources shares in the market, with a condition that these shares are to be held
for a minimum period of two years, post-acquisition
60% based on the following production parameters:
◗ Total group gold sold – weight 50%
◗ Total group cost per kilogramme of gold produced – weight 30%
◗ Group safety record – weight 20%
Stretch targets on production
See remuneration framework on
page 116 for details
40% based on personal KPIs determined by the board and Remco. KPIs relate to
predetermined outcomes which are aligned to shareholder value creation
The approved annual incentive is subject to 30% of after-tax proceeds being used to acquire
Pan African Resources shares in the market, with a condition that these shares are to be held
for a minimum period of two years, post-acquisition
60% based on the following production parameters:
◗ Total group gold – weight 50%
◗ Total group cost per kilogramme of gold produced – weight 30%
◗ Group safety record – weight 20%
Stretch targets on production
See remuneration framework on
page116 for details
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 kilogramme of gold produced – weight 30%
◗ Group safety record – weight 20%
Stretch targets on production
See remuneration framework on
page 116 for details
40% based on personal KPIs which relate to predetermined outcomes set by the chief
executive officer and which are aligned to shareholder value creation
60% based on the following production parameters:
◗ Total group gold – weight 50%
◗ Total group cost per kilogramme of gold produced – weight 30%
◗ Group safety record – weight 20%
Stretch targets on production
See remuneration framework on
page 116 for details
40% based on personal KPIs which relate to predetermined outcomes set by the chief
executive officer and which are aligned to shareholder value creation
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121
TRANSPARENCY
AND ACCOUNTABILITY
EXECUTIVE DIRECTOR SERVICE CONTRACTS
The chief executive officer and financial director are remunerated
in rand 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.
◗
Key elements considered by Remco in the executive directors’
contracts include:
◗ basic remuneration
◗
short-term incentives linked to operational and personal
performance
long-term cash and equity-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, chief operating officer, corporate office
◗ Bert van den Berg, group mining engineer, corporate office
◗ Neal Reynolds, group financial controller, corporate office
◗
◗ Barry Naicker, group mineral resource manager, corporate office
◗ Niel Symington, group management accounting and IT manager,
Jonathan Irons, group metallurgist, corporate office
corporate office
◗ Mandla Ndlozi, group SHEQC manager, Barberton Mines and
corporate office
◗ Mthandazo Dlamini, financial controller, corporate office
◗ Lazarus Motshwaiwa, general manager, Evander Mines
◗
◗ Oriel Shikwambana, operations manager, Elikhulu Tailings
Jan Thirion, general manager, Barberton Mines
Retreatment.
SHORT- AND LONG-TERM INCENTIVES
Pan African Resources provides both short- and long-term incentives
to executives, senior management and other employees approved by
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.
Pan African Resources’ Senior Management Share Scheme
(PARSMSS)
After consultation with shareholders, as well as appointing PwC
Remchannel to review the current LTI schemes of the group, Remco
implemented the new PARSMSS on 1 July 2019 for corporate senior
managers. The primary purpose of the new scheme being further
alignment of management’s interests with those of our shareholders.
PARSMSS is a conditional-share type plan where actual Pan African
Resources shares are awarded at the end of a vesting period, subject
to the achievement of performance conditions over a defined period,
provided the employee is still in the employment of Pan African
Resources. The employee therefore becomes the owner of the actual
shares at the end of the defined period.
Pan African Share Appreciation Bonus Plan (PASABP) –
discontinued for senior corporate management
The main objective of the PASABP is to provide appropriate
incentives to select employees employed at operational managerial
level within the group. The scheme ensures retention of key skills
required for the ongoing operational performance, the 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 a conditional right to participant entitling
the employee to be paid a cash bonus equal to the appreciation in
the company’s/group’s share price from the date of allocation to the
date of surrender or deemed surrender of his/her notional shares
(share appreciation bonus).
Senior corporate executive scheme: Pan African Corporate
Option Scheme (PACOS) – discontinued for senior
corporate management
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 to reposition the
group on a low-cost and sustainable basis.
Senior corporate executive scheme: PACOS cash payment
Participants are also 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.
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TRANSPARENCY
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
REMUNERATION POLICY AND IMPLEMENTATION continued
PART ONE: REMUNERATION POLICY continued
SUMMARY OF LONG-TERM INCENTIVES
Details
Vesting Period
Performance criteria
PASABP
Four years
Continued employment
within the group for
senior managers at an
operational level
PACOS – Discontinued
New PARSMSS
Two years (all options vest on 30 June 2020)
Three years
Delivering into the following:
◗ Barberton Mines’ overall production
stabilised at 100,000oz per annum
◗ Elikhulu 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
project must have commenced. The 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 project
◗ The conditional share plan will be
performance-linked and based on a
percentage of total guaranteed package
(TGP) in line with current market
benchmarks
◗ Total shareholder return (TSR)
benchmarked against our peer group
(therefore relative TSR) is the most
appropriate performance criteria given its
accepted use within the industry and its
alignment with shareholder returns
◗ In the event of the company’s performance
being equal to the index, 25% of the
possible vesting will occur, with all shares
vesting at an outperformance percentage
of 5% or more and pro rata vesting
between 0% and 5%. In the event that the
company underperforms the sector, no
vesting will occur
Measurement criteria
30-day VWAP share price
30-day VWAP share price
90-day VWAP share price
90-day VWAP on date of issue
Shares will vest on a pro rata basis based on
time lapsed. In the event of death or disability,
similar pro rata vesting will occur
◗ There is no mechanism to carry
over unvested shares (due to
underperformance)
◗ Malfeasance/malice and clawback clauses
are included, consistent with current best
practice
◗ In the event of vesting, Pan African
Resources will acquire settlement shares
on market, no primary issuance or treasury
shares utilised
Strike price
30-day VWAP on date of
first issue as well as on any
subsequent top-up going
forward
R1.21
Change of control
All unvested options vest
automatically
All unvested options vest automatically
Other criteria
Lapses on the sixth
anniversary of the date
on which the final tranche
vested
◗ 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 a
12-month period following the vesting date
◗ 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
◗ Includes a clawback provision, which
states that 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
– claim back all amounts already paid to
the participant in terms of any options
already exercised
Instrument type
Notional shares linked to
share price
Notional shares linked to share price
Actual Pan African Resources shares
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123
TRANSPARENCY
AND ACCOUNTABILITY
PART TWO: REMUNERATION IMPLEMENTATION REPORT
EXECUTIVE DIRECTORS’ OPERATIONAL AND PERSONAL KPI PERFORMANCE ANALYSIS
Executive director remuneration – financial year ended 30 June 2019
Mr JAJ Loots
Mr GP Louw
Total
Share
option
taxable
benefit
Basic
remuneration
R
Allowances
30 June 2019
R
–
–
–
5,083,125
4,416,563
9,499,688
208,197
9,171
217,368
Note 1: These incentives paid relate to the successful completion of the Elikhulu project.
Executive director remuneration – financial year ended 30 June 2018
Mr JAJ Loots
Mr GP Louw
Total
Share
option
taxable
benefit
5,639,077
–
5,639,077
Basic
remuneration
R
Allowances
30 June 2019
R
4,832,500
4,206,250
9,038,750
196,841
16,802
213,643
Leave
payout
R
283,355
–
283,355
Leave
payout
R
269,920
–
269,920
Total
R
5,574,677
4,425,734
10,000,411
Incentives
(Note 1)
R
4,250,000
3,700,000
7,950,000
Total
R
10,938,338
4,223,052
15,161,390
Incentives
(Note 2)
R
4,601,469
3,086,053
7,687,522
Note 2: During the 2018 financial year, the executive directors and senior management, in consultation with Remco, agreed to forgo any qualifying short-term incentives, because of the
financial impact on the group following the cessation of underground operations at Evander Mines. The incentives disclosed were paid in the 2018 financial year but were related to and
accrued for in the 30 June 2017 financial year.
Chief executive officer’s performance for incentive purposes
2019
2018
Production parameters
Production parameters per operation are weighted on budgeted profit
contribution:
◗ Barberton Mines’ production and safety group weighting of 59% was
Production parameters
Production parameters per operation are weighted on budgeted profit
contribution:
◗ Barberton Mines’ production and safety group weighting of 70% was
38.77% (max 38.77%)
18.55% (max 45.92%)
◗ Evander Mines’ production and safety group weighting of 41% was 19.06%
◗ Evander Mines’ production and safety group weighting of 30% was 8.44%
(max 27.23%)
(max 20.08%)
Personal KPIs
Personal KPI approved by Remco for the 2019 financial year were the
following:
◗ Successfully deliver into group turn-around strategy
◗ Progress strategic initiatives to reduce costs and increase group gold
production
◗ Successful conclusion of three-year wage agreement at Barberton Mines
Personal KPIs
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 one-year wage agreement at Barberton Mines
◗ Successful completion and commissioning of the regrind mill at the BTRP
◗ Barberton Mines achieving production 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
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TRANSPARENCY
AND ACCOUNTABILITY
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
REMUNERATION POLICY AND IMPLEMENTATION continued
PART TWO: REMUNERATION IMPLEMENTATION REPORT continued
Financial director’s performance for incentive purposes
2019
2018
Production parameters
Production parameters per operation are weighted on budgeted profit
contribution:
◗ Barberton Mines’ production and safety group weighting of 59% was 28.2%
Production parameters
Production parameters per operation are weighted on budgeted profit
contribution:
◗ Barberton Mines’ production and safety group weighting of 70% was
(max 28.2%)
13.50% (max 33.40%)
◗ Evander Mines’ production and safety group weighting of 41% was 13.86%
◗ Evander Mines’ production and safety group weighting of 30% was 6.13%
(max 19.8%)
(max 14.60%)
Personal KPIs
Personal KPIs approved by Remco for the 2019 financial year were the
following:
◗ Successfully deliver into group turn-around strategy
◗ Refinancing of the group’s revolving credit facility
Personal KPIs
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
◗ A number of value-accretive initiatives successfully implemented, such as a
tailings deposition agreement with Taung Gold
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.
2019 financial year
Executive director
Cobus Loots
Notional share options
Cobus Loots
Share incentive
Deon Louw
Notional share options
Deon Louw
Share incentive
Opening
balance
Issued2
Exercised
Forfeited
Closing
balance
Weighted
average
strike
price
R
Value
of options
accrued
at
year-end
R
Value
of options
paid
during
the year
R
–
12,427,686
6,533,334
–
–
8,690,599
3,100,000
–
–
–
–
–
–
–
–
–
12,427,686
6,533,3341
8,690,599
3,100,000
–
–
–
–
–
–
–
–
–
–
–
–
1 1,533,334 shares vested subsequent to year-end, following fulfilment of agreed vesting conditions.
2 PACOS options issued as per 2018 remuneration report.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
125
TRANSPARENCY
AND ACCOUNTABILITY
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
Closing
balance
Weighted
average
strike
price
R
Value
of options
accrued
at
year-end
R
Value
of options
paid
during
the year1
R
2,500,000
–
–
(2,500,000)
–
4,500,000
5,000,000
(2,966,666)
–
6,533,334
2,114,979
–
–
3,100,000
–
–
(2,114,979)
–
–
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 as 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 as at 1 July 2018, and replaced by the new PACOS scheme.
SUMMARY OF KEY CONTRACTUAL ARRANGEMENTS FOR THE CHIEF EXECUTIVE OFFICER AND FINANCIAL DIRECTOR
Term
Chief executive officer
Financial director
Contract duration
Three-year contract ending 28 February 2021
Three-year contract ending on 28 February 2021
Short-term annual
incentive
Participation in
the phantom share
scheme (PASABP)
Participation in the
corporate option
scheme (PACOS)
A maximum of 110% of annual CTC of which 30% of their
post-tax incentive is to be used to acquire Pan African Resources
shares, on market, at the first opportunity to do so (taking
cognisance of closed periods), after payment of the initial
incentive. These shares are required to be held for a period of
two years post the financial year to which they relate
A maximum of 80% of annual CTC of which 30% of their post-
tax incentive is to be used to acquire Pan African Resources
shares, on market, at the first opportunity to do so (taking
cognisance of closed periods), after payment of the initial
incentive. These shares are required to be held for a period of
two years post the financial year to which they relate
No further participation in the phantom share scheme (other
than existing allocation)
No further participation in the phantom share scheme (other
than existing allocation)
No further participation in PACOS (other than existing
allocation)
No further participation in PACOS (other than existing
allocation)
Participation in the
new PARSMSS
To participate in the new PARSMSS, effective 1 July 2019. Details
of this scheme are disclosed on
page 121
To participate in the new PARSMSS, effective 1 July 2019. Details
of this scheme are disclosed on
page 121
Minimum
shareholding in Pan
African Resources
Long-term share
incentive
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
Shareholding requirements were subsequently increased – refer
to amendments to STI scheme, which requires additional shares
to be acquired and held for a minimum of two years post
acquisition
Shareholding requirements were subsequently increased – refer
to amendments to STI scheme, which requires additional shares
to be acquired and held for a minimum of two years post
acquisition
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
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
PRESCRIBED OFFICER REMUNERATION
The prescribed officers’ remuneration is disclosed in the annual financial statements on
pages 195 and 196.
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A GOLDEN FUTURE
FOR GOLD
Gold is a near-perfect commodity. The ancient Egyptians,
who first realised gold’s suitability for elaborate
jewellery, doubtlessly had no idea how vital gold
would become as human societies progressed.
Today, gold’s unique qualities, such as its durability, corrosion resistance,
chemical inertness and non-allergenic properties, mean that this incredible
substance is used in a myriad of health-, electronic-, environmental-, and even
space-technology applications. In fact, few other minerals taken from the
earth are as useful, easy to work with, or as versatile as gold.
Many of gold’s current applications only emerged recently, spurred by the
pace of technological development. We have just scratched the surface of
the possibilities that gold presents in the fourth industrial revolution.
MAKING YOUR MEDICINE
Given its excellent anti-bacterial properties, for centuries gold was
considered the ideal tooth repair material before today’s less costly
alternatives were invented.
Gold continues to rise in popularity as a sought-after component in many
modern medical advances. Doctors are now using radioactive gold isotopes
in some cancer treatments, while gold nanoparticles are used for rheumatoid
arthritis, skin reconstruction, anti-viral applications, gene therapy and life-
support devices.
ENABLING THE SMART IN PHONES
Gold’s resistance to corrosion makes it integral to many electronic
components and devices.
Each modern phone contains around 50 milligrams of gold, which is likely to
increase as technologies advance. Already, gold nanotechnologies are proving
their functional usefulness in high-tech displays, touch-sensitive screens,
solid-state drives and flash memory. With hundreds of tonnes already used
in smartphone components, demand for gold by the world’s memory
manufacturers will continue to rise exponentially in the coming years.
FROM GOLD TO GREEN
As a preferred metal for safe wire bonding, gold plays an increasingly relevant
role in global environmental sustainability. Gold is used in electric vehicles and
shows significant promise as an efficient fuel cell catalyst.
THE FUTURE LOOKS BRIGHT
As society demands ever more sophisticated technology and materials,
gold’s applications will almost certainly expand. Given that there are few
substitutes, natural or manmade, for this incredible material, growing demand
will cause the value and importance of gold to steadily rise. In every way,
gold always was – and still is – a metal of the future.
Barberton Mines – gold bar moulds
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CONTENTS
Note ANNUAL FINANCIAL STATEMENTS
Statement of directors' responsibilities
Certificate of the company secretary
Directors’ report
Audit committee report
Independent auditors’ report
Primary statement
Consolidated and parent company statements
of financial position
Consolidated and parent company statements of profit
or loss and other comprehensive income
Consolidated and parent company statements of cash flows
Consolidated and parent company statements of changes
in equity
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS
1 General information
2 Significant accounting policies
3 Significant accounting judgements and estimates
FINANCIAL PERFORMANCE
4 Revenue and other revenue
5 Cost of production
6 Segmental analysis
7 Other expenses
8 Finance (costs)/income
9 Profit/(loss) before taxation
10 Earnings per share
11 Dividends
12 Reconciliation of profit/(loss) before taxation to cash
generated by/(utilised in) operations
EMPLOYEES
13 Staff costs and complement
14 Long-term liabilities – other
15 Post-retirement benefit information
16 ESOP transactions
CAPITAL ALLOCATION
17 Property, plant and equipment and mineral rights
18 Other intangible assets
19 Long-term receivables
20 Rehabilitation fund
WORKING CAPITAL
21 Inventories
22 Trade and other receivables
23 Trade and other payables
24 Cash and cash equivalents
EQUITY
25 Share capital
26 Treasury capital reserve
27 Share option reserve
DEBT AND FINANCIAL RISK MANAGEMENT
28 Long-term liabilities: financial institutions
29 Financial instruments
ENVIRONMENTAL AND GOVERNANCE
30 Long-term provisions
31 Directors' emoluments
32 Auditors' remuneration
TAXATION
33 Taxation
34 Current taxation
35 Deferred taxation
GROUP STRUCTURE
36 Discontinued operations
37 Goodwill
38 Investments
OTHER ITEMS
39 Operating leases
40 Related party transactions
41 Commitments, contingent liabilities and guarantees
42 Events after the reporting period
43 Impact of applying significant accounting policies effective in
the current financial year
44 Correction of prior period errors
128
128
129
131
134
138
140
141
142
144
144
144
151
155
156
156
160
161
161
162
164
165
166
167
170
171
172
176
176
177
178
178
178
179
180
180
181
181
184
192
193
197
197
198
199
201
203
204
207
208
210
211
212
214
A
N
N
U
A
L
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
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128
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the integrated annual
report and the annual financial statements in accordance with
applicable laws and regulations.
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 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
the European Union (EU) (and article 4 of the IAS regulation) and
have also chosen to prepare the parent company annual financial
statements under IFRS as adopted by the EU. In terms of the
Companies Act 2006, the directors should 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, directors are legally
required to:
◗ 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 of IFRS are 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 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 Companies Act 2006. They are also
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.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
◗ The annual financial statements, prepared in accordance with
IFRS, as adopted by the EU give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole
◗ 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.
By order of the board
Cobus Loots
Chief executive officer
18 September 2019
Deon Louw
Financial director
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 Companies Act 2006. All such returns are true, correct and up to date.
St James’s Corporate Services Limited
Company secretary
18 September 2019
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
DIRECTORS’ REPORT
The directors present their integrated annual report and the audited
annual financial statements for the year ended 30 June 2019.
PRINCIPAL ACTIVITIES
Pan African Resources is incorporated in the United Kingdom and
registered in England and Wales under the Companies Act 2006 with
the registration number 3937466. The company has a dual primary
listing on South Africa’s JSE and London’s AIM market. The nature of
the group’s operations and its principal activities relate to precious
mining and exploration activities. The group owns and operates a
portfolio of high-quality, low-cost operations and projects located in
South Africa.
A full review of the activities of the business and of its prospects is
contained in the chairman’s statement and chief executive officer’s
statement that accompanies these annual financial statements, with
financial and non-financial key performance indicators shown from
pages 10 to 15.
RESULTS AND HISTORICAL DIVIDENDS
The results for the 2019 financial year are disclosed in the
consolidated statement of profit and loss and other comprehensive
income on
found on
page 140. The key features of these results can be
page 38.
DIVIDENDS
Proposed dividend for the financial year ended 30 June 2019
The board has analysed the group performance and proposed a final
dividend of R50 million or approximately USD3.4 million, equating
to 2.2375 ZAR cents per share or approximately 0.12660 pence
per share (0.15169 USD cents per share) (2018: 0.00 ZAR cents per
share) at prevailing exchange rates. This dividend remains subject to
approval at the annual general meeting on 28 November 2019.
The group suspended its dividend for the 2018 financial year in light
of the cessation of large-scale underground operations at Evander
Mines and the capital being spent on Elikhulu. The group’s dividend
policy has been disclosed on
report.
page 47 of the integrated annual
POLICY FOR PAYMENT OF CREDITORS
It is the company’s policy to settle all transactions within the terms
established with suppliers. The company’s intent is to settle creditors
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. The group’s risk
management and key business risks are documented within the risk
section on
pages 29 to 35.
129
ANNUAL FINANCIAL
STATEMENTS
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:
◗ Review of monthly financial reports and monitoring performance
◗ Review of internal audit reports and follow-up action of
weaknesses identified by these reports
◗ Review of competency and experience of senior management
staff
◗ Prior approval of all significant expenditure, including all major
investment decisions
◗ Review and debate of group policies.
The board has reviewed the operation and effectiveness of the
group’s system of internal control for the 2019 financial year and the
period up to the date of approval of the annual financial statements,
and are satisfied that there has been no material breakdown in the
group’s system of internal controls for the review period.
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 USD16.0 million
(2018: USD35.6 million) of available debt facilities and USD5.3 million
(2018: USD0.9 million) of cash and cash equivalents as at 30 June 2019.
Based on the current status of the group’s finances, having considered
going concern forecasts and reasonable downside scenarios, including a
rand gold price of R543,000/kg (USD1,190oz at a prevailing ZAR:USD
average exchange rate R14.19), and reduced production volumes, the
group’s forecasts from current operations 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 annual 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 2019
annual financial statements.
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ANNUAL FINANCIAL
STATEMENTS
DIRECTORS’ REPORT continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
EVENTS AFTER THE REPORTING PERIOD
Subsequent to year-end, Yvonne Themba and Charles Needham were
appointed as independent non-executive directors with effect from
17 July 2019.
Evander Mines concluded a gold loan for 20,000oz or USD28.3 million
(R394 million) on 15 July 2019. The terms of the gold loan are
as follows:
Gold loan ounces
Gold loan value
Number of instalments
Ounces per instalment
Term of loan
First instalment date
Last instalment date
Effective rand gold price
20,000
USD28.3 million
12
1,666.67
15 July 2019 – 30 June 2020
31 July 2019
30 June 2020
R633,347/kg
The gold loan is an IFRS 15 contract liability as Evander Mines has an
obligation to transfer gold to RMB for the gold loan consideration
received on 15 July 2019. The group has elected the practical
expedient to not adjust the consideration amount of the gold loan
for the effects of financing. The practical expedient was applied as the
gold loan’s term is less than 12 months and the financing component
does not represent a significant financing component of the gold
loan’s value. The gold loan will consequently not be carrying financing
costs over the 30 June 2020 financial year.
In light of the prevailing strong rand gold price environment and
given our emphasis on financial risk management and de-gearing the
balance sheet, the group entered into the following zero cost collar
derivative hedges:
AUDITOR
PwC was appointed as the company’s external auditor, replacing
Deloitte LLP. Tim McAllister is the designated audit partner for the
financial year ending June 2019. PwC’s appointment as external
auditor was effective from 7 December 2018, and is subject to
approval by shareholders at the company’s next AGM.
Each of the persons who are directors, at the date of approval of
this integrated annual report, confirm that:
◗ As far as the directors are aware, all relevant information has
been provided to the group’s auditor
◗ The directors have taken all the steps that they ought to have
taken as directors to be aware of any relevant audit information
and to establish that the group’s auditor is aware of that
information.
This confirmation is given and should be interpreted in accordance
with S418 of the Companies Act 2006.
PwC 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 THE ANNUAL FINANCIAL STATEMENTS
The board of directors therefore approves the integrated annual
report, strategic report and associated annual financial statements.
By order of the board
Gold hedged
Average floor price
Average ceiling price
1 July 2019 –
31 December 2020
Cobus Loots
Chief executive offi cer
18 September 2019
120,010
654,166
828,303
Unit
(oz)
(R/kg)
(R/kg)
DIRECTORS
Directors during the year under review:
KC Spencer
JAJ Loots
GP Louw
HH Hickey
TF Mosololi
RM Smith
Y Themba
C Needham
(Independent non-executive chairman)
(Chief executive officer)
(Financial director)
(Independent non-executive director)
(Independent non-executive director)
(Independent non-executive director)1
(Independent non-executive director)2
(Independent non-executive director)2
1 Resigned from the board with effect from 3 April 2019.
2 Appointed to the board with effect from 17 July 2019.
The company has directors' and public officers' liability insurance in
place that provides insurance cover in the event of a claim or legal
action. The insurance cover was in place throughout the financial year
and remains in place.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
131
ANNUAL FINANCIAL
STATEMENTS
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 both reporting responsibilities to 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, and has adopted King IV™
as its code of corporate governance.
The performance of the audit committee is evaluated against its
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 20 November 2018.
In terms of King IV™, all three members of the audit committee are
independent non-executive directors.
As at 30 June 2019, the audit committee comprised of two
independent directors and the independent chairman of the board.
Keith Spencer resigned from the audit committee with effect from
10 September 2019. Charles Needham, an independent non-
executive director, was appointed to the audit committee with effect
from 17 July 2019.
The independent non-executive directors of the audit committee as
at the date of approval of this report were:
◗ Hester Hickey (chairperson of the audit committee)
◗ Thabo Mosololi
◗ Charles Needham.
Details on the number of meetings held and attendance by members
are included on
pages 100 and 101. All the members of the audit
committee are considered by the board to have an independent
and objective mindset. The board believes that the audit committee
members collectively have the necessary skills to carry out their
duties effectively and with due care. 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 are sourced.
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 annual financial statements,
challenging the consistency and appropriateness of accounting
principles, policies and practices that have been applied in the
preparation, measurement and disclosures in the financial reports,
culminating with a recommendation to the board for approval
◗ Reviewing the integrity of the integrated annual report by
ensuring its content is reliable, includes all relevant operational,
financial and other non-financial information, risks and other
relevant factors
◗ Considering significant judgements and estimates applied in the
preparation of the interim results and year-end annual 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
◗ Reviewing the effectiveness of the external audit function
◗ Assessing the external auditors’ independence
◗ Determining the audit fees in respect of the interim review
procedures and year-end external audit
◗ Making recommendations to the board on the appointment,
reappointment or change of the group’s external auditor,
such changes are subject to shareholder approval at the
company’s AGM
◗ Specifying guidelines and authorising the award of non-audit
services to the external auditor
◗ Reviewing the effectiveness of the internal audit function
◗ Reviewing the internal audit management reports with, when
relevant, recommendations being made to the board
◗ Approving the internal audit plan
◗ 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 risk
management, internal controls and governance processes
◗ Dealing with concerns relating to accounting practices, internal
audit, the audit or content of annual financial statements and
internal financial controls
◗ Evaluation of the performance of the financial director and the
financial department
◗ Review of the adequacy of the group’s risk management process,
policies, mitigating controls and risk register
◗ Review of the governance of information and technology and the
effectiveness of the group’s information systems
◗ Review of the group’s going concern to determine the
appropriateness of the group’s annual financial statements being
presented on a going concern basis.
EXTERNAL AUDITOR
The committee is responsible for recommending the appointment
or reappointment of a firm of external auditors to the board
that, in turn, will recommend the appointment to shareholders.
The committee is responsible for determining that the designated
appointee firm and signing registered auditor have the necessary
independence, experience, qualifications and skills and that the audit
fee is adequate.
Following a formal tender process, PwC was appointed as the
company’s external auditor replacing Deloitte LLP. Tim McAllister
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ANNUAL FINANCIAL
STATEMENTS
AUDIT COMMITTEE REPORT continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
is the designated audit partner for the financial year ending
30 June 2019. PwC’s appointment as external auditor was effective
7 December 2018, subject to approval by shareholders at the
company’s next AGM. The company initiated this change as a result
of the adoption of an audit firm rotation process.
The audit committee is satisfied with the accreditation of PwC.
The committee satisfied itself that the external auditor is independent
as defined by the Companies Act 2006 and the standards
stipulated by the auditing profession. The committee received the
quality information from the firm regarding the individual auditor,
their quality processes, their JSE accreditation and the regulator's
inspection letters. The audit committee concluded it appropriate to
recommend PwC to the board for shareholder approval. The audit
committee held meetings with the external auditor, without the
presence of management, on one occasion, and the chairman of the
audit committee independently met with the external auditor on
two occasions.
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 2019 financial year-
end, taking into consideration such factors as the timing of the audit,
the extent of the work required and the scope. Refer to note 32 of
the annual financial statements for disclosure of the audit and any
non-audit fees.
The committee has a policy on the nature and extent of non-audit
services. The policy allows for limited tax and corporate governance
advice as well as the provision of reporting accountant services in
relation to capital market transactions.
The committee monitors the external auditor’s performance and
the effectiveness of the audit process as provided in the terms
of engagement and in respect of the audit scope and approach.
The committee reviewed and approved the annual audit plan at its
meeting in June 2019 including the proposed scope, materiality levels,
and significant risk areas.
It was established that the approach was appropriate to be
responsive to regulatory changes and organisational risks and
other applicable requirements. Through the 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.
The group’s subsidiaries are also audited by PwC.
Tim McAllister will rotate as the audit partner after the June 2023
financial year.
FINANCIAL REPORTING
The principal role of the audit committee in relation to financial
reporting is reviewing, with senior 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 parent company
annual financial statements for the year ended 30 June 2019 and, based
on the information provided to the committee, considers that the
consolidated and parent company annual financial statements comply,
in all material respects, with the requirements of the Companies
Act 2006 and IFRS. The consolidated and parent company annual
financial statements were subsequently 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. Furthermore, compliance to 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.
SIGNIFICANT ISSUES CONSIDERED BY THE AUDIT COMMITTEE
Significant judgements, estimates and assumptions made by management are detailed in note 3 of the consolidated and parent company annual
financial statements. Position papers were presented to the audit committee by management during the course of the financial year detailing
management’s critical and other significant accounting judgements and estimates. These were reviewed by the audit committee and included,
but were not limited to, the following areas:
Critical accounting judgements
Audit committee response
Impairment of goodwill and impairment reversal of assets
In accordance with IAS 36, goodwill is tested for impairment
annually or earlier where an indicator of impairment
becomes apparent. In addition, other long-term assets are
reviewed for impairment indicators
The committee monitors the impairment review process, including the identification of
impairment and impairment reversal indicators. The committee has reviewed the judgements
used in the valuation and identification of cash-generating units (CGUs). During the prior
financial year the following was considered:
◗ Evander Mines’ underground operations were impaired by USD140.3 million during the
The values of mining operations are sensitive to a range of
attributes unique to each asset. Management is required to
apply judgement in the estimation of:
◗ Mineral Reserves and Mineral Resources
◗ Commodity prices
◗ Foreign exchange rates
◗ Discount rates
◗ Operating costs, capital expenditure and other operating
factors
2018 financial year following the cessation of large-scale underground operations
◗ Following receipt of a positive feasibility study on the technical and financial merits of
Evander Mines’ 8 Shaft pillar project, the board approved the development of the pillar
that gave rise to the impairment reversal
◗ On 16 May 2019, the group announced its intention to mine the pillar and has commenced
with the development and equipping of the pillar. These cost have been capitalised
The audit committee considered the assessment for reversal of impairment, key assumptions
and disclosure to be reasonable and appropriate
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ANNUAL FINANCIAL
STATEMENTS
Other significant accounting judgements
Audit committee response
New accounting standards
Going concern basis of accounting
Deferred taxation
Rehabilitation and decommissioning provision
The committee reviewed management’s assessment of the impact of the adoption of
IFRS 16: Leases, which will become effective in 2019. Management is currently in the process
of evaluating the accounting impact of the new standard for service contracts. The committee
has considered these disclosures in the notes to the consolidated and parent company annual
financial statements prepared by management and concluded that these were appropriate
The committee has reviewed the forecasted net debt levels, headroom on existing facilities
and compliance with debt covenants. The going concern analysis covered the period
1 July 2019 to 30 September 2020, and considered a range of downside sensitivities, including
the impact of lower commodity prices and reduced production levels. The committee
concluded that it was appropriate to adopt going concern as a basis for the preparation
of the annual financial statements
The committee has reviewed management’s judgement applied in the determination of the
future expected deferred taxation rate for the group’s gold mining entities
The committee considered the key assumptions applied in the determination
The audit committee reviewed the estimate for the environmental and decommissioning
provision, which was based on the work of external consultants and internal experts
The committee considered the disclosure of the rehabilitation and decommission provision
in the consolidated and parent company annual financial statements and the changes in
assumptions and other drivers of the movement in the provision and concluded that the
recorded provision was appropriate
INTERNAL AUDITOR
The committee performs an oversight role of the internal audit
function by approval of the internal audit plan and review of the
internal auditor’s 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 the internal auditor is invited to attend each
audit committee meeting.
The committee assesses the work of internal audit on a regular basis
through receipt of reports on the progress of the internal audit plan.
The committee met with the head of internal audit on one occasion,
which enables further evaluation of the work performed.
The committee reviewed the proposed 2019 internal audit plan and
assessed whether the plan addressed the key areas of risk for the
group. The committee approved the plan having discussed the scope
of work in relationship to the group’s risk.
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 remuneration committee. No retirement fund
contributions are made by the group to or on behalf of non-
executive directors. Refer to
parent company annual financial statements for the disclosure
of remuneration to audit committee members.
page 194 of the consolidated and
SUBSIDIARY COMPANIES
The functions of the audit committee are also performed for each
subsidiary company of the Pan African Resources group.
FINANCIAL DIRECTOR
The committee considered the functioning of the company’s finance
department and believes that it functions effectively, with the required
controls and systems in place.
The committee has assessed and is satisfied that Deon Louw has the
appropriate skills, expertise and experience, for the role of financial
director, as required by the JSE Listings Requirements and AIM rules.
RISK MANAGEMENT
Risk management is the responsibility of the board and is integral to
the achievement of the group’s objectives. Refer to the risk section
of the integrated annual report on
management approach and process has been further discussed.
pages 29 to 35 where the risk
The board, through the audit committee, fulfils its responsibility in
reviewing the effectiveness of the group’s risk management approach
and internal controls through the review of reports submitted over
the course of the year covering the risk management process and
control environment, specifically in-depth reviews of the group’s risk
registers and review of internal audit reports.
The committee is satisfied that there was no material breakdown
in the internal accounting controls during the financial year under
review.
On behalf of the audit committee
Hester Hickey
Chairperson, audit committee
18 September 2019
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134
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PAN AFRICAN RESOURCES PLC
REPORT ON THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS
OPINION
In our opinion, Pan African Resources PLC’s group financial statements
and parent company financial statements (the “financial statements”):
◗
give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 30 June 2019 and of the group’s
profit and the group’s and the parent company’s cash flows for
the year then ended;
◗ have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company’s financial statements,
as applied in accordance with the provisions of the Companies
Act 2006; and
◗ have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the
Integrated Annual Report (the Annual Report), which comprise: the
consolidated and parent company statements of financial position as
at 30 June 2019; the consolidated and parent company statements
of profit or loss and other comprehensive income, the consolidated
and parent company statements of cash flows, and the consolidated
and parent company statements of changes in equity for the year
then ended; and the notes to the financial statements, which include a
description of the significant accounting policies.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as
applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
OUR AUDIT APPROACH
Overview
Materiality
Overall group materiality
◗ Overall group materiality: USD2.44 million, based on 5% of profit before tax.
◗ Overall parent company materiality: USD2.16 million, based on 1% of total assets.
Group audit scope
◗ We conducted a full scope audit of four significant components based on their size and risk
characteristics; this included the three main operating entities and the parent company in South Africa.
Specific audit procedures on certain balances and transactions were also performed on a further two
reporting units relating to other expenses, borrowings and accounts payable.
◗ Senior members of the group audit team based in London visited South Africa during the year-end audit,
including a visit to both mine sites at Barberton and Evander, in order to have sufficient oversight of the
work of our component auditors in South Africa.
Key audit matters
◗
Impairment assessments of goodwill, intangible assets and property, plant and equipment (Group).
Audit
scope
Key audit
matters
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements. In particular, we looked at where the directors made subjective judgements, for
example in respect of significant accounting estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
135
ANNUAL FINANCIAL
STATEMENTS
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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)
identified by the auditors, including 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, and any comments we make on the results of our procedures thereon, 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. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Impairment assessments of goodwill, intangible assets and property, plant
and equipment – Group
Impairment assessments require significant judgement and there is the risk
that the valuation of the assets may be incorrect and any potential impairment
charge or reversal miscalculated. As such, this was a key area of focus for our
audit due to the material nature of the respective balances.
In assessing the valuation of the Barberton CGU and the impairment reversal
of the Evander CGU, we evaluated management’s future cash flow forecasts for
each CGU, and the process by which they were drawn up, including checking
the mathematical accuracy of the cash flow models. We agreed future capital
and operating expenditure to the latest Board approved budgets and the latest
approved resources and reserves statements, forecasted life of mine production
plans, capital expenditure budgets and forecast operational costs.
page 131 (Audit Committee report),
page 151 (significant
Refer to
judgements in applying accounting policies and key sources of estimation
uncertainty),
page 144 (significant accounting policies) and note 17 and 37.
The group has goodwill of USD21.6 million, indefinite-lived intangible assets of
USD0.7 million and property, plant and equipment of USD305.4 million as at
30 June 2019, contained within four cash-generating units (CGUs).
The Barberton CGU has a carrying value of USD93.3 million and contained all
of the goodwill balance and indefinite-lived intangible assets. Management has
determined that the recoverable amount of the goodwill balance exceeded
the carrying value and no impairment has been recognised.
The carrying values of the Barberton CGU’s assets are supported by fair
value less costs of disposal calculations, which are based on future cash flow
forecasts using reserve and production estimates approved by the internal
competent person.
In addition, management has performed an impairment trigger assessment
for the other CGUs. Management identified the 8-shaft pillar project at
Evander as an indicator of impairment reversal, as management is using
previously impaired infrastructure assets in the three year project. Accordingly,
management recorded a post-tax reversal of USD17.9 million in the Evander
underground CGU using the fair value less costs to dispose of the CGU.
Management has determined that there were no triggers for impairment in
either of the other CGUs, having considered factors such as long-term gold
prices, interest rates, reserves and production.
We assessed the competent person’s skills and experience and concluded that
they are appropriately qualified and experienced.
For both the Evander and Barberton CGU we used our valuation experts to
assist us in evaluating the appropriateness of key market-related assumptions
in management’s valuation models, including gold prices, and foreign exchange,
inflation and discount rates.
We assessed the reasonableness of management’s future forecasts of capital and
operating expenses included in the cash flow forecasts in light of the historical
accuracy of such forecasts and the current operational results.
We performed sensitivity analysis around the key assumptions within the cash
flow forecasts using a range of discount rates and lower long-term gold prices
and exchange rates based on what, in our view, a market participant may apply.
For the Evander CGU, the estimation of recoverable amount is sensitive to
changes in gold price assumptions and the effect on timing of the level of
production from the pillar project. The estimated recoverable amount of this CGU
exceeded the depreciated carrying value, resulting in the need for an impairment
reversal. We formed an independent view of the gold price and discount rate that
a market participant might use in a fair value less cost to dispose scenario.
We considered management’s impairment trigger analysis and agreed that no
impairment or reversal indicators existed for the other CGUs.
We examined the related disclosures in note 17 of the financial statements,
including the sensitivities provided with respect to the CGUs.
Based on our analysis, we consider management’s impairment conclusions, the
impairment reversal recognised and the associated disclosures to be reasonable.
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group
and the parent company, the accounting processes and controls, and
the industry in which they operate.
In establishing the overall approach to the group audit, we
determined the type of work that needed to be performed at the
statutory reporting unit level by us, as the group audit team, or
through involvement of our component auditors in South Africa. The
group’s assets and operations are primarily located within two mine
sites in South Africa. Financial reporting is undertaken at the head
office in Johannesburg.
size or risk characteristics. This included the three main operating
subsidiaries in South Africa, as well as the parent company. Specific
audit procedures on certain balances and transactions were also
performed on a further two reporting units relating to other
expenses, borrowings and accounts payable. Audit work was
performed by our component auditors in South Africa and we
determined the level of involvement we needed to have in the
audit work for each reporting unit to be able to conclude whether
sufficient appropriate audit evidence had been obtained as a basis for
our opinion on the group financial statements as a whole. As part of
our year-end audit, the group audit team’s involvement comprised of
site visits, conference calls, review of component auditor work papers,
attendance at component audit clearance meetings and other forms
of communication as considered necessary.
We identified four reporting units which, in our view, required an
audit of their complete financial information, either due to their
This, together with additional procedures performed at the group
level, gave us the evidence we needed for our opinion on the group
financial statements as a whole.
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136
ANNUAL FINANCIAL
STATEMENTS
INDEPENDENT AUDITORS’ REPORT continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Overall materiality
USD2.44 million.
How we determined it
5% of profit before tax.
USD2.16 million.
1% of total assets.
Rationale for
benchmark applied
Based on the benchmarks used in the annual report, profit before
tax is the primary measure used by shareholders in assessing the
performance of the group, and is a generally accepted auditing
benchmark.
We believe that total assets is the most appropriate benchmark as
the parent company is the ultimate holding company of the group
therefore its operations are driven solely by its investments and
inter-company loans.
For each component in the scope of our group audit, we allocated
a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between
USD2.33 million and USD0.79 million. Certain components were
audited to a local statutory audit materiality that was also less than
our overall group materiality.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
USD122,000 (Group audit) and USD108,090 (Parent company
audit) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
◗
CONCLUSIONS RELATING TO GOING CONCERN
ISAs (UK) require us to report to you when:
◗
the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the group’s and 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.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the group’s and
parent company’s ability to continue as a going concern. For example,
the terms on which the United Kingdom may withdraw from the
European Union are not clear, and it is difficult to evaluate all of the
potential implications on the group’s trade, customers, suppliers and
the wider economy.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
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
an apparent material inconsistency or material misstatement, we
are required to perform procedures to conclude whether there is
a material misstatement of 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. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, ISAs (UK) require us also to
report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic Report and Directors’
Report for the year ended 30 June 2019 is consistent with the
financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and parent
company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic
Report and Directors’ Report.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
137
ANNUAL FINANCIAL
STATEMENTS
OTHER REQUIRED REPORTING
COMPANIES ACT 2006 EXCEPTION REPORTING
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 not been
received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are
not made; or
the parent company financial statements are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Timothy McAllister
Senior statutory auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
18 September 2019
page 128, the directors are responsible for the
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Statement of Responsibilities
set out on
preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true and
fair view. The directors are also responsible for such internal control
as they 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.
Auditors’ 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 auditors’
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.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only
for the parent company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
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138
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CONSOLIDATED AND PARENT COMPANY
STATEMENTS OF FINANCIAL POSITION
as at 30 June 2019
ASSETS
Non-current assets
Property, plant and equipment and mineral rights
Other intangible assets
Deferred taxation
Long-term inventory
Long-term receivables
Goodwill (note 2)
Investments
Rehabilitation fund
Current assets
Inventories
Receivables from other group companies
Current taxation asset
Trade and other receivables
Current portion of long-term receivables
Derivative financial 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 reserve
Equity attributable to owners of the parent
Total equity
Non-current liabilities
Long-term provisions
Long-term liabilities – financial institutions
Long-term liabilities – other
Deferred taxation
Current liabilities
Trade and other payables
Derivative financial liabilities
Current portion of long-term liabilities – financial institutions
Current portion of long-term liabilities – other
Payables to other group companies
Current taxation liability
Liabilities directly associated with assets held for sale
Total equity and liabilities
Consolidated
Restated
(note 1)
30 June 2018
USD thousand
Restated
(note 1)
30 June 2017
USD thousand
Notes
30 June 2019
USD thousand
17
18
35
21
19
37
38
20
21
34
22
19
29
24
25
27
26
30
28
14
35
23
29
28
14
34
305,354.7
655.2
2,141.1
614.5
1,021.9
21,554.8
6,802.0
25,021.1
363,165.3
5,708.5
–
1,888.6
15,101.3
1,924.8
–
5,341.2
29,964.4
–
393,129.7
38,150.6
235,063.2
(138,857.1)
2,624.7
112,984.2
(18,121.7)
(24,871.4)
(21,637.4)
(1,753.2)
183,581.9
183,581.9
15,781.3
109,617.7
1,727.2
18,567.1
145,693.3
35,921.3
917.7
24,147.7
2,390.9
–
476.9
63,854.5
–
393,129.7
254,246.7
41.7
8,186.4
748.2
1,746.6
22,120.4
4,133.9
26,550.0
317,773.9
3,561.3
–
910.6
19,578.4
1,252.2
289.5
921.8
26,513.8
–
344,287.7
38,150.6
235,063.2
(135,154.2)
2,624.7
74,942.0
(18,121.7)
(24,871.4)
(21,637.4)
(4,008.2)
146,987.6
146,987.6
19,929.5
112,827.4
1,237.4
18,911.2
152,905.5
36,815.3
–
6,426.2
391.1
–
762.0
44,394.6
–
344,287.7
292,007.6
94.1
991.0
889.5
3,295.0
23,256.1
9,776.5
24,568.7
354,878.5
6,559.7
–
1,388.6
17,862.1
–
–
12,277.7
38,088.1
7,291.5
400,258.1
38,150.6
235,063.2
(129,633.9)
2,016.4
208,414.1
(18,121.7)
(36,815.7)
(21,637.4)
–
277,435.6
277,435.6
15,147.5
13,828.5
2,144.2
50,616.5
81,736.7
35,163.2
–
1,587.2
3,800.6
–
63.3
40,614.3
471.5
400,258.1
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency
represents a voluntary change in an accounting policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors.
A change in presentation currency requires the restatement of comparatives. Refer to note 43.
Note 2: Goodwill has been restated in the prior financial year. Refer to note 44.
The above consolidated and parent company statement of financial position should be read in conjunction with the accompanying notes.
The annual financial statements on
18 September 2019 and were signed on its behalf by:
pages 128 to 215 were approved by the board of directors and authorised for issue on
Cobus Loots
Chief executive offi cer
18 September 2019
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
139
ANNUAL FINANCIAL
STATEMENTS
Parent company
Restated
(note 1)
30 June 2018
USD thousand
Restated
(note 1)
30 June 2017
USD thousand
30 June 2019
USD thousand
–
–
1,593.1
–
–
–
162,825.6
–
164,418.7
–
93,672.9
103.4
22.4
1,108.5
–
36.3
94,943.5
–
259,362.2
38,150.6
235,063.2
(73,272.7)
1,616.9
54,076.8
–
–
3,153.1
(1,753.2)
257,034.7
257,034.7
–
–
402.3
–
402.3
1,024.8
–
–
900.4
–
–
1,925.2
–
259,362.2
–
–
2,016.5
–
–
–
160,157.4
–
162,173.9
–
95,653.6
99.1
6.4
1,027.7
–
269.0
97,055.8
–
259,229.7
38,150.6
235,063.2
(70,542.5)
1,616.9
55,059.6
–
–
3,153.1
(4,008.2)
258,492.7
258,492.7
–
–
47.5
–
47.5
466.3
–
–
223.2
–
–
689.5
–
259,229.7
–
–
540.2
–
1,915.7
–
238,368.6
–
240,824.5
–
118,026.7
86.4
7.2
–
–
10,409.3
128,529.6
6,819.9
376,174.0
38,150.6
235,063.2
8,351.0
1,616.9
69,371.6
–
–
3,153.1
–
355,706.4
355,706.4
–
–
707.9
–
707.9
1,459.9
–
–
269.1
18,030.7
–
19,759.7
–
376,174.0
Deon Louw
Financial director
18 September 2019
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140
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CONSOLIDATED AND PARENT COMPANY
STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2019
Consolidated
Parent company
Restated
(note 1)
Restated
(note 1)
Notes
30 June 2019
USD thousand
30 June 2018
USD thousand
30 June 2019
USD thousand
30 June 2018
USD thousand
Continuing operations
Revenue
Other revenue
Revenue and other revenue
Cost of production (note 2)
Mining depreciation and amortisation
Operating profit
Other expenses
Impairment reversal/(cost)
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 after taxation from discontinued operations
Profit/(loss) for the year
4
4
5
17,18
7
17, 18, 36
36
8
8
33
36
217,374.6
304.4
217,679.0
(152,980.0)
(16,227.8)
48,471.2
(7,562.3)
17,853.5
–
(354.1)
58,408.3
849.7
(13,041.8)
46,216.2
(8,174.0)
38,042.2
145,828.8
146.0
145,974.8
(107,139.9)
(6,625.5)
32,209.4
(5,903.1)
(10,763.4)
–
(557.8)
14,985.1
2,003.6
(4,225.3)
12,763.4
2,826.0
15,589.4
–
38,042.2
(138,405.0)
(122,815.6)
–
1,973.2
1,973.2
–
–
1,973.2
(3,396.0)
–
–
–
(1,422.8)
192.6
(0.1)
(1,230.3)
247.5
(982.8)
–
(982.8)
–
778.2
778.2
–
–
778.2
(3,195.9)
–
626.8
–
(1,790.9)
360.5
(8.0)
(1,438.4)
369.1
(1,069.3)
–
(1,069.3)
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)
Investment measured at fair value through other
comprehensive income adjustment
Taxation on investment measured at fair value through
other comprehensive income adjustment
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
Profit/(loss) attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
Earnings/(loss) per share (USD cents)
Diluted earnings/(loss) per share (USD cents)
Earnings per share from continuing operations (USD cents)
Diluted earnings per share from continuing operations
(USD cents)
Weighted average number of shares in issue (thousand)
Diluted average number of shares in issue (thousand)
38
2,876.3
(5,165.2)
2,876.3
(5,165.2)
(621.3)
1,157.0
(621.3)
1,157.0
(3,702.9)
36,594.3
(5,520.3)
(132,344.1)
(2,730.2)
(1,458.0)
(78,893.5)
(83,971.0)
38,042.2
(122,815.6)
(982.8)
(1,069.3)
36,594.3
1.97
1.97
1.97
(132,344.1)
(6.79)
(6.79)
0.86
(1,458.0)
(0.05)
(0.05)
(0.05)
(83,971.0)
(0.06)
(0.06)
(0.06)
1.97
0.86
(0.05)
(0.06)
1,928,329.5
1,928,329.5
1,809,726.7
1,809,726.7
1,928,329.5
1,928,329.5
1,809,726.7
1,809,726.7
10
10
10
10
10
10
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43.
Note 2: Realisation costs have been restated in the prior financial year. Refer to note 5 and 44.
The above consolidated and parent company statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
141
ANNUAL FINANCIAL
STATEMENTS
CONSOLIDATED AND PARENT COMPANY
STATEMENTS OF CASH FLOWS
for the year ended 30 June 2019
Consolidated
Parent company
Restated
(note 1)
Notes
30 June 2019
USD thousand
30 June 2018
USD thousand
30 June 2019
USD thousand
30 June 2018
USD thousand
Cash flow from operating activities (note 4)
Net cash generated by/(utilised in) operating activities
before dividend, taxation, royalties and net finance costs
and income
Net dividend paid (note 2)
Income taxation paid (note 3)
Royalties (paid)/refund (note 3)
Finance costs paid (note 3)
Finance income received
Net cash generated by/(utilised in) operating activities
Cash flow from investing activities
Additions to property, plant and equipment and
mineral rights
Additions to other intangible assets
Repayments/(advances) of long-term loans receivable
Rehabilitation funds withdrawal/(contributions)
Proceeds from disposal of investment
Proceeds from disposals of property, plant and equipment
and mineral rights
Net cash (utilised in)/generated by investing activities
Cash flow from financing activities
Borrowings raised
Borrowings repaid
Advances in loans to subsidiaries
Proceeds from disposal of treasury shares
Net cash generated by/(utilised in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
12
18
20
36
28
28
26
24
56,889.0
–
(3,847.0)
(649.9)
(15,014.8)
329.4
37,706.7
(55,115.7)
(16.3)
286.0
2,585.4
–
5,344.7
(11,030.0)
(2,384.0)
749.8
(7,103.4)
1,027.6
(13,395.3)
(124,698.6)
(23.3)
(517.9)
(2,038.9)
6,317.9
466.3
(51,794.3)
1.2
(120,959.6)
21,494.0
(3,523.6)
–
–
17,970.4
3,882.8
921.8
536.6
5,341.2
119,455.3
(7,782.1)
–
11,944.3
123,617.5
(10,737.4)
12,277.7
(618.5)
921.8
215.6
–
–
–
(0.1)
7.0
222.5
–
–
–
–
–
–
–
–
–
(461.4)
–
(461.4)
(238.9)
269.0
6.2
36.3
(2,010.0)
(13,706.5)
(17.5)
–
–
128.8
(15,605.2)
–
–
–
–
6,317.9
–
6,317.9
–
–
(876.9)
–
(876.9)
(10,164.2)
10,409.3
23.9
269.0
Note 1: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43.
Note 2: Net dividend paid represents the total dividend paid less the reciprocal dividend received from PAR Gold. Refer to the dividend note 11 and the related parties note 40.
Note 3: The income taxes, royalties and finance costs paid and received have been disclosed in the face of the statement of cash flows in the current and prior financial year.
Note 4: Proceeds from derivative financial instruments have been restated to cash flow from operating activities. Refer to note 44.
The above consolidated and parent company statement of cash flows should be read in conjunction with the accompanying notes.
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142
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
CONSOLIDATED AND PARENT COMPANY
STATEMENTS OF CHANGES IN EQUITY
for the year ended 30 June 2019
Consolidated
Share
capital
USD thousand
Share
premium
USD thousand
Translation
reserve
(note 1)
USD thousand
Share
option
reserve
USD thousand
38,150.6
–
–
–
–
–
–
–
38,150.6
–
–
38,150.6
235,063.2
(1,124.2)
1,124.2
–
–
–
–
–
235,063.2
–
–
235,063.2
(129,633.9)
–
–
–
(5,520.3)
–
–
–
(135,154.2)
–
(3,702.9)
(138,857.1)
Parent company
2,016.4
–
–
–
–
–
–
608.3
2,624.7
–
–
2,624.7
Share
capital
USD thousand
Share
premium
USD thousand
Translation
reserve
(note 1)
USD thousand
Share
option
reserve
USD thousand
38,150.6
–
–
–
38,150.6
–
–
38,150.6
235,063.2
–
–
–
235,063.2
–
–
235,063.2
8,351.0
–
(78,893.5)
–
(70,542.5)
–
(2,730.2)
(73,272.7)
1,616.9
–
–
–
1,616.9
–
–
1,616.9
Balance as at 1 July 2017 (Restated) (note 8)
Disposal of treasury shares
Transfer to treasury capital reserve (note 6)
Loss for the year
Other comprehensive loss
Dividends paid
Reciprocal dividends – PAR Gold (note 7)
Share-based payment – charge for the year
Balance as at 30 June 2018 (Restated) (note 8)
Profit for the year
Other comprehensive (loss)/income
Balance as at 30 June 2019
Balance as at 1 July 2017 (Restated) (note 8)
Loss for the year
Other comprehensive loss
Dividends paid
Balance as at 30 June 2018 (Restated) (note 8)
Loss for the year
Other comprehensive (loss)/income
Balance as at 30 June 2019
Note 1: The translation reserve comprises of all foreign exchange differences arising from the translation of the financial results' functional currency (rand) to the group's presentational
currency (USD).
Note 2: The merger reserve was created through the historical reverse acquisition of Barberton Mines in July 2007.
Note 3: The other reserves comprises of unrealised gains or losses recognised when financial assets are measured at fair value through other comprehensive income.
Note 4: The 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 to PAR Gold.
Note 5: The treasury capital reserve was created on 6 June 2016 and comprises of Funding Company's investment in PAR Gold. The PAR Gold's investment in Pan African Resources'
shares eliminate on consolidation therefore reducing the group equity and the weighted average number of shares in issue (refer to note 38 and 26).
Note 6: The costs associated with the disposal of treasury shares were reclassified from share premium to the treasury capital reserve.
Note 7: Reciprocal dividend – PAR Gold is an inter-company transaction which eliminates on consolidation as disclosed above. Refer to the related party note 40.
Note 8: The group changed its presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency represents a voluntary change in an accounting
policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors. A change in presentation currency requires the restatement of comparatives. Refer to note 43.
The above consolidated and parent company statement of changes in equity should be read in conjunction with the accompanying notes.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
143
ANNUAL FINANCIAL
STATEMENTS
Consolidated
Realisation
of equity
reserve
(note 4)
USD thousand
Treasury
capital
reserve
(note 5)
USD thousand
Retained
earnings
USD thousand
Merger
reserve
(note 2)
USD thousand
Other
reserves
(note 3)
USD thousand
Total
USD thousand
208,414.1
–
–
(122,815.6)
–
(13,242.7)
2,586.2
–
74,942.0
38,042.2
–
112,984.2
(18,121.7)
–
–
–
–
–
–
–
(18,121.7)
–
–
(18,121.7)
(36,815.7)
13,068.5
(1,124.2)
–
–
–
–
–
(24,871.4)
–
–
(24,871.4)
(21,637.4)
–
–
–
–
–
–
–
(21,637.4)
–
–
(21,637.4)
Parent company
–
–
–
–
(4,008.2)
–
–
–
(4,008.2)
–
2,255.0
(1,753.2)
277,435.6
11,944.3
–
(122,815.6)
(9,528.5)
(13,242.7)
2,586.2
608.3
146,987.6
38,042.2
(1,447.9)
183,581.9
Retained
earnings
USD thousand
Realisation
of equity
reserve
USD thousand
Treasury
capital
reserve
USD thousand
Merger
reserve
(note 2)
USD thousand
Other
reserves
(note 3)
USD thousand
Total
USD thousand
69,371.6
(1,069.3)
–
(13,242.7)
55,059.6
(982.8)
–
54,076.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,153.1
–
–
–
3,153.1
–
–
3,153.1
–
–
(4,008.2)
–
(4,008.2)
–
2,255.0
(1,753.2)
355,706.4
(1,069.3)
(82,901.7)
(13,242.7)
258,492.7
(982.8)
(475.2)
257,034.7
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144
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2019
1. GENERAL INFORMATION
Pan African Resources is a company incorporated in the United
Kingdom and registered in England and Wales under the Companies
Act 2006 with the registration number 3937466. The company
has a dual primary listing on the JSE and the UK’s AIM market. The
nature of the group’s operations and its principal activities relate to
commodity mining and exploration activities.
The group’s presentation currency was changed in the current
financial year to USD from GBP. Reporting in USD provides a more
relevant presentation of the group’s financial position, financial
performance and cash flows. For additional information regarding the
amendment, refer to note 43.
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 the company operates.
The company, and the subsidiary companies of Pan African Resources
have determined their functional currency as the South African rand.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation and statement of compliance
The group’s consolidated annual financial statements have been
prepared in accordance with EU adopted IFRS and interpretations
issued by IFRS Interpretations Committee in accordance with the
provisions of the Companies Act 2006.
The consolidated and parent company annual financial statements
have been prepared under the historical cost basis, except for certain
financial instruments that are stated at fair value. The consolidated
and parent company annual financial statements have been prepared
on the going concern basis.
The consolidated and parent company annual financial statements are
presented in USD and all values are rounded to the nearest thousand
(USD’000), except where otherwise indicated.
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.
Basis of consolidation
The annual financial statements incorporate a consolidation of
the annual financial statements of the company and the entities
controlled by the company (its subsidiaries). Entities that constitute
the group are those enterprises controlled by the group regardless
of the number of shares owned by the group. Control is achieved
where the group has the power to govern the financial and operating
policies of an investee enterprise to obtain benefits from its
activities. Entities are consolidated from the date on which control is
transferred to the group and cease to be consolidated from the date
on which control is transferred out of the group.
All inter-company balances, transactions income and expenses have
been eliminated on consolidation where appropriate.
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 USD16.0 million
(2018: USD35.6 million) of available debt facilities and USD5.3 million
(2018: 0.9 million) of cash and cash equivalents as at 30 June 2019.
Based on the current status of the group’s finances, having considered
going concern forecasts and reasonably possible downside scenarios,
including a rand gold price of R543,000/kg (USD1,190/oz at a
prevailing ZAR:USD average exchange rate of R14.19), and reduced
production volumes, the group’s forecasts from current operations
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 annual 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 2019
annual financial statements.
New standards, interpretations and amendments effective
for the first time as at 30 June 2019
The group applies all applicable IFRS in preparation of the
consolidated and parent company annual financial statements.
Consequently, all IFRS statements as adopted by the EU that were
effective as at 30 June 2019 and are relevant to its operations have
been applied.
At the date of authorisation of these consolidated and parent
company annual financial statements, the following standards, which
have been applied in these consolidated and parent company annual
financial statements, for the first time, were in issue and effective as
at 30 June 2019.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
145
ANNUAL FINANCIAL
STATEMENTS
Standard
Executive summary of the amendment
Effective
IFRS 2:
Share-based Payments
Clarifying how to account
for certain types of
share-based payment
transactions
This amendment clarifies the measurement basis for cash-settled,
share-based payments and the accounting for modifications that
change an award from cash-settled to equity-settled. It also introduces
an exception to the principles in IFRS 2 that will require an award
to be treated as if it was wholly equity-settled, where an employer
is obliged to withhold an amount for the employee’s tax obligation
associated with a share-based payment and pay that amount to the
tax authority
Annual periods beginning
on or after 1 January 2018
Impact
No impact
IFRS 9:
Financial Instruments
◗ Financial liabilities
◗ Derecognition of
financial instruments
◗ Financial assets
◗ On general hedge
accounting
IFRS 15:
Revenue from Contracts
with Customers
IFRIC 22:
Foreign Currency
Transactions and Advance
Consideration
Annual improvements
2014 – 2016
This standard replaces the guidance in IAS 39. It includes requirements
on the classification and measurement of financial assets and liabilities;
it also includes an Expected Credit Loss (ECL) model that replaces the
current incurred loss impairment model
The IASB has amended IFRS 9 to align hedge accounting more closely
with an entity’s risk management. The revised standard also establishes
a more principles-based approach to hedge accounting and addresses
inconsistencies and weaknesses in the current model in IAS 39
The Financial Accounting Services Board (FASB) and IASB issued
their long awaited converged standard on revenue recognition on
29 May 2014. It is a single, comprehensive revenue recognition model
for all contracts with customers to achieve greater consistency in the
recognition and presentation of revenue. Revenue is recognised based
on the satisfaction of performance obligations, which occurs when
control of goods or services transfer to a customer
The IASB has amended IFRS 15 to clarify the guidance, but there were
no major changes to the standard itself. The amendments comprise
clarifications of the guidance on identifying performance obligations,
accounting for licences of intellectual property and the principal versus
agent assessment (gross versus net revenue presentation). New and
amended illustrative examples have been added for each of these
areas of guidance. The IASB has also included additional practical
expedients related to transition to the new revenue standard
This IFRIC addresses foreign currency transactions or parts of
transactions where there is consideration that is denominated or
priced in a foreign currency. The interpretation provides guidance for
when a single payment/receipt is made as well as for situations where
multiple payment/receipts are made. The guidance aims to reduce
diversity in practice
These amendments impact two standards:
◗ IFRS 1: First-time Adoption of IFRS regarding the deletion of short-
term exemptions for first-time adopters regarding IFRS 7, IAS 19,
and IFRS 10
◗ IAS 28: Investments in Associates and Joint Ventures regarding
measuring an associate or joint venture at fair value. IAS 28 allows
venture capital organisations, mutual funds, unit trusts and similar
entities to elect measuring their investments in associates or joint
ventures at fair value through profit or loss
Annual periods beginning
on or after 1 January 2018
Refer to note 29 and 43
of the consolidated and
parent company annual
financial statements
Annual periods beginning
on or after 1 January 2018
Refer to note 4 and 43
of the consolidated and
parent company annual
financial statements
Annual periods beginning
on or after 1 January 2018
No impact
Annual periods beginning
on or after 1 January 2018
No impact
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146
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
New standards, interpretations and amendments issued but not yet effective as at 30 June 2019
As at the date of authorisation of these consolidated and parent company annual financial statements, the following standards and
interpretations, which have not been applied in these consolidated and parent company annual financial statements, were in issue and not yet
effective as at 30 June 2019:
Standard
Effective date
Amendments to References to the Conceptual Framework in IFRS Standards
Annual periods beginning on or after 1 January 2020
IAS 1: Presentation of Financial Statements
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors on the definition of material
Annual periods beginning on or after 1 January 2020
IAS 19: Employee Benefits on plan amendment, curtailment or settlement
Annual periods beginning on or after 1 January 2019
IFRS 3: Business Combinations on the definition of a business
Annual periods beginning on or after 1 January 2020
IFRS 17: Insurance Contracts
IFRS 9: Financial Instruments on prepayment features with negative compensation and modification
of financial liabilities
Annual periods beginning on or after 1 January 2021
Annual periods beginning on or after 1 January 2019
IFRS 16: Leases
Annual periods beginning on or after 1 January 2019
Annual improvements cycle 2015 – 2017
Annual periods beginning on or after 1 January 2019
IFRIC 23: Uncertainty over Income Tax Treatments
Annual periods beginning on or after 1 January 2019
The expected impact of standards other than IFRS 16: Leases, and interpretations, in issue and not yet effective, is not expected to have a
material impact for the group.
IFRS 16: Leases was published in January 2016 and became effective
for the group from 1 July 2019, 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.
Based on information currently available, the group expects its lease
liabilities to principally relate to the lease of corporate offices and
the lease of Aachen reactors. Management is currently in the process
of evaluating the accounting impact of the new standard in respect
of service contracts. It is expected that the adoption of IFRS 16 will
result in a material increase in lease liabilities, representing the present
value of future payments under arrangements classified as operating
leases, along with a corresponding increase in property, plant and
equipment for a right-of-use asset, together with an increase in
depreciation and finance costs.
The group will apply IFRS 16 from 1 July 2019 using the modified
retrospective approach. Therefore the cumulative effect of adopting
IFRS 16 will be recognised as an adjustment to the opening
balance of retained earnings as at 1 July 2019 with no restatement
of comparative information.
The group will not bring leases of low-value assets or short-term
leases with 12 or fewer months remaining on the consolidated
statement of financial position at 1 July 2019. In the consolidated
and parent company cash flow statement for the year ended
30 June 2020 the total amount of cash paid will be separated
between repayments of principal and repayment of interest.
Repayments of principal will be presented within cash flows from
financing activities and payment of interest in cash flows from
operating activities..
Property, plant and equipment and mineral rights
Property, plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Cost is the fair
value of the consideration required to acquire and develop the asset
and includes the purchase consideration, acquisition of mineral rights,
cost directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner as
intended by management, the initial estimate of any decommissioning
obligation, for assets that take a substantial period of time to get
ready for their intended use and their associated borrowing costs.
Income generated from the sale of products extracted during
the development or pre-commissioning phase of a mining asset is
capitalised to the cost of property, plant and equipment and mineral
rights as per IAS 16: Property, Plant and Equipment.
Gains or losses on disposal of property, plant and equipment are
determined by comparing the proceeds from disposal with the
carrying amount. The gain or loss is recognised in the statement
of profit or loss and other comprehensive income.
Depreciation of property, plant and equipment and
mineral rights
Mining rights and mining property, plant and machinery and shaft and
exploration assets 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.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
147
ANNUAL FINANCIAL
STATEMENTS
Buildings and infrastructure and items of plant and machinery for
which the consumption is not linked to production is depreciated
to their residual values at varying rates on a straight-line basis over
their estimated useful lives or the life-of-mine, whichever is shorter.
The estimated useful life may vary between five and 10 years.
Other non-mining assets are recorded at cost and depreciated on
the straight-line basis over their expected useful lives which may vary
between three and 10 years.
Capital under construction is measured at cost less any recognised
impairment. Depreciation commences when the asset is capable of
operating in the manner as intended by management, at which point
they are transferred to the appropriate asset class.
Land is not depreciated.
Depreciation methods, residual values and estimated useful lives are
reviewed at least annually.
Other intangible assets
Other intangible assets, which excludes mining rights and exploration
assets, are measured at cost less accumulated amortisation and
accumulated impairment losses. Other intangible assets are amortised
over their estimated useful lives, usually between three and five years,
except goodwill, which is not depreciated. Amortisation methods,
residual values and estimated useful lives are reviewed at least
annually.
Mineral exploration and evaluation costs
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.
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.
Exploration expenditure is the cost of exploring for Mineral
Resources other than that occurring at existing operations
and projects and comprises geological and geophysical studies,
exploratory drilling and sampling and Mineral Resources
development.
Evaluation expenditure includes the cost of conceptual and pre-
feasibility studies and evaluation of Mineral Resources at existing
operations.
Capitalised pre-production expenditure is assessed for impairment
in accordance with the group accounting policy stated below.
Impairment
Cash-generating units (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 its carrying amount, 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.
At each statement of financial position reporting date, the group
reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets
are impaired. Impairment losses are immediately recognised as an
expense in the statement of profit or loss and other comprehensive
income. A reversal of an impairment loss is recognised in the
statement of comprehensive income.
Where an impairment loss subsequently reverses the carrying
amount of the asset or CGU is increased to the revised estimate
of its recoverable amount, to the extent that the increased carrying
amount does not exceed the carrying amount that would have
been determined had no impairment been recognised on the asset
or CGU.
Taxation
The taxation expense includes the current taxation and deferred
taxation charge recognised in the income statement.
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 recognised in respect of temporary differences
arising from differences between the carrying amount of assets and
liabilities in the annual financial statements and the corresponding
amounts used for taxation purposes. 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. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than a business combination) of
other assets and liabilities in a transaction, which affects neither tax
nor accounting profit.
Deferred 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 tax
is also recorded within equity, or where they arise from the initial
accounting for a business combination. In a business combination,
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NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
the tax 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 amount of deferred taxation assets is 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.
Provision for environmental rehabilitation and
decommissioning costs
An obligation to incur environmental restoration, rehabilitation and
decommissioning costs arises when disturbance is caused by the
development or ongoing production of a mining asset. Rehabilitation
and environmental costs are estimated annually using either the work
of external consultants or internal experts adjusted as appropriate
for changes in legislation or technology. Such costs arising from
the decommissioning of plant and other site preparation work,
discounted to their net present value, are provided for and capitalised
at the start of each project as soon as the obligation to incur such
costs arises.
These costs are recognised in the statement of profit or loss over
the life of the operation through depreciation of the asset and the
unwinding of the discount on the provision.
The amount recognised as a provision represents management’s best
estimate of the consideration required to complete the restoration
and rehabilitation activity. These estimates are inherently uncertain
and could materially change over time.
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 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.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
The measurement of the provision that results from subsequent
changes in the estimated timing or amount of cash flows, is added
back to, or deducted from the cost of the related asset in the current
period. The unwinding of the discount rate on the provision is
recognised as finance costs.
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 lease payments are recognised as an expense on a
straight-line basis over the lease term. The difference between the
amounts recognised as an expense and the contractual payments
are recognised as an operating lease liability.
In addition to lease contracts, other significant contracts are
assessed to determine whether in substance they are or contain
a lease. This includes the assessment of whether an arrangement
is dependent on a specific asset and the right to use that asset is
conveyed through the contract.
Foreign currency transactions and translation
The group’s subsidiaries are incorporated in South Africa and their
functional currency is the rand. The group’s business is conducted
in rand 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 rand. The ongoing review
of the results of operations conducted by executive management
and the board is also performed in rand.
Foreign currency transactions by group companies are recognised
in the functional currency of the company at the rates of exchange
ruling on the date of the transaction.
At each reporting date, monetary assets and liabilities denominated
in foreign currencies are translated at the functional currency spot
rates of exchange ruling at the reporting date. Gains or losses arising
on translation of monetary items are recognised in the statement of
profit or loss and other comprehensive income.
Non-monetary assets and liabilities 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 the presentation currency (USD) of the group, at the rate of
exchange prevailing at the reporting date. Income and expense items
are 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 and are recognised as income or
expenses in the period in which the operation is disposed of.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
149
ANNUAL FINANCIAL
STATEMENTS
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 in the group’s 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.
The BBBEE restructure transaction was historically equity-settled
prior to the group’s acquisition of PAR Gold and the subsequent
BBBEE restructure on 15 June 2018. The transaction agreements
specify that these options are to be equity-settled.
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.
The employee share ownership plan (ESOP) is designated as cash-
settled in the event of a share buy as per the ESOP agreements.
The employee and director share options may be settled in either cash
or equity. Historically, these have been settled in cash and therefore
these options have been classified as cash-settled share options.
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 funds’ 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 recognised immediately in the income
statement through profit or loss. Movements, other than cash
contributions or deductions, in the rehabilitation fund are recognised
immediately in the income statement through profit and loss.
Revenue recognition
Revenue is recognised in a manner that depicts the pattern of
transfer of goods and services to customers. The amount recognised
reflects the amount to which the group expects to be entitled to in
exchange for those goods and services. Sales contracts are evaluated
to determine the performance obligations, the transaction price and
the point at which there is transfer of control. The transaction price is
the amount of the consideration due in exchange for transferring the
promised goods or services to the customer, and is allocated against
the performance obligations and is recognised in accordance with
whether control is recognised over a defined period or at a specific
point in time.
The group sells precious metals into the market through commodity
trading transactions with financial institutions. Sales contracts contain
a single performance obligation, to deliver gold at which time, title
and risk pass to the purchaser. The group recognises revenue from
the sale of precious metals when title and risk are transferred to
the customer, being the date of delivery of the precious metals to
Rand Refinery Limited. Payment of the commodity trade is due
immediately on transfer of title and risk. Commodity sales are
measured at the fair value of the consideration received or receivable
after deducting discounts, volume rebates value-added taxes.
Revenue from the sale of material by-products is recognised within
revenue at the point control passes.
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ANNUAL FINANCIAL
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NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
The group does not expect to have any contracts where the period
between the transfer of the promised goods to the customer and
payment by the customer exceeds one year. As a consequence, the
group does not adjust any of the transaction prices for the time value
of money.
Revenue from services is recognised over time as the service is
delivered in line with the policy above.
Financial assets
Investments, other than investments in subsidiaries, joint arrangements
and associates, are financial asset investments and are initially
recognised at fair value. Transaction costs are capitalised to the
instrument for instruments not classified as fair value through profit
and loss. The group’s financial assets are classified into the following
measurement categories: instruments measured at amortised cost,
instruments measured at fair value through other comprehensive
income and instruments measured at fair value through profit and loss.
Financial assets are classified as measured at amortised cost only if
the asset is held within a business model whose objective is to collect
the contractual cash flows and contractual terms of the asset give rise
to cash flows that are solely payments of principal and interest.
At subsequent reporting dates, financial assets measured at
amortised cost are measured at amortised costs less any impairment
losses. Other investments are classified either at fair value through
profit and loss (which includes investments held for trading) or at fair
value through other comprehensive income. Both these categories
are subsequently measured at fair value. Where investments are held
for trading purposes, unrealised gains and losses for the period are
included in the statement of profit or loss and other comprehensive
income within other income and expenses.
The group has elected to measure equity instruments that are
neither held for trading nor are a contingent consideration in a
business combination, at fair value through other comprehensive
income as this better reflects the strategic nature of the group’s
equity investments. For equity instruments at fair value through other
comprehensive income, changes in the fair value, including those
related to foreign exchange, are recognised in other comprehensive
income and there is no subsequent reclassification of fair value gains
and losses to profit or loss.
Impairment of financial assets
The group recognises loss allowances for expected credit losses
(ECL) on financial assets measured at amortised cost. The group
recognised ECL based on lifetime default events for financial assets,
except for those that have not experienced a significant increase in
credit risk, which are measured using 12-month default events. When
determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the
group considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis based
on the group’s historical experience, informed credit assessment
and including forward-looking information. The maximum period
considered when estimating ECLs is the maximum contractual
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
period over which the group is exposed to credit risk. Credit losses
are measured as the difference between the cash flows due in
accordance with the contract and the cash flows the group expects
to receive. A financial asset is ‘credit-impaired’ when one or more
events that have a detrimental adverse impact on the estimated
future cash flows of a financial asset have occurred.
Financial liabilities
Financial liabilities are classified and accounted for as debt according
to the substance of the contractual arrangements entered into.
Derecognition of financial assets and financial liabilities
Financial assets are derecognised when the right to receive cash
flows from the asset has expired, the right to receive cash flows has
been retained, but an obligation to pay them in full without material
delay has been assumed or the right to receive cash flows has been
transferred together with substantially all the risks and rewards of
ownership.
Financial liabilities are derecognised when the associated obligation
has been discharged, cancelled or has expired.
A substantial modification of the terms of a financial liability is
accounted for as an extinguishment of the original financial liability
and the recognition of a new financial liability. The difference between
the carrying amount of the extinguished financial liability and the
consideration paid is recognised in profit and loss.
The terms of a financial liability is considered substantially different if
the present value of the cash flows under the new terms (including
any fees paid net of fees received), differs at least 10% from the
present value of the financial liability’s cash flows using the original
effective interest rate and term.
If an exchange of debt instruments or modification of terms is
accounted for as an extinguishment, any costs or fees incurred are
recognised as part of the gain or loss on the extinguishment. If the
exchange or modification is not accounted for as an extinguishment,
any costs or fees incurred adjust the carrying amount of the
liability and are amortised over the remaining term of the modified
financial liability.
Investments
Investments in subsidiaries are measured at cost.
Borrowing costs
Interest on borrowings directly relating to the financing of qualifying
assets in the course of construction is added to the capitalised
cost of those projects under ‘capital under construction’ until such
time as assets are substantially ready for their intended use or sale.
Where funds have been borrowed specifically to finance a project,
the amount capitalised represents the actual borrowing costs
incurred. Where funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using a weighted
average rate applicable to the relevant borrowings of the group
during the period. All other borrowing costs are recognised in the
statement of profit or loss and other comprehensive income.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
151
ANNUAL FINANCIAL
STATEMENTS
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 as at 30 June 2019 of the respective investments
are 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 Mineral 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 used to make strategic decisions that were reviewed by Exco.
Exco considers the business principally according to the nature of
the products and services 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
tax expense.
The criteria for held for sale classification is 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 tax from discontinued operations in the statement of profit or
loss and other comprehensive income.
Additional disclosures are provided in note 36. All other notes to
the annual financial statements include amounts from continuing
operations, unless otherwise mentioned.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND
3.
ESTIMATES
The preparation of the group’s consolidated and parent company
annual financial statements in accordance with IFRS requires
management to make judgements, estimates and assumptions that
may materially affect the carrying amounts of assets, liabilities and
contingent liabilities reported at the date of the consolidated and
parent company annual financial statements and the reported
amounts of revenue and expenses during the current financial year.
These judgements and estimates are based on management’s
best knowledge of the relevant facts and circumstances historical
experience, current and expected future economic conditions and
other factors. Actual results may differ from the amounts included in
the consolidated and parent company annual financial statements.
Further information about such judgements and estimates is included
in the accounting policies and/or the notes to the consolidated and
parent company annual financial statements.
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 or if the
revision affects both current and future periods.
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ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
Critical accounting judgements
The following are areas of judgement, apart from those involving
estimations, that have the most significant effect on the amounts
recognised in the consolidated and parent company annual financial
statements.
Impairment and impairment reversals of assets
The group assesses at each reporting date whether there are any
indicators that its assets and CGUs may be impaired or requires
previous impairment provisions to be reversed. Operating and
economic assumptions which could affect the valuation of assets
using discounted cash flow models are regularly reviewed and
updated as part of the group’s monitoring of operational and financial
performance and forecasting processes. Judgement is required in
determining if operating and economic changes are significant and
impact the performance potential of an asset or CGU, and therefore
an indication of an impairment or an impairment reversal.
Assets (other than goodwill) that have previously been impaired
must be assessed for indicators of both impairment and impairment
reversal. Such assets are recorded on the statement of financial
position at their recoverable amount at the date of the last
impairment assessment therefore a change in operational plans,
assumptions or economic conditions could result in further
impairment or an impairment reversal if an indicator is identified.
The group has previously impaired Evander Mines’ large-scale
underground operations, and during the current financial year,
recorded a reversal of impairment on Evander Mines’ pillar project
related to the previously impaired 8 Shaft, 7 Shaft and Kinross plant
infrastructure.
Cash-generating units
The group defines a CGU as the smallest identifiable group of assets
that generate cash flows largely independent of cash flows from
other assets or groups of assets. The allocation of assets to a CGU
requires judgement.
Consistent with the prior financial year, our CGUs have been
classified as follows:
◗ Barberton Mines’ underground operations: Underground
operations (Fairview, Sheba and Consort) are reliant on the
Fairview BIOX® plant for processing and these operations have
been grouped together and 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 was
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
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
◗ Evander Mines’ underground operations: Includes 7 Shaft, 8 Shaft
and the run-of-mine circuit in the Kinross metallurgical plant and
8 Shaft pillar mining, which are independent of Elikhulu and the
Egoli project, resulting in them being classified as a single CGU.
Cash flow projections and key assumptions
Expected future cash flows used in discounted cash flow models are
inherently uncertain and could materially change over time. Cash flow
projections are significantly affected by a number of factors including
Mineral Reserves and Mineral Resources together with economic
factors such as commodity prices and discount rates and estimates of
production costs and future capital expenditure. Where discounted
cash flow models based on management’s assumptions 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.
Cash flow projections are based on financial forecasts 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 Reserves
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. Please refer
to the Abridged Mineral Reserves and Mineral Resources report
on
pages 56 to 75 for further disclosure of the group’s Mineral
Reserves and Resources and life-of-mine plans
◗ Commodity prices: Commodity prices are based on latest
internal forecasts, benchmarked with external sources of
information, to ensure that 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
projections are sensitive to changes in the discount rate. Refer to
note 17
◗ 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 (for example the grade of Mineral Reserves and
Mineral Resources varying significantly over time and unforeseen
operational issues). Refer to the unaudited Abridged Mineral
Reserves and Mineral Resources report on
pages 56 to 75.
independent of Evander Mines’ underground operations resulting
in Elikhulu being classified as a single CGU
Refer to note 17 where the reversal of impairment has been further
disclosed.
0792 PAR IAR 2019 AFS FA.indd 152
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
153
ANNUAL FINANCIAL
STATEMENTS
Discontinued operation
A component of the group is classified as a discontinued operation if
it has been either disposed off or is classified as held for sale and:
◗
represents a separate major line of business or geographical area
of operations
it is part of a single coordinated plan to dispose of a separate
major line of business or geographical area of operations
it is a subsidiary acquired exclusively with the view of resale.
◗
◗
Due to the cessation of Evander Mines’ large-scale underground
operations in the 2018 financial year, which included 8 Shaft, 7
Shaft and the run-of-mine circuit in the Kinross metallurgical plant,
the financial results from Evander Mines’ large-scale underground
operations were classified as a discontinued operation. Judgement
was required in determining the allocation of the shared operational
costs and revenue between Evander Mines’ continuing and
discontinued operations.
Refer to note 36 where the discontinued operations have been
further disclosed.
Critical sources of estimation uncertainty
Impairment and impairment reversals of assets
For assets where indicators of impairment or impairment reversals
are identified, the group performs an impairment review to assess the
recoverable amount of its operating assets, principally with reference
to fair value less costs of disposal, which is assessed using discounted
cash flow models. Mining operations are large, complex assets
requiring significant technical and financial resources to operate. Their
value may be sensitive to characteristics unique to each asset. 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.
Evander Mines’ underground operations
Following an internal and external review of Evander Mines’
underground operations, it was concluded that there was no realistic
prospect of mining on a sustainable basis from this operation, and the
decision was taken on 18 May 2018 to cease large-scale underground
operations at Evander Mines and, as a result, the CGU was fully
impaired. An impairment charge of USD140.3 million was recognised
in the 2018 financial results.
Subsequently, an independent feasibility study into the merits of
mining Evander Mines’ 8 Shaft pillar and high-grade areas in proximity
to the pillar was completed and the board of directors approved
the development of this project on 12 June 2019. Consequently,
the valuation of Evander Mines’ underground operations has been
assessed and the previous impairment of the Kinross plant, the 7
Shaft and 8 Shaft infrastructure has been reversed to the recoverable
amount of USD17.9 million that would have been recognised had no
impairment loss been recorded previously.
The carrying value based on discounted cash flow is sensitive to
changes in input assumptions.
Refer to note 17 where sensitivities of key assumptions has been
further disclosed.
Other significant accounting judgements and estimates
Elikhulu date of commissioning
Given the nature of Elikhulu, a key area of judgement was the
determination of when Elikhulu was in the location and condition
for it to be operating in the manner intended by management.
Pan African Resources has applied a guiding principle that once the
plant achieves commercial production, it is operating in the manner
as intended by management. At the beginning of the month in which
the project achieved commercial production, the various assets, by
major component, are recorded in the fixed asset register and are
subject to depreciation over their respective useful lives.
Commercial production is assumed when management can
demonstrate that the plant is able to materially achieve the
technical design parameters established by the feasibility study and
it is probable that future economic benefits will be generated by
the plant.
Commercial production was achieved during the month of
September 2018 and thus the commissioning date of Elikhulu was
determined to be 1 September 2018.
Refer to note 17 for further disclosure on the Elikhulu date of
commission.
Deferred taxation rate
Deferred taxation assets and liabilities are measured at the taxation
rate that is expected to apply to the period when the asset is realised
or the liability settled, based on the taxation rates (and taxation laws)
that have been enacted or substantively enacted at the end of the
current financial year.
South African income taxation on gold mining income is determined
according to a formula (the gold formula) that takes into account the
taxable income and revenue from gold mining operations. Judgement
was applied in the determination of the future expected deferred
taxation rates in our gold mining entities.
The group prepares nominal cash flow models to calculate the
expected average income taxation rate over the life-of-mine. The key
assumptions in the cash flow models are the same as those noted in
the cash flow projections and key assumptions section above.
Refer to note 35 for further disclosure of the deferred taxation rate.
0792 PAR IAR 2019 AFS FA.indd 153
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2019/10/02 2:43 PM
154
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
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 that 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
◗ Life-of-mine and related Mineral Reserves and Resources. Refer to
the unaudited Abridged Mineral Reserves and Mineral Resources
report on
pages 56 to 75.
Refer to note 30 for further disclosure on the rehabilitation and
decommissioning provision.
During the current financial year, an assessment of the group’s
environmental rehabilitation plan identified a risk relating to the
potential pollution of deep ground mine water at Barberton Mines.
The group may have a potential exposure to rehabilitate Barberton
Mines’ groundwater. The group will undertake a detailed assessment
to determine if there is an environmental contingency, and if it
becomes quantifiable, we would be required to account for the
groundwater rehabilitation exposure as a liability, and it may have a
material impact on the annual financial statements of the group.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Cash-settled share option liability
The company applies the requirements of IFRS 2: Share-based
Payments to cash-settled share-based payments made to employees.
These are measured at fair value at grant date and, at each
subsequent reporting date, the company revised its estimated
fair value in accordance with the requirements of IFRS 2 with the
movement recognised in profit or loss. The determination of the fair
value of cash-settled share option liability is subject to judgement.
The fair value is calculated using actuarial valuations where required.
Refer to note 14 for detailed inputs used in the model and further
disclosure on cash-settled share option liabilities.
Contingencies
By their nature, contingencies will only be resolved when one or
more future events occur or fail to occur. The assessment of such
contingencies inherently involves the exercise of significant judgement
and estimates of the outcome of future events. Such contingencies
include, but are not limited to, litigation or regulatory procedures.
When a loss is considered probable and can be reliably estimated, a
liability is recorded based on the best estimate of the expected loss.
The likelihood of a loss with respect to a contingency can be difficult
to predict and determining a meaningful estimate of loss or range
of losses may not always be predicable based on the information
available at the time and the potential effect of future events and
decisions by third parties that will determine the ultimate resolution
of the contingency. When a loss is probable, but a reasonable
estimate cannot be made, disclosure is provided in the annual
financial statements.
Refer to note 41 for further disclosure on contingent liabilities.
0792 PAR IAR 2019 AFS FA.indd 154
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2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
155
ANNUAL FINANCIAL
STATEMENTS
4.
REVENUE AND OTHER REVENUE
Revenue from contracts with customers
The effect of initially applying IFRS 15 to the group's revenue from contracts with customers is disclosed in note 43. The group has
chosen the full retrospective adoption of IFRS 15 in the current year.
All external revenue from contracts with customers is recognised at the point of delivery to Rand Refinery in South Africa in the
following major product lines:
Gold revenue
Silver revenue
Management fees (recognised on delivery of the service)
Liabilities related to contracts with customers
Amounts received in advance of settlement of gold
Gold prepayment and gold loan transactions:
Reconciliation of the movement in liabilities related
to contracts with customers
Opening balance
Gold prepayment transaction receipts
Gold prepayment transaction revenues realised
Foreign currency translation reserve
Closing balance
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
217,374.6
304.4
–
217,679.0
145,828.8
146.0
–
145,974.8
–
–
1,973.2
1,973.2
–
–
778.2
778.2
–
–
–
8,027.3
(8,104.3)
77.0
–
2,041.0
–
(2,072.8)
31.8
–
–
–
–
–
–
–
–
–
–
–
–
–
As a consequence of the group entering into gold prepayment transactions, the group recognises revenue received in advance in the
statement of financial position when the gold prepayment transactions are entered into with financial institutions. Revenues from these
gold prepayment transactions are subsequently recognised in the statement of comprehensive income in terms of the customer contract,
at the contractually agreed transaction price.
0792 PAR IAR 2019 AFS FA.indd 155
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
156
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
5.
COST OF PRODUCTION
Cost of production is summarised by the nature of its components and consists of the following:
Salaries and wages
Electricity
Mining
Processing and metallurgy
Engineering and technical services
Administration and other
Realisation costs (note 1)
Security
Cost of production
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
(46,402.4)
(18,317.2)
(27,345.9)
(35,454.9)
(11,968.6)
(4,780.9)
(1,466.8)
(7,243.3)
(152,980.0)
(41,643.4)
(10,308.4)
(10,036.7)
(26,012.1)
(7,216.5)
(5,029.5)
(2,696.0)
(4,197.3)
(107,139.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 1: Realisation costs have been restated and reclassified to cost of production in the prior financial year. Refer to note 44.
6.
SEGMENTAL ANALYSIS
The group’s continuing operations are involved in gold mining activities and the operations are located in South Africa. The segment
results have been presented based on the executive committee's reporting format, in accordance with the disclosures presented below.
Continuing operations in South Africa:
◗ Barberton Mines (including BTRP), located in Barberton
◗ Evander Mines (Elikhulu, 8 Shaft pillar and surface sources), located in Evander
◗ Corporate, comprising: Pan African Resources PLC, Pan African Resources Management Services Company Proprietary Limited,
Concrete Rose Proprietary Limited, PAR SA Holding Company Proprietary Limited and PAR Gold Proprietary Limited, located
in Johannesburg
Funding Company, located in Johannesburg.
◗
0792 PAR IAR 2019 AFS FA.indd 156
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2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
157
ANNUAL FINANCIAL
STATEMENTS
6.
SEGMENTAL ANALYSIS continued
Discontinued operations:
◗ Phoenix, located near Rustenburg
◗ Evander Mines’ underground operations (including 8 Shaft, 7 Shaft and the Kinross metallurgical plant), located in Evander.
30 June 2019
Continuing operations
Barberton
Mines
USD thousand
Evander
Mines
USD thousand
Corporate
USD thousand
Funding
Company
USD thousand
Group
USD thousand
125,875.8
42.3
125,918.1
(92,046.9)
(7,301.2)
26,570.0
(1,262.0)
–
(480.4)
24,827.6
20.5
(233.7)
24,614.4
(2,508.5)
91,498.8
262.1
91,760.9
(60,933.1)
(8,926.6)
21,901.2
2,417.3
17,853.5
126.3
42,298.3
235.4
89.7
42,623.4
(6,285.6)
–
–
–
–
–
–
(8,189.6)
–
–
(8,189.6)
340.4
(0.1)
(7,849.3)
664.3
–
–
–
–
–
–
(528.0)
–
–
(528.0)
253.4
(12,897.7)
(13,172.3)
(44.2)
217,374.6
304.4
217,679.0
(152,980.0)
(16,227.8)
48,471.2
(7,562.3)
17,853.5
(354.1)
58,408.3
849.7
(13,041.8)
46,216.2
(8,174.0)
22,105.9
22,105.9
36,337.8
36,337.8
(7,185.0)
(7,185.0)
(13,216.5)
(13,216.5)
38,042.2
38,042.2
(2,889.8)
696.8
(2,104.7)
(13,217.3)
5,135.4
(527.3)
(140.9)
13,047.8
–
–
19,912.9
21,015.8
(2,576.9)
(309.6)
38,042.2
110,478.7
38,744.1
21,554.8
71,734.6
16,156.3
24,827.6
7,301.2
32,128.8
–
32,128.8
244,449.6
31,325.6
–
213,124.0
40,359.1
42,298.3
8,926.6
51,224.9
(17,853.5)
33,371.4
12,292.3
5,577.9
–
6,714.4
151.2
(8,189.6)
–
(8,189.6)
–
(8,189.6)
4,354.3
133,900.2
–
(129,545.9)
–
(528.0)
–
(528.0)
–
(528.0)
371,574.9
209,547.8
21,554.8
162,027.1
56,666.6
58,408.3
16,227.8
74,636.1
(17,853.5)
56,782.6
Revenue (note 1)
Other revenue
Revenue and other revenue
Cost of production
Depreciation and amortisation
Operating profit
Other (expenses)/income (note 2)
Impairment reversal
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
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) (note 3)
Capital expenditure (note 4)
Reconciliation of adjusted EBITDA
Net income/(loss) before taxation,
finance income and finance costs
Adjust: Depreciation and amortisation
EBITDA
Adjust: Impairment reversal
Adjusted EBITDA (note 5)
Note 1: All gold sales were made in South Africa and the majority of revenue (more than 90%) was earned from sales to South African financial institutions.
Note 2: Other (expenses)/income exclude inter-company management fees and dividends.
Note 3: The segmental assets and liabilities above exclude inter-company balances.
Note 4: Capital expenditure comprises of additions to property, plant and equipment, mineral rights and intangible assets.
Note 5: In the current financial year, adjusted EBITDA is comprised of earnings before interest, taxation, depreciation, amortisation and the reversal of impairments.
0792 PAR IAR 2019 AFS FA.indd 157
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2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
158
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
6.
SEGMENTAL ANALYSIS continued
30 June 2018
Continuing operations
Barberton
Mines
USD thousand
Evander
Mines
(note 3)
USD thousand
Corporate
USD thousand
Funding
Company
USD thousand
Revenue – gold (note 1)
Other revenue
Revenue – platinum
Revenue and other revenue
Cost of production
Depreciation and amortisation
Operating profit
Other (expenses)/income (note 2)
Impairment costs
Asset held for sale adjustment
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) (note 5)
Capital expenditure (note 6)
Reconciliation of adjusted EBITDA
Net income/(loss) before taxation, finance income
and finance costs
Adjust: Depreciation and amortisation
EBITDA
Adjust: Impairment costs
Asset held for sale adjustment
Adjusted EBITDA (note 7)
117,235.0
–
–
117,235.0
(89,159.6)
(5,668.9)
22,406.5
(988.5)
–
–
(505.7)
20,912.3
254.9
(1.6)
21,165.6
(3,128.7)
18,036.9
–
18,036.9
(2,645.9)
(401.9)
14,989.1
104,521.1
35,479.2
22,120.4
69,041.9
16,375.4
20,912.3
5,668.9
26,581.2
–
–
26,581.2
28,593.8
146.0
–
28,739.8
(17,980.3)
(956.6)
9,802.9
1,014.0
(10,763.4)
–
(52.1)
1.4
1,032.3
–
1,033.7
7,464.6
8,498.3
–
8,498.3
(118.5)
–
8,379.8
206,877.4
40,474.7
–
166,402.7
97,751.4
1.4
956.6
958.0
10,763.4
–
11,721.4
–
–
–
–
–
–
–
(5,369.6)
–
–
–
(5,369.6)
493.7
(8.0)
(4,883.9)
(1,468.4)
(6,352.3)
–
(6,352.3)
3,190.7
(487.4)
(3,649.0)
9,832.9
2,070.1
–
7,762.8
172.3
(5,369.6)
–
(5,369.6)
–
–
(5,369.6)
–
–
–
–
–
–
–
(559.0)
–
–
–
(559.0)
222.7
(4,215.7)
(4,552.0)
(41.5)
(4,593.5)
–
(4,593.5)
(155.6)
4,847.9
98.8
935.9
119,276.1
–
(118,340.2)
–
(559.0)
–
(559.0)
–
–
(559.0)
Note 1: All gold sales were made in the South Africa and the majority of revenue (more than 90%) was earned from sales to South African financial institutions.
Note 2: Other (expenses)/income exclude inter-company management fees and dividends.
Note 3: During the prior financial year, Evander Mines' underground operations ceased on 31 May 2018. The ETRP and Kinross plant’s surface sources and Elikhulu operation
remained as continuing operations.
Note 4: The Phoenix Platinum disposal was concluded on 6 November 2017.
Note 5: The segmental assets and liabilities above exclude inter-company balances.
Note 6: Capital expenditure comprises of additions to property, plant and equipment, mineral rights and intangible assets.
Note 7: In the prior financial year, adjusted EBITDA is comprised of earnings before interest, taxation, depreciation, amortisation, impairments, discontinued operations and profit/
(loss) on disposal of investments.
0792 PAR IAR 2019 AFS FA.indd 158
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
159
ANNUAL FINANCIAL
STATEMENTS
30 June 2018
Discontinued operations
Evander
Mines
(note 3)
USD thousand
Phoenix
Platinum
Mines
(note 4)
USD thousand
Reclassi-
fi cation
USD thousand
Consoli-
dated
USD thousand
63,141.3
–
–
63,141.3
(80,957.3)
(8,260.6)
(26,076.6)
(15,411.0)
(129,537.5)
–
(315.7)
(171,340.8)
668.3
–
(170,672.5)
32,764.9
(137,907.6)
–
(137,907.6)
(270.7)
(3,958.6)
(142,136.9)
–
–
–
–
14,122.8
(171,340.8)
8,260.6
(163,080.2)
129,537.5
–
(33,542.7)
–
–
1,921.0
1,921.0
(2,192.3)
–
(271.3)
58.3
–
(346.0)
–
(559.0)
3.8
–
(555.2)
57.8
(497.4)
–
(497.4)
–
–
(497.4)
–
–
–
–
–
(559.0)
–
(559.0)
–
346.0
(213.0)
(63,141.3)
–
(1,921.0)
(65,062.3)
83,149.6
8,260.6
26,347.9
15,352.7
129,537.5
346.0
315.7
171,899.8
(672.1)
–
171,227.7
(32,822.7)
138,405.0
(138,405.0)
–
–
–
–
–
–
–
–
–
171,899.8
(8,260.6)
163,639.2
(129,537.5)
(346.0)
33,755.7
145,828.8
146.0
–
145,974.8
(107,139.9)
(6,625.5)
32,209.4
(5,903.1)
(10,763.4)
–
(557.8)
14,985.1
2,003.6
(4,225.3)
12,763.4
2,826.0
15,589.4
(138,405.0)
(122,815.6)
–
–
(122,815.6)
322,167.3
197,300.1
22,120.4
124,867.2
128,421.9
14,985.1
6,625.5
21,610.6
10,763.4
–
32,374.0
0792 PAR IAR 2019 AFS FA.indd 159
0792 PAR IAR 2019 AFS FA.indd 159
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
160
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
7.
OTHER EXPENSES
Foreign exchange loss
Operating leases (refer to note 39)
Non-mining depreciation
Non-mining amortisation
Non-executive directors' emoluments
Executive directors' emoluments
Equity-settled share option expense (refer to note 27)
Cash-settled share option (expense)/income
(refer to note 14)
Auditors’ fees (refer to note 32)
Salaries corporate office
Investor and public realisations
Business development costs
Legal fees
Corporate social expenditure
Loss arising from unrealised derivative financial instruments
(refer to note 29)
Profit arising from realised derivative financial instruments
(refer to note 29)
Profit on disposal of property, plant and equipment
and mineral rights
Rehabilitation funds fair value adjustment (refer to note 20)
Rehabilitation provision adjustment
Non-refundable deposition fee
Loss on loan modification adjustment
Deferred consideration provision
Net other income/(expenses)
Other expenses
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
(10.6)
(314.8)
(93.9)
(3.2)
(218.4)
(704.8)
–
(2,350.6)
(339.3)
(3,161.1)
(208.5)
(260.5)
(44.9)
(1,743.2)
(1,190.5)
1,572.4
181.4
1,604.8
–
–
(423.1)
(72.6)
219.1
(7,562.3)
(667.3)
(277.2)
(44.0)
(26.7)
(241.3)
(741.0)
608.3
915.3
(461.3)
(1,925.3)
(228.8)
(1,103.1)
(71.0)
(817.6)
–
–
1.2
25.0
(317.5)
778.2
–
(1,046.4)
(262.6)
(5,903.1)
(10.4)
–
–
–
(218.4)
(704.8)
–
(848.3)
(129.9)
(695.4)
(96.6)
(260.5)
–
–
–
–
–
–
–
–
–
(72.6)
(359.1)
(3,396.0)
(8.1)
–
–
–
(241.3)
(741.0)
–
264.2
(113.4)
–
(94.4)
(730.9)
(58.4)
–
–
–
–
–
–
–
–
(1,046.4)
(426.2)
(3,195.9)
0792 PAR IAR 2019 AFS FA.indd 160
0792 PAR IAR 2019 AFS FA.indd 160
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
161
ANNUAL FINANCIAL
STATEMENTS
8.
FINANCE (COSTS)/INCOME
Finance income related to financial instruments
Finance income – financial institutions
Finance income – other
Finance income – rehabilitation fund investment
Finance income – other
Finance income – South African Revenue Service (SARS)
Finance income – total
Finance costs related to financial instruments
Finance costs – financial institutions
Finance costs – other
Finance costs – other
Finance costs – SARS
Finance costs – rehabilitation fund provision
Finance costs – total
Net finance (costs)/income
9.
PROFIT/(LOSS) BEFORE TAXATION
Included in profit/(loss) before taxation are the following:
Equity-settled share option expense (refer to note 27)
Cash-settled share options (expenses)/income
(refer to note 14)
Mining depreciation
Impairment reversal/(cost)
Fair value adjustment on asset held for sale
Staff costs
Royalty costs
Profits arising from realised and unrealised derivative
financial instruments (note 1)
Business development costs
Non-refundable deposition fee
Deferred consideration costs
Operating leases
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
252.9
452.6
137.2
842.7
7.0
7.0
849.7
(12,981.7)
(0.4)
(12,982.1)
(0.1)
(59.6)
(59.7)
(13,041.8)
(12,192.1)
781.9
570.8
650.9
2,003.6
–
–
2,003.6
(4,222.8)
(0.2)
(4,223.0)
(2.3)
–
(2.3)
(4,225.3)
(2,221.7)
7.0
178.8
–
185.8
6.8
6.8
192.6
(0.1)
–
(0.1)
–
–
–
(0.1)
192.5
120.8
239.7
–
360.5
–
–
360.5
(8.0)
–
(8.0)
–
–
–
(8.0)
352.5
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
–
(608.3)
–
–
(2,350.5)
(16,227.8)
17,853.5
–
(50,281.4)
(354.1)
381.9
(260.5)
–
(72.6)
(314.8)
915.1
(6,625.5)
(10,763.4)
–
(44,325.6)
(557.8)
–
(1,103.1)
778.2
(1,046.4)
(277.2)
(848.3)
–
–
–
(1,413.3)
–
–
(260.5)
–
(72.6)
–
264.2
–
–
(626.8)
(759.7)
–
–
(730.9)
–
(1,046.4)
–
Note 1: In the prior year all the realised and unrealised derivative instruments' profits related to the Evander Mines' discontinued operation and was disclosed in the statement
of comprehensive income's discontinued operations section.
0792 PAR IAR 2019 AFS FA.indd 161
0792 PAR IAR 2019 AFS FA.indd 161
2019/10/02 2:43 PM
2019/10/02 2:43 PM
162
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
10. EARNINGS PER SHARE
Basic and diluted earnings per share for 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 that all potentially dilutive ordinary shares are converted to 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. There was no dilutive impact on the weighted average number of shares in issue during the current and prior year.
Year ended 30 June 2019
Year ended 30 June 2018
Net profi t
USD thousand
Weighted
average
number of
shares in issue
Earnings
per share
USD cents
Net loss
USD thousand
Weighted
average
number
of shares
in issue
Loss
per share
USD cents
Basic earnings/(loss)
per share
Dilutive potential
ordinary shares
Diluted earnings
per share
38,042.2
1,928,329.5
1.97
(122,815.6)
1,809,726.7
(6.79)
–
–
–
–
–
–
38,042.2
1,928,329.5
1.97
(122,815.6)
1,809,726.7
(6.79)
Headline earnings per share for continuing and discontinued operations
Headline earnings per share is based on the group’s headline earnings divided by the weighted average number of shares in issue during
the year.
Reconciliation between earnings and headline earnings from continuing and discontinued operations (combined operations) is disclosed below:
Year ended 30 June 2019
Year ended 30 June 2018
Net profi t
USD thousand
Weighted
average
number of
shares in issue
Earnings
per share
USD cents
Net profi t
USD thousand
Weighted
average
number
of shares
in issue
Earnings
per share
USD cents
38,042.2
1,928,329.5
1.97
(122,815.6)
1,809,726.7
(6.79)
(181.4)
50.8
–
(17,853.5)
2,795.9
–
–
–
–
–
22,854.0
1,928,329.5
–
–
(0.01)
(1.2)
0.02
–
0.3
383.5
(0.93)
140,300.9
–
0.14
1.19
–
17,867.9
1,809,726.7
–
–
–
–
–
–
–
22,854.0
1,928,329.5
1.19
17,867.9
1,809,726.7
–
0.01
0.02
7.75
–
0.99
–
0.99
Basic earnings/(loss)
per share
Adjustments
Profit on disposal of
property, plant and
equipment and
mineral rights
Taxation on profit arising
on disposal of property,
plant and equipment
and mineral rights
Fair value movement
on asset held for sale
Impairment (reversal)/
costs
Taxation on impairment
(reversal)/costs
Headline earnings
per share
Dilutive potential
ordinary shares
Diluted headline
earnings per share
0792 PAR IAR 2019 AFS FA.indd 162
0792 PAR IAR 2019 AFS FA.indd 162
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
163
ANNUAL FINANCIAL
STATEMENTS
10. EARNINGS PER SHARE continued
Headline earnings per share for continuing and discontinued operations continued
Headline earnings per share is required in terms of the JSE Listings Requirements.
The weighted average number of shares in issue factor in the elimination of the 306.4 million PAR Gold shares. During the prior year, on
30 May 2018, 130 million Pan African Resources shares held by PAR Gold were disposed of at a price of R1.15 per share (refer to note 26).
Net asset value per share (note 1)
Tangible net asset value per share (note 2)
Consolidated
30 June 2019
USD cents
30 June 2018
USD cents
9.52
5.14
7.62
3.35
Note 1: Net assets is the total assets less non-current and current liabilities.
Note 2: Tangible net assets is the total assets less non-current liabilities, current liabilities, mineral rights, goodwill and mining properties.
Basic and diluted earnings per share for continuing operations
Year ended 30 June 2019
Year ended 30 June 2018
Net profi t
USD thousand
Weighted
average
number of
shares in issue
Earnings
per share
USD cents
Net profi t
USD thousand
Weighted
average
number
of shares
in issue
38,042.2
1,928,329.5
1.97
15,589.4
1,809,726.7
–
–
–
–
–
38,042.2
1,928,329.5
1.97
15,589.4
1,809,726.7
Earnings
per share
USD cents
0.86
–
0.86
Basic earnings per share
Dilutive potential
ordinary shares
Diluted earnings
per share
0792 PAR IAR 2019 AFS FA.indd 163
0792 PAR IAR 2019 AFS FA.indd 163
2019/10/02 2:43 PM
2019/10/02 2:43 PM
164
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
10. EARNINGS PER SHARE continued
Headline earnings per share for continuing operations
Reconciliation between earnings and headline earnings from continuing operations is disclosed below:
Year ended 30 June 2019
Year ended 30 June 2018
Net profi t
USD thousand
Weighted
average
number of
shares in issue
Earnings
per share
USD cents
Net profi t
USD thousand
Weighted
average
number
of shares
in issue
Earnings
per share
USD cents
38,042.2
1,928,329.5
1.97
15,589.4
1,809,726.7
0.86
(181.4)
50.8
(17,853.5)
2,795.9
–
–
–
–
22,854.0
1,928,329.5
–
–
–
–
–
–
(0.01)
(1.2)
0.02
0.3
(0.93)
10,763.4
–
0.14
1.19
–
26,351.9
1,809,726.7
–
–
22,854.0
1,928,329.5
1.19
26,351.9
1,809,726.7
–
0.01
0.59
–
1.46
–
1.46
Basic earnings per share
Adjustments
Profit on disposal of
property, plant and
equipment and
mineral rights
Taxation on profit arising
on disposal of property,
plant and equipment
and mineral rights
Impairment (reversal)/
costs
Taxation on impairment
(reversal)/costs
Headline earnings
per share
Dilutive potential
ordinary shares
Diluted headline
earnings per share
11. DIVIDENDS
The board has analysed the group performance and proposed a final dividend of R50 million or approximately USD3.4 million equating
to 2.2375 ZAR cents per share or approximately 0.12660 pence per share (0.15169 USD cents per share). This dividend is subject to
approval at the AGM, which will take place on Thursday, 28 November 2019.
0792 PAR IAR 2019 AFS FA.indd 164
0792 PAR IAR 2019 AFS FA.indd 164
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
165
ANNUAL FINANCIAL
STATEMENTS
12. RECONCILIATION OF PROFIT/(LOSS) BEFORE TAXATION TO CASH GENERATED BY/(UTILISED IN) OPERATIONS
Consolidated
Parent company
30 June 2019
USD thousand
30 June 2018
USD thousand
30 June 2019
USD thousand
30 June 2018
USD thousand
12,763.4
(171,227.7)
161,577.6
(1,230.3)
–
910.9
Profit before taxation from continuing operations
Loss before taxation from discontinued operations
Adjusted for:
Adjustments from continuing operations
(Reversal of impairment)/impairment
Cash and equity-settled share options costs
Finance income
Finance expense
Profit on disposal of property, plant and equipment
and mineral rights
Royalty costs
Deferred compensation
Deferred consideration provision
Profits arising from realised and unrealised derivative
financial instruments
Increase in environmental rehabilitation provision
Debt refinance modification adjustment
Fair value adjustment on rehabilitation funds
Non-mining depreciation and amortisation
Mining depreciation and amortisation
Gold loan amortisation
Fair value adjustment on post-retirement benefits
Adjustments from discontinued operations
Impairment
Finance income – rehabilitation fund
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
Operating cash flows before working capital changes
Working capital changes
(Increase)/decrease in inventories
Decrease/(Increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Other non-cash items
Settlement of cash-settled share option costs
Settlement of rehabilitation costs
Proceeds from derivative financial instruments
Net cash generated by/(utilised in) operating activities
before dividend, taxation, royalties and net finance costs
and income
46,216.2
–
11,862.1
(17,853.5)
2,350.6
(849.7)
13,041.8
(181.4)
354.1
182.5
72.6
(381.9)
–
418.2
(1,604.8)
97.1
16,227.8
–
(11.3)
–
–
–
–
–
–
–
58,078.3
1,253.8
(2,013.5)
4,477.1
(894.0)
(315.8)
(10.1)
(4,005.4)
1,572.4
10,763.4
(307.0)
(2,003.6)
4,225.3
(1.2)
557.8
–
1,046.4
(309.1)
317.5
–
197.8
70.7
6,625.5
(2,072.8)
(7.6)
129,537.5
(668.3)
5,050.1
315.7
(13.5)
8,260.6
(7.6)
3,113.3
2,314.2
3,139.7
(1,716.3)
1,652.1
(761.3)
(1,295.5)
–
1,212.7
(1,438.4)
–
429.7
–
(264.2)
(360.5)
8.0
–
–
–
1,046.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
848.3
(192.6)
0.1
–
–
182.5
72.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(319.4)
535.0
–
(16.0)
558.5
(7.5)
–
–
–
(1,008.7)
(1,001.3)
–
0.8
(993.6)
(8.5)
–
–
–
56,889.0
5,344.7
215.6
(2,010.0)
0792 PAR IAR 2019 AFS FA.indd 165
0792 PAR IAR 2019 AFS FA.indd 165
2019/10/02 2:43 PM
2019/10/02 2:43 PM
166
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
12.
RECONCILIATION OF PROFIT/(LOSS) BEFORE TAXATION TO CASH GENERATED BY/(UTILISED IN) OPERATIONS
continued
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 receivable at the beginning of the year
Taxation receivables at the end of the year
Foreign currency translation
Taxation paid during the year
Royalty paid during the year
Royalty costs payable/(receivable) at the beginning of the year
Royalty costs receivable/(payable) 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 paid/(refunded) during the year
Reconciliation of loans from subsidiaries
Opening balance
Repayments
Restructuring non-cash items
Foreign currency translation
Closing balance
Reconciliation of loans to subsidiaries
Opening balance
Advances/(repayments)
Restructuring of non-cash items
Foreign currency translation
Closing balance
13. STAFF COSTS AND COMPLEMENT
Consolidated
Parent company
30 June 2019
USD thousand
30 June 2018
USD thousand
30 June 2019
USD thousand
30 June 2018
USD thousand
8,174.0
–
(5,312.6)
–
2,861.4
(374.5)
1,327.8
32.3
3,847.0
–
225.9
83.9
354.1
–
(14.0)
649.9
–
–
–
–
–
–
–
–
–
–
–
–
(2,826.0)
(32,822.7)
4,946.7
32,822.7
2,120.7
(140.1)
374.5
28.9
2,384.0
–
(1,185.2)
(225.9)
557.8
315.7
(212.2)
(749.8)
–
–
–
–
–
–
–
–
–
–
–
–
(247.5)
–
247.5
–
–
(99.1)
103.4
(4.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
95,653.6
461.4
–
(2,442.1)
93,672.9
(369.1)
–
369.1
–
–
(86.4)
99.1
4.8
17.5
–
–
–
–
–
–
–
–
(18,030.7)
4,985.7
19,517.7
(6,472.7)
–
–
118,026.7
(4,108.8)
(19,514.0)
1,249.7
95,653.6
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
The group's remuneration comprised of:
Salaries and wages from continued operations
Salaries and wages from discontinued operations
Retrenchment costs
50,281.4
–
–
50,281.4
44,325.6
36,236.5
12,525.6
93,087.7
1,413.3
–
–
1,413.3
Included in staff costs above is other retirement costs
(refer to note 15)
2,877.3
6,951.0
–
759.7
–
–
759.7
–
0792 PAR IAR 2019 AFS FA.indd 166
0792 PAR IAR 2019 AFS FA.indd 166
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
167
ANNUAL FINANCIAL
STATEMENTS
13. STAFF COSTS AND COMPLEMENT continued
Operating cost employees
Corporate
Evander Mines
Barberton Mines
Capital employees
Barberton Mines
Evander Mines
Total number of employees
14. LONG-TERM LIABILITIES – OTHER
Cash-settled share options
Opening balance
Expense/(income) for the year from continuing operations
Payments during the year
Foreign currency translation reserve
Closing balance
Less current portion
Long-term portion
Gold loan
Opening balance
Gold loan repayments
Foreign currency translation reserve
Closing balance
Post-retirement benefits (refer to note 15)
Opening balance
Utilised for the year from continuing operations
Utilised for the year from discontinued operations
Foreign currency translation reserve
Closing balance
Long-term portion
Deferred executive incentive payments
Opening balance
Expense for the current year
Foreign currency translation reserve
Closing balance
Less current portion (note 1)
Long-term portion
Note 1: The prior year current portion was settled during July 2019.
Consolidated
Year ended
30 June 2019
Average
Year ended
30 June 2019
Closing
Year ended
30 June 2018
Average
Year ended
30 June 2018
Closing
18
174
1,739
1,931
200
5
205
2,136
17
181
1,743
1,941
207
–
207
2,148
16
1,596
1,762
3,374
206
98
304
3,678
17
106
1,742
1,865
203
1
204
2,069
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1,453.3
2,350.6
(10.1)
(19.0)
3,774.8
(2,282.0)
1,492.8
–
–
–
–
63.5
(11.3)
–
(1.7)
50.5
50.5
111.7
182.5
(1.4)
292.8
(108.9)
183.9
3,704.6
(915.3)
(1,295.5)
(40.5)
1,453.3
(279.4)
1,173.9
2,041.0
(2,072.8)
31.8
–
81.7
(7.6)
(7.6)
(3.0)
63.5
63.5
117.5
–
(5.8)
111.7
(111.7)
–
159.0
848.3
–
2.6
1,009.9
(791.5)
218.4
–
–
–
–
–
–
–
–
–
–
859.5
(264.2)
(438.8)
2.5
159.0
(111.5)
47.5
–
–
–
–
–
–
–
–
–
–
111.7
182.5
(1.4)
292.8
(108.9)
183.9
117.5
–
(5.8)
111.7
(111.7)
–
0792 PAR IAR 2019 AFS FA.indd 167
0792 PAR IAR 2019 AFS FA.indd 167
2019/10/02 2:43 PM
2019/10/02 2:43 PM
168
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
14. LONG-TERM LIABILITIES – OTHER continued
Summary of current and non-current portions
of long-term liabilities – other
Current portion of long-term liabilities – other
Long-term liabilities – other
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
2,390.9
1,727.2
4,118.1
391.1
1,237.4
1,628.5
900.4
402.3
1,302.7
223.2
47.5
270.7
The group recognised cash settled share option expenses across all schemes discussed below, as follows during the year.
Group cash-settled share options – Pan African Share
Appreciation Bonus Plan
ESOP transactions
PACOS (including cash incentive)
Executive director share incentive scheme
Total
Year ended
30 June 2019
Year ended
30 June 2018
Year ended
30 June 2019
Year ended
30 June 2018
483.2
72.4
1,484.3
310.7
2,350.6
(1,849.6)
972.1
–
(37.8)
(915.3)
(42.4)
–
580.0
310.7
848.3
(226.4)
–
–
(37.8)
(264.2)
Group cash-settled share options – Pan African Resources share appreciation bonus plan
Details of the share options outstanding during the year, in relation to this scheme, are:
Group cash-settled share options
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited due to PACOS (refer to below)
Share options discounted
Outstanding and exercisable at the end of the year
Year ended 30 June 2019
Year ended 30 June 2018
Weighted
average price
Rand
1.78
1.25
1.64
2.01
–
1.38
Number
of options
67,941,916
68,088,829
(757,839)
(29,263,069)
–
106,009,837
Weighted
average price
Rand
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
Cash-settled share options are valued annually at their fair value.
The weighted average share price on redemption was R1.83 (2018: R2.39).
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169
ANNUAL FINANCIAL
STATEMENTS
14. LONG-TERM LIABILITIES – OTHER continued
Fair values were calculated using the Binomial Pricing Model of which the inputs were as follows:
Weighted average share price (rand)
Weighted average exercise/strike price (rand)
Exercise price (rand)
Expected volatility (%)
Expected life (years)
Weighted average remaining life (years)
Risk-free rate (%)
Expected dividend yield (%)
Year ended
30 June 2019
Year ended
30 June 2018
1.21
1.84
1.15 – 3.93
43
3 – 6
3.46
7.02 – 7.45
2
1.21
2.07
1.15 – 3.93
47
3 – 6
3.35
7.37 – 7.74
4
Refer to
page 121 of the remuneration policy for further details on the group‘s cash-settled options.
Expected volatility is impacted by the following factors
◗ The historical volatility of the share price over the most recent period that is commensurate with the expected option term
(taking into account the remaining contractual option life and the effect of expected early exercise)
◗ The length of time an entity’s shares have been publicly traded.
Participation in share-based and other long-term incentive schemes is restricted to employees as described in this note.
The group has introduced employee share ownership schemes at Barberton Mines and Evander Mines which are recorded as cash-
settled share options for accounting purposes. Refer to note 16.
PACOS
As at the 2019 financial year-end, the fair values of PACOS and the cash incentive scheme were calculated using an actuarial valuation.
The actuarial valuation inputs are:
Number of shares
Strike price (rand)
Grant date
Vesting date
Expiry date
Year ended
30 June 2019
Year ended
30 June 2018
50,467,417
1.21
1 July 2018
1 July 2020
1 July 2022
–
–
–
–
–
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170
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
14. LONG-TERM LIABILITIES – OTHER continued
The following assumptions were also used in the actuarial valuation:
Company volatility (%)
Gold index volatility (%)
Risk-free rate
Spot price (rand)
Dividend yield (%)
Probability of non-market conditions (%)
Withdrawal decrement (%)
Year ended
30 June 2019
Year ended
30 June 2018
43.0
38.0
Swap curve
at grant date
1.86
2.0
100.0
10% per annum
–
–
–
–
–
–
–
At year-end a liability of USD1,495,889 (2018: nil) was recognised in the statement of financial position for the group and USD584,577
(2018: nil) for the company pertaining to PACOS.
Refer to
pages 121 to 122 of the remuneration policy for further details on the PACOS.
Executive director share incentive scheme
To incentivise and retain the group's executive directors and align their interests with those of the group's stakeholders, the following
long-term incentives were introduced and are in issue as at 30 June 2019. Refer to the remuneration committee report on
and 125 for further details of executive director share incentives.
pages 124
Historically, this incentive scheme has been settled in cash and is therefore treated as a cash-settled share option scheme at year-end with
a liability of USD425,326.14 (2018: USD115,162) recognised in the statement of financial position.
15. POST-RETIREMENT BENEFIT INFORMATION
The majority of employees are required to be members of either the Barberton Pension Umbrella Fund, the Sentinel Retirement
Fund, the 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 Pension Act 1956 as amended. The assets of the schemes are held separately
from those of the group in independent funds and they are in the control of the fund's trustees. A total cost of USD2.9 million
(2018: USD6.9 million) was recognised in the statement of comprehensive income at a consolidated level and USD7,563 (2018: nil) at
company level. This cost represents the employer’s contributions payable to the respective 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 SARS' life expectancy tables as the benefits payable are a fixed amount per pensioner. The balance of post-retirement
medical benefits was USD50,481 (2018: USD63,452).
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
171
ANNUAL FINANCIAL
STATEMENTS
16. ESOP TRANSACTIONS
Evander Mines ESOP transaction
The Evander Mines' ESOP has been discontinued following the cessation of deep-level operations at 8 Shaft and after an agreement was
reached with the relevant labour stakeholders to discontinue the scheme.
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 provided that Barberton Mines would issue 5% of its authorised share capital for a
consideration of 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 by means of a preference share issued by Barberton Mines BEE Company
Proprietary Limited to Barberton Mines for R99.5 million.
Notional preference share subscription terms
◗ Real interest rate of 2% per annum
◗ Vesting period of the BBBEE scheme is 10 years.
The ESOP allows for a portion of the dividends declared by Barberton Mines to be set-off against the preference shares redemption
liability.
The retention percentage applied to dividends for repayment are summarised as follows:
Year 1
%
Year 2
%
Year 3
%
Year 4
%
Years 5 to 10
%
Percentage of ordinary dividends
withheld for redemption of the
preference share liability
Percentage of dividends accruing
to the Barberton Mines BEE Trust
Total dividends
50
50
100
50
50
100
60
40
100
70
30
100
80
20
100
Barberton Mines' ordinary dividends policy provides for 80% of the mine’s net cash generated during a financial year to be declared as a
dividend subject to compliance with the liquidity and solvency requirements of the South African Companies Act.
This scheme is classified under IFRS 2 as a cash-settled share option scheme (refer to note 14) and its liability for the Barberton Mines
was valued by independent actuaries as at 30 June 2019. The liability for Evander Mines' ESOP was not valued due to the cessation of
underground operations during the prior year after the scheme’s discontinuation (refer to note 36).
Statement of financial position
ESOP share options liability
Opening balance
Dividend accrued
Dividend paid
IFRS 2 revaluation expense
Foreign currency translation reserve
Closing balance
Statement of comprehensive income
ESOP IFRS 2 expense
Barberton Mines
Evander Mines
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
751.2
–
–
72.4
(18.6)
805.0
136.9
319.2
(319.2)
663.1
(48.8)
751.2
72.4
982.3
–
–
–
–
–
–
–
10.0
–
–
(10.2)
0.2
–
(10.2)
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172
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS
Land
(note 1)
USD thousand
Mineral rights
and mining
property
USD thousand
Exploration
assets
(note 2)
USD thousand
Buildings
and
infrastructure
USD thousand
Plant
and
machinery
USD thousand
Group
Cost
Balance as at 1 July 2017
Transfers (note 4)
Additions
Disposals
Foreign currency translation reserve
Balance as at 30 June 2018
Transfers
Additions
Disposals
Transfer to intangible assets
Foreign currency translation reserve
Balance as at 30 June 2019
Accumulated depreciation and impairment
Balance as at 1 July 2017
Transfers
Depreciation charge for the year
Disposals
Impairment costs
Foreign currency translation reserve
Balance as at 30 June 2018
Depreciation charge for the year
Disposals
Impairment reversal
Foreign currency translation reserve
Balance as at 30 June 2019
Carrying amount
As at 30 June 2018
As at 30 June 2019
2,829.9
–
–
–
(138.2)
2,691.7
–
–
–
–
(68.8)
2,622.9
–
–
–
–
–
–
–
–
–
–
–
–
54,914.1
–
–
–
(2,681.7)
52,232.4
–
217.6
–
–
(1,333.8)
51,116.2
(10,085.9)
–
(1,403.6)
–
(16,504.3)
1,628.1
(26,365.7)
(535.3)
–
4,621.4
669.9
(21,609.7)
36,082.3
–
–
–
(1,762.0)
34,320.3
–
–
–
–
(877.5)
33,442.8
–
–
–
–
–
–
–
–
–
–
–
–
46,442.1
–
246.1
–
(2,283.6)
44,404.6
13,737.3
2,360.2
(422.8)
–
(1,012.9)
59,066.4
(10,334.5)
–
(1,929.2)
–
(12,203.8)
1,400.8
(23,066.7)
(2,020.7)
139.9
1,262.7
575.2
(23,109.6)
142,428.8
9,943.5
9,624.6
–
(8,196.1)
153,800.8
123,623.8
4,601.7
(40.7)
–
(2,930.9)
279,054.7
(40,944.9)
–
(8,216.0)
–
(87,448.3)
8,065.7
(128,543.5)
(11,121.0)
38.8
11,960.6
3,200.1
(124,465.0)
2,691.7
2,622.9
25,866.7
29,506.5
34,320.3
33,442.8
21,337.9
35,956.8
25,257.3
154,589.7
Note 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.
Note 2: Exploration assets, comprising of Evander South, Rolspruit and Poplar, were recognised on 1 March 2013 at their respective fair values in terms of
IFRS 3: Business Combinations.
Note 3: The capital under construction decreased in the current financial year as a result of Elikhulu being commissioned on 1 September 2018
(refer to
pages 52 and 53). The remaining capital under construction balance relates to ongoing capital projects within the group.
Note 4: In the prior year, the group transferred assets within capital under construction to shafts and exploration, and plant and machinery. This transfer was for proper
disclosure of the capital under construction category to represent assets not yet brought into production and therefore not depreciated. The transfer had no impact on the
prior year depreciation or impairment charge recognised in the statement of profit or loss and other comprehensive income and the net book value of property, plant and
equipment and mineral rights disclosed in the statement of financial position.
Refer to note 28 for property, plant and equipment pledged as security for the group's senior debt.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
173
ANNUAL FINANCIAL
STATEMENTS
Capital
under
construction
(note 3)
USD thousand
Shafts
and
exploration
USD thousand
Other
USD thousand
Total
USD thousand
14,056.0
(13,707.8)
111,874.3
–
(6,911.3)
105,311.2
(137,361.1)
40,358.9
–
(772.0)
(3,456.4)
4,080.6
–
–
–
–
–
–
–
–
–
–
–
–
76,755.0
3,764.3
6,504.6
–
(4,399.1)
82,624.8
–
8,976.9
–
–
(2,042.8)
89,558.9
(20,242.6)
–
(3,317.9)
–
(22,420.8)
2,620.7
(43,360.6)
(2,366.8)
–
–
1,090.2
(44,637.2)
404.8
(19.0)
149.0
(5.8)
(27.7)
501.3
–
135.0
–
–
(11.8)
624.5
(297.5)
16.0
(44.0)
5.8
–
15.8
(303.9)
(93.9)
–
–
7.0
(390.8)
373,913.0
(19.0)
128,398.6
(5.8)
(26,399.7)
475,887.1
–
56,650.3
(463.5)
(772.0)
(11,734.9)
519,567.0
(81,905.4)
16.0
(14,910.7)
5.8
(138,577.2)
13,731.1
(221,640.4)
(16,137.7)
178.7
17,844.7
5,542.4
(214,212.3)
105,311.2
4,080.6
39,264.2
44,921.7
197.4
233.7
254,246.7
305,354.7
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174
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS continued
Depreciation on property, plant and equipment and mineral rights
Amortisation on intangible assets
Non-mining depreciation and amortisation
Depreciation and amortisation arising from discontinued operations
Total mining depreciation
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
(16,137.7)
(187.2)
97.1
–
(16,227.8)
(14,910.7)
(46.1)
70.7
8,260.6
(6,625.5)
Impairment considerations
In the current year, there was no change in the composition of the group’s CGUs. The group's operational CGUs are as follows:
Barberton Mines
◗ Mining operations (Fairview, Sheba, Consort, BIOX®)
◗ Surface mining operations (BTRP).
Evander Mines
◗ Underground operations (7 Shaft and 8 Shaft and the Kinross metallurgical plant)
◗ Elikhulu surface mining operation
◗ Egoli project.
In the prior year, Evander Mines’ underground operations were ceased resulting in an impairment charge recognised for those operations
categorised as discontinued and certain continuing operations (refer to note 36).
As at 30 June 2019, no impairment indicators were identified on the group's CGUs for impairment testing. Goodwill, however, as
disclosed in note 37 and the group's resources not included in the life-of-mine were also tested for impairment.
Impairment reversal
A feasibility study into the merits of mining Evander Mines’ 8 Shaft Pillar and high-grade areas in proximity to the pillar (pillar project) was
completed.
Development and equipping of the pillar project commenced in May 2019, with first gold expected during August 2019.
In light of the commencement of the pillar mining, Evander Mines assessed, in compliance with IAS36, the carrying value of the assets
to be used in the mining of the pillar project for an impairment reversal, which resulted in a reversal of the impairment charge of
USD17.8 million to the carrying value of property, plant and equipment and mineral rights, and USD8,779 to the carrying value of other
intangible assets (refer to note 18).
The pillar project is a new mining project following the successful conclusion of a feasibility study during March 2019. The pillar project will
mine new Mineral Reserves not previously recognised in the prior financial year, and mining will occur in a separate area from Evander
Mines’ historical large-scale underground discontinued operation. Although the pillar project will utilise previously impaired 8 Shaft, 7 Shaft
and Kinross plant infrastructure which has resulted in the reversal of the associated impairment charge, this does not result in the need to
re-present previously reported discontinued operations in the comparative numbers, for the reasons noted above.
Impairment assessment assumptions
The group derives the recoverable amounts of property, plant and equipment and mineral rights by calculating the value in use of
the respective CGUs. Value in use is derived by discounting future cash flows of the CGUs on a nominal basis using the following key
assumptions. The group prepares cash flow forecasts derived from the most recent financial forecasts approved by management and
forecasts future cash flows on a nominal basis.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
175
ANNUAL FINANCIAL
STATEMENTS
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS continued
Year ended 30 June 2019
Barberton Mines CGUs
Evander Mines CGUs
BTRP
surface
mining
operations
9.80
11.15
15.40
16.82
599,510
5.1
9
Mining
operations
9.80
11.15
15.40
16.82
599,510
5.1
20
Elikhulu
surface
mining
operations
7.40
9.8
12.90
15.49
599,510
5.1
13
Pillar
project
20.70
21.99
26.80
28.21
599,510
5.1
3
Egoli
project
11.80
13.07
17.50
18.84
599,510
5.1
11
Real discount rate (post-tax) (%)
Real discount rate (pre-tax) (%)
Nominal discount rate (post-tax) (%)
Nominal discount rate (pre-tax) (%)
Real gold price (R/kg) (note 1)
Long-term cost inflation (%)
Life-of-mine (years)
Note 1: In the impairment assessment, the group applied a consensus rand gold price forecast which increases over a 20-year period at an effective annual compound rate of
approximately 5.1%.
Year ended 30 June 2018
Barberton Mines CGUs
Evander Mines CGUs
BTRP
surface
mining
operations
10.25
11.05
15.40
16.70
550,000
11
Elikhulu
surface
mining
operations
7.50
9.24
12.70
15.20
550,000
13
Mining
operations
–
–
–
–
–
–
Mining
operations
10.25
11.05
15.40
16.70
550,000
20
Egoli
project
12.40
13.17
17.50
18.80
550,000
11
Real discount rate (post-tax) (%)
Real discount rate (pre-tax) (%)
Nominal discount rate (post-tax) (%)
Nominal discount rate (pre-tax) (%)
Real gold price (R/kg)
Life-of-mine (years)
Below is a sensitivity table on the impairment reversal:
Gold price
South African rand
South African rand
Unit
Sensitivity
(ZAR/kg)
(ZAR:USD)
(ZAR:USD)
5% decrease in USD gold price
5% stronger
3% weaker
569,535
13.38
14.50
(Reduction)/
increase in
impairment
reversal
USD thousand
(4,664.2)
(4,909.7)
2,717.0
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
176
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
18. OTHER INTANGIBLE ASSETS
Software costs
Opening balance
Transfer from property, plant and equipment
and mineral rights (note 1)
Additions
Amortisation
Impairment reversal/(cost) (refer to notes 17 and 14)
Foreign currency translation reserve
Closing balance
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
41.7
772.0
16.3
(187.2)
8.8
3.6
655.2
94.1
3.0
23.3
(46.1)
(31.4)
(1.2)
41.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 1: Following the commissioning of Elikhulu on 1 September 2018, the group transferred software costs relating to the project from capital under construction in property,
plant and equipment and mineral rights. Refer to note 17 and
pages 52 and 53 for additional information on Elikhulu.
The group has no internally generated intangible assets at year-end.
19. LONG-TERM RECEIVABLES
Long-term receivables (note 1)
Current portion of long-term receivables
Deferred consideration receivable (note 2)
Deferred consideration receivable provision (note 2)
Current portion of other long-term receivables
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1,021.9
1,021.9
1,924.8
2,136.7
(1,028.2)
816.3
1,746.6
1,746.6
1,252.2
2,007.8
(980.1)
224.5
–
–
1,108.5
2,136.7
(1,028.2)
–
–
–
1,027.7
2,007.8
(980.1)
–
Note 1: Long-term loans receivables accrues interest at the prime rate with repayment terms of up to 24 months.
Note 2: The deferred consideration receivable that related to MC Mining Limited was settled in full on 1 July 2019. The deferred consideration receivable was assessed at year-
end in relation to the actual settlement received on 1 July 2019. The amended deferred consideration receivable net of the provision was USD1,108,459 (2018: USD1,027,682).
The carrying value of long-term receivables approximate their fair value given the nature of the counterparty and the historical low levels
of credit default. There is no current observable data to indicate a material future default risk and as a result, the credit quality at year-end
is considered high.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
177
ANNUAL FINANCIAL
STATEMENTS
20. REHABILITATION FUND
Funds held in a trust fund
Opening balance as at 1 July 2017
Capital fund contribution
Transfer of rehabilitation funds to an insurance product (note 1)
Interest earned on rehabilitation funds
Interest earned on 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 2018
Transfer of rehabilitation funds to an insurance product (note 1)
Interest earned on rehabilitation funds
Foreign currency translation reserve
Closing balance as at 30 June 2019
Funds held in an insurance product
Opening balance as at 1 July 2017
Premium contribution (note 1)
Fair value adjustment
Foreign currency translation reserve
Closing balance as at 30 June 2018
Premium contribution (note 1)
Drawdowns
Fair value adjustment
Foreign currency translation reserve
Closing balance as at 30 June 2019
Barberton
Mines
USD thousand
Evander
Mines
USD thousand
Total
USD thousand
3,401.7
282.3
–
182.7
–
17.3
–
(196.7)
3,687.3
(3,580.7)
15.5
(122.1)
–
–
–
–
–
–
3,580.7
–
249.4
29.9
3,860.0
21,167.0
1,756.6
(9,684.4)
468.2
668.3
94.1
13.5
(609.9)
13,873.4
(13,535.6)
121.7
(459.5)
–
–
9,684.4
(86.4)
(608.7)
8,989.3
13,535.6
(2,585.4)
1,355.4
(133.8)
24,568.7
2,038.9
(9,684.4)
650.9
668.3
111.4
13.5
(806.6)
17,560.7
(17,116.3)
137.2
(581.6)
–
–
9,684.4
(86.4)
(608.7)
8,989.3
17,116.3
(2,585.4)
1,604.8
(103.9)
21,161.1
25,021.1
Total rehabilitation funds as at year-end
(trust funds and insurance investment product)
3,860.0
21,161.1
25,021.1
Note 1: These funds are held in a Cenviro Solutions insurance investment product and are invested in interest-bearing and equity instruments within the insurance product.
Cenviro Solutions has issued guarantees to the DMR in support of the group's environmental liabilities. The group's environmental liabilities are fully funded by the investments
contained in the investment product.
The group has transferred the rehabilitation funds invested in the group's rehabilitation trust to an insurance investment product, held by
Cenviro Solutions underwritten by Centriq Insurance Company Limited. The insurance policies are in the respective names of the mining
operations, Evander Mines and Barberton Mines.
Refer to note 30 for the associated rehabilitation provision disclosure.
0792 PAR IAR 2019 AFS FA.indd 177
0792 PAR IAR 2019 AFS FA.indd 177
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
178
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
21.
INVENTORIES
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Consumables stores
Current portion of long-term inventory (note 1)
Provision for obsolete stock
Long-term inventory (note 1)
6,640.7
193.1
(1,125.3)
5,708.5
614.5
6,323.0
4,640.3
269.2
(1,348.2)
3,561.3
748.2
4,309.5
Inventory recognised as cost of production
20,638.7
20,545.8
Note 1: The long-term inventory relates to a holding of tailings contained in Barberton Mines' Harper tailings storage facility.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22. TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debts
Other receivables and prepayments
VAT receivable
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
9,168.5
(107.5)
3,184.8
2,855.5
15,101.3
8,697.1
(100.3)
2,506.1
8,475.5
19,578.4
–
–
22.4
–
22.4
–
–
6.4
–
6.4
The group’s credit risk is deemed to be minimal as it only sells refined gold to rated South African financial institutions. Given the
creditworthiness of these institutions, the likelihood of impairment is considered minimal. Due to the nature of these institutions and the
historical low levels of credit default, the group has not raised a provision for doubtful debts pertaining to trade receivables. Refer to the credit
risk disclosure in note 29. These financial Institutions are the major customers, representing 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's circumstances.
No interest is charged on trade receivables given their short-term nature.
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 receivables approximates the carrying value, given their short-term nature. Trade receivables have been pledged as
security in terms of the group's senior debt.
23. TRADE AND OTHER PAYABLES
Trade payables
Accruals and other payables
VAT payable
Total trade and other payables (note 1)
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
20,431.3
14,843.0
647.0
35,921.3
21,346.0
14,933.4
535.9
36,815.3
62.9
716.0
245.9
1,024.8
100.2
288.9
77.2
466.3
Note 1: The fair value of trade and other payables is not materially different from the carrying value presented given their short-term nature.
0792 PAR IAR 2019 AFS FA.indd 178
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
179
ANNUAL FINANCIAL
STATEMENTS
24. CASH AND CASH EQUIVALENTS
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Cash and cash equivalents
5,341.2
921.8
36.3
269.0
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Credit facilities
Revolving credit facility (note 1)
Term loan facility (note 2)
Guarantees (note 3)
Eskom Holdings SOC Limited
Department of Mineral Resources –
Cenviro Solutions insurance investment product
Department of Mineral Resources
General banking facility (note 4)
Pre-settlement splits
FEC facilities
Precious metals hedging facility
Gold hedging facility
71,022.7
71,022.7
72,886.3
72,886.3
1,313.9
1,792.5
25,613.2
852.3
–
1,019.6
9,943.2
10,204.1
2,840.9
7,954.5
19,176.1
2,915.5
8,163.3
19,679.3
USD trading and derivative facilities (note 5)
37,642.0
61,309.0
Credit cards
Other limit
Available facilities
General banking facilities
Utilisation of the general banking facilities as at year-end
Revolving credit facility
Utilisation of the revolving credit facility as at year-end
Term loan facility
Utilisation of the term loan facility as at year-end
106.5
355.1
247,843.1
17,704.7
9,943.2
(51.0)
71,022.7
(63,210.2)
71,022.7
(71,022.7)
109.3
364.4
251,329.6
36,711.7
10,204.1
(96.0)
72,886.3
(63,046.6)
72,886.3
(56,122.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
355.1
355.1
–
364.4
364.4
Note 1: The group has a revolving credit facility from Nedbank Limited, Absa Bank Limited and Rand Merchant Bank (a division of FirstRand Bank Limited) (refer to note 28).
Note 2: During the prior year, the group secured a term loan facility for the funding of Elikhulu with Rand Merchant Bank, Ashburton Investments, Absa Bank Limited and
Nedbank Limited (refer to note 28).
Note 3: The guarantees relate to USD1.3 million (2018: USD1.8 million) for Eskom Holdings SOC Limited (Electricity utility – for the provision of electricity), USD26.5 million
(2018: USD1.0 million) for the Department of Mineral Resources (DMR) in support of the group's rehabilitation liabilities.
Note 4: The Absa Bank Limited, Nedbank Limited and Rand Merchant Bank general banking facilities are unsecured and USD0.05 million was utilised (2018: USD0.1 million) at
year-end. These facilities attract interest at rates linked to the South African prime interest rate.
Note 5: The USD, gold and derivative trading facilities are used by the group for the purpose of trading gold inventory and subsequent conversion of USD sales proceeds into
rand. The facilities are held with the following financial institutions:
◗ Absa Bank Limited
◗ Nedbank Limited
◗ Rand Merchant Bank
◗ Investec Bank.
0792 PAR IAR 2019 AFS FA.indd 179
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180
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
25. SHARE CAPITAL
Issued
Number of ordinary shares issued and fully paid (note 1)
Treasury shares (note 2)
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Consolidated
Parent company
Year ended
30 June 2019
Number
Year ended
30 June 2018
Number
Year ended
30 June 2019
Number
Year ended
30 June 2018
Number
2,234,687,537
(306,358,058)
1,928,329,479
2,234,687,537
(306,358,058)
1,928,329,479
2,234,687,537
(306,358,058)
1,928,329,479
2,234,687,537
(306,358,058)
1,928,329,479
Note 1: No additional ordinary shares were issued during the current financial year (2018: nil).
Note 2: During the prior financial year, PAR Gold disposed of 130 million Pan African Resources’ shares at USD0.09 per share, resulting in a decrease in the treasury shares held
(refer to note 26).
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Share capital
38,150.6
38,150.6
38,150.6
38,150.6
26. TREASURY CAPITAL RESERVE
On 7 June 2016, the group purchased shares in PAR Gold representing 23.83% or 436.4 million of its issued share capital at the time.
The accounting effect of this transaction was akin to that of a share buy-back as the group acquired shares in a company that held an
investment in the group's parent company.
In the prior year, on 30 May 2018, PAR Gold publicly disposed of 130 million shares in Pan African Resources PLC, as is summarised below:
Proceeds on sale of treasury shares
Treasury capital reserve movement – book value of shares disposed
Capital loss on sale of treasury shares
Proceeds per treasury share disposed
Treasury capital reserve reconciliation at year-end:
Year ended
30 June 2018
USD thousand
11,944.3
(13,068.5)
(1,124.2)
(0.09)
Opening balance
Disposal of treasury shares
Closing balance at year-end
Consolidated
Number
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
Year ended
30 June 2018
24,871.4
–
24,871.4
36,815.7
(11,944.3)
24,871.4
306,358,058
–
306,358,058
436,358,058
(130,000,000)
306,358,058
0792 PAR IAR 2019 AFS FA.indd 180
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
181
ANNUAL FINANCIAL
STATEMENTS
27. SHARE OPTION RESERVE
The share option reserve consists of historical IFRS 2 equity-settled share option schemes and BBBEE transactions.
In the prior year, on 15 January 2018, the group concluded a BBBEE restructuring exercise with Concrete Rose as the group's new
BBBEE entity (refer to note 38). Concrete Rose is held 49.9% by Funding Company and 50.1% by strategic BBBEE partners through
a vendor financed arrangement. The nature of the restructuring transaction gave Concrete Rose a 22.11% ownership in SA HoldCo.
The BBBEE 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 implied option in this scheme was valued at
USD608,286. The incremental value disclosed arose due to an extension of the BBBEE scheme’s original 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
Closing balance
28. LONG-TERM LIABILITIES: FINANCIAL INSTITUTIONS
Revolving credit facility
Opening balance
Drawdowns
Finance costs incurred
Finance costs capitalised (note 1)
Facility arranging fee (note 2)
Refinancing modification adjustment (note 2)
Repayments of capital
Repayments of finance costs
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
2,624.7
–
2,624.7
2,016.4
608.3
2,624.7
1,616.9
–
1,616.9
1,616.9
–
1,616.9
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
63,131.2
5,285.4
6,149.7
–
(944.6)
418.2
(3,523.6)
(6,161.8)
(1,650.7)
62,703.8
(9,943.2)
52,760.6
15,415.7
59,533.1
3,549.3
1,190.7
–
–
(7,782.1)
(4,741.2)
(4,034.3)
63,131.2
(6,426.2)
56,705.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 1: Interest incurred and capitalised relates to the term loan facility which was specifically used for the Elikhulu's construction. Capitalisation of the borrowing costs ceased
on 31 August 2018 as the plant was commissioned on 1 September 2018. The capitalisation of the borrowing costs was in accordance with IAS 23: Borrowing Costs.
Note 2: The terms of the revolving credit facility were renegotiated on 3 June 2019 (refer to terms below). The restructure of the revolving credit facility resulted in a debt
modification adjustment being recognised in terms of IFRS 9. The debt modification adjustment was calculated on the differential in the revolving credit facility's fair values based
on its original and new terms.
0792 PAR IAR 2019 AFS FA.indd 181
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182
ANNUAL FINANCIAL
STATEMENTS
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
28. LONG-TERM LIABILITIES: FINANCIAL INSTITUTIONS continued
Term loan facility
Opening balance
Drawdowns
Finance costs incurred
Finance costs incurred and capitalised (note 1)
Repayments of finance loan
Repayments of finance costs
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Summary of current and non-current portions
of long-term liabilities
Current portion
Long-term portion
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
56,122.4
16,208.6
6,363.7
1,199.1
–
(7,524.1)
(1,308.1)
71,061.6
(14,204.5)
56,857.1
–
59,922.2
451.9
1,687.1
–
(2,139.0)
(3,799.8)
56,122.4
–
56,122.4
24,147.7
109,617.7
133,765.4
6,426.2
112,827.4
119,253.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 1: Interest incurred and capitalised relates to the term loan facility which was specifically used for the Elikhulu's construction. Capitalisation of the borrowing costs ceased
on 31 August 2018 as the plant was commissioned on 1 September 2018. The capitalisation of the borrowing costs was in accordance with IAS 23: Borrowing Costs.
Revolving credit facility
Term loan facility
Facility amount
Lenders
R1 billion
Rand Merchant Bank (a division of FirstRand Bank Limited),
Absa Bank Limited, Nedbank Limited
Borrower
Funding Company
Interest rate
One-month JIBAR rate
R1 billion
Rand Merchant Bank (a division of FirstRand
Bank Limited), Absa Bank Limited, Nedbank
Limited, Ashburton Investments
Funding Company
Three-month JIBAR rate
Interest rate margin
3% (3.3% from 3 June 2019)
3.8 %
Commitment fee
– prior to 3 June 2019
A commitment fee of 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
Commitment fee
– after 3 June 2019
A commitment fee of 1% of the aggregate of the available
commitment. Payable semi-annually
Term of loan
Seven years effective 17 June 2015 (previously, five years
effective 17 June 2015)
A commitment fee of 0.95% calculated on a
day-to-day basis on the aggregate available
commitment. Payable quarterly
Seven years effective from 15 September 2017
0792 PAR IAR 2019 AFS FA.indd 182
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
183
ANNUAL FINANCIAL
STATEMENTS
28. LONG-TERM LIABILITIES: FINANCIAL INSTITUTIONS continued
Revolving credit facility
Term loan facility
Repayment period
Fully amortising facility as follows:
◗ R250 million on 15 June 2020
◗ R25 million on 15 December 2020
◗ R25 million on 15 June 2021
◗ R50 million on 15 September 2021
◗ R50 million on 15 December 2021
◗ R50 million on 15 March 2022
◗ R50 million on 15 June 2022
◗ R500 million on 30 June 2022
Fully amortising facility over a repayment term
of five years, commencing in September 2019
The above reductions in the facility's capacity were re-
negotiated from the original R80 million semi-annual
instalment redemption profile, commencing on 17 June 2018
Final maturity date
30 June 2022
15 September 2024
Financial covenants
– after 3 June 2019
◗ The net debt to equity ratio must be less than 1:1
◗ The interest cover ratio must be greater than the following
ratios in the table below:
Measurement date
30 June 2020
30 June 2021
30 June 2022
◗ The net debt to adjusted EBITDA ratio must be less than
Ratio
4:1
4.5:1
5.1:1
the ratios disclosed in the table below:
Measurement date
Ratio
30 June 2020
2.5:1
30 June 2021
2:1
1.5:1
30 June 2022
◗ The debt service cover ratio must be greater than
1.3 times (measured semi-annually)
◗ The net debt to equity ratio must be less than 1:1
◗ The interest cover ratio was revised to be greater than
2.3 times as at 31 December 2018 and greater than
4 times from 30 June 2019 onwards
◗ The net debt to adjusted EBITDA ratio must be less than
2.5:1. The ratio was considered by the lenders effective
31 December 2019 due to Elikhulu's construction
◗ The debt service cover ratio must be more than 1.3 times
Financial covenants
– before 3 June 2019
0792 PAR IAR 2019 AFS FA.indd 183
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184
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
28. LONG-TERM LIABILITIES: FINANCIAL INSTITUTIONS continued
Bonds as security for the facilities:
The following bonds were registered in favour of the lenders:
◗ Mortgage bond B3644/2015 – Barberton Mines/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Mortgage bond B1163/2016 – Evander Gold Mining/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Mortgage bond B4673/2015 – Evander Gold Mining/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Mortgage bond B7829/2015 – Evander Gold Mining/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Mortgage bond B3701/2015 – Evander Township Limited/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Mortgage bond B6665/2015 – Evander Township Limited/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ General notarial bond BN15110/2015 – Barberton Mines/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ General notarial bond BN15357/2015 – Evander Gold Mining/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Special notarial bond BN15563/2015 – Evander Gold Mining/Bowwood on Main No. 40 (RF) Proprietary Limited
◗ Special notarial bond BN15616/2015 – Barberton Mines/Bowwood on Main No. 40 (RF) Proprietary Limited.
Ceded rights to the lenders as security for the facilities:
◗ Bank accounts
◗ Trade debtors
◗
Insurance proceeds
◗
Immovable property
◗ Shares held in subsidiaries.
29. FINANCIAL INSTRUMENTS
The group manages its solvency to ensure that it will be able to continue as a going concern while maximising sustainable return to
shareholders through the optimisation of the debt and equity components. The group’s overall financial risk management and capital
structure remains unchanged relative to the prior year.
Components of capital and financial covenants:
Cash and cash equivalents
Revolving credit facility
Term loan facility
Add: Derivative financial liabilities/(asset)
Less: Refinancing modification adjustment (note 1)
Less: Facilities arranging fees (note 1)
Net debt
Equity
Net debt to equity ratio
Note 1: The group's net debt excludes the refinancing modification adjustment and facilities arranging fees.
Consolidated
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
(5,341.2)
62,703.8
71,061.6
917.7
(418.2)
944.6
129,868.3
183,581.9
0.71
(921.8)
63,131.2
56,122.4
(289.5)
–
–
118,042.3
146,987.6
0.80
0792 PAR IAR 2019 AFS FA.indd 184
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185
Consolidated
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
6,149.7
7,562.8
384.3
14,096.8
56,782.6
1,190.5
57,973.1
4,740.0
2,139.0
142.7
7,021.7
32,374.0
–
32,374.0
4.1
4.6
129,868.3
57,973.1
2.2
57,973.1
1,253.8
1,580.5
(37,161.6)
–
(4,496.9)
19,148.9
14,096.8
1.4
118,042.3
32,374.0
3.6
32,374.0
2,314.2
6,416.3
–
(11,030.0)
(1,634.2)
28,440.3
7,021.7
4.1
29. FINANCIAL INSTRUMENTS continued
Finance costs – revolving credit facility
Finance costs – term loan facility
Finance costs – general banking facilities
Total finance costs – interest-bearing facilities
Adjusted EBITDA (note 1)
Unrealised gains and losses from derivative financial instruments
Net adjusted EBITDA
Interest cover ratio
Net debt
Net adjusted EBITDA (note 2)
Net debt to net adjusted EBITDA
Net adjusted EBITDA (note 2)
Net working capital change
Add: Non-cash flow items
Total capital expenditure less capital funded through permitted indebtedness
Less: Dividends paid
Less: Taxation and royalty paid
Free cash flow
Finance costs from interest-bearing facilities
Debt service cover ratio
Note 1: Adjusted EBITDA is comprised of earnings before interest, taxation, depreciation, amortisation, loss on disposal of associate, discontinued operations, impairment reversal/
(cost) and loss on disposal of assets held for sale.
Note 2: Net adjusted EBITDA is the adjusted EBITDA excluding unrealised gains and losses from financial instruments.
Refer to note 28 for a summary of the financial covenants limits.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019ANNUAL FINANCIALSTATEMENTS PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
186
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
29. FINANCIAL INSTRUMENTS continued
Categories of financial instruments
Financial assets
Measured at amortised cost
Cash and cash equivalents
Long-term receivables
Receivables (note 1)
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
5,341.2
2,946.7
12,245.8
921.8
2,998.8
11,102.9
36.3
1,108.5
22.4
269.0
1,027.7
6.4
Measured at fair value through other comprehensive income
Listed investment
6,802.0
4,133.9
6,802.0
4,133.9
Financial assets at fair value through profit and loss
Rehabilitation trust fund
Financial instruments asset
Financial liabilities
Measured at fair value through profit or loss
Financial instruments liabilities
Measured at amortised cost
Trade and other payables
Revolving credit facility
Term loan facility
25,021.1
–
26,550.0
289.5
917.7
–
35,274.3
62,703.8
71,061.6
36,279.4
63,131.2
56,122.4
–
–
–
778.9
–
–
–
–
–
389.1
–
–
Note 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 adverse 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, interest rate, credit and liquidity risk in terms of its treasury policy. Exposure limits are reviewed on a continuous basis.
The group does not enter into financial derivative 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 combined maximum credit risk exposure of the group is as follows:
Long-term receivables
Trade and other receivables
Guarantees to the DMR and Eskom
Consolidated
30 June 2019
USD thousand
30 June 2018
USD thousand
2,946.7
12,245.8
27,779.4
2,998.8
11,102.9
2,812.1
0792 PAR IAR 2019 AFS FA.indd 186
0792 PAR IAR 2019 AFS FA.indd 186
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
187
ANNUAL FINANCIAL
STATEMENTS
29. FINANCIAL INSTRUMENTS continued
Categories of financial instruments continued
Credit risk continued
Expected credit loss assessment as at 30 June 2019
The group determines each exposure to credit risk based on data that is determined to be predictive of the risk of loss and the past
experienced credit judgement.
Long-term receivables
The group's credit risk is deemed to be minimal given the nature of the counterparty and the historical low levels of credit default. There
is no current observable data to indicate a material future default risk and as a result, the credit quality at year-end is considered high.
Trade and other receivables
The group’s credit risk is deemed to be minimal as it only sells refined gold to rated South African financial institutions. 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 represent more than 5% of the gold mining subsidiaries' trade and other receivables. The
amounts presented in the statement of financial position are net of allowances for doubtful debtors pertaining to other receivables of
USD107,475 (2018: USD100,268), estimated by the group’s management based on the current economic environment and individual
debtor circumstances.
Guarantees to the DMR and Eskom
The guarantees in favour of the DMR are represented by funds held by Cenviro Solutions in an insurance investment product and
are invested in interest-bearing and equity instruments within the insurance product. Cenviro Solutions is a reputable and vetted
counterparty which is also underwritten by Centriq Insurance Company Limited. Based on the nature of the counterparty, credit default
is considered minimal at year-end.
The guarantees in favour of Eskom are represented by funds held by rated South African institutions. The credit risk on liquid funds is
limited due to these funds being invested only with reputable financial institutions.
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, exposing the group to foreign exchange rate fluctuations. Exchange rate
exposures are managed within approved policy parameters. The group specifically ensure USD gold sale receipts are converted into rand
as efficiently as possible.
Commodity price risk
The group is affected by the price volatility of gold. The group may enter into forward contracts to hedge its exposure to fluctuations in gold
prices and exchange rates on specific transactions. The contracts are matched with anticipated future cash flows from gold sales receipts.
Currency and gold spot price
ZAR:USD exchange rate
Average gold spot price received (USD/oz)
Average gold spot price received (R/kg)
30 June 2019
30 June 2018
Closing rate
Average rate
Closing rate
Average rate
14.08
14.19
13.72
12.85
Year ended
30 June 2019
Year ended
30 June 2018
1,266
577,573
1,301
538,100
0792 PAR IAR 2019 AFS FA.indd 187
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188
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
29. FINANCIAL INSTRUMENTS continued
Categories of financial instruments continued
Commodity price risk continued
2019
USD gold price increase or decrease sensitivity
2018
USD gold price increase or decrease sensitivity
2019
Increase in foreign currency sensitivity
Decrease in foreign currency sensitivity
2018
Increase in foreign currency sensitivity
Decrease in foreign currency sensitivity
2019
Current assets
Current liabilities
2018
Current assets
Current liabilities
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Impact of 10%
gold price
movement
on profit
USD thousand
17,852.3
17,697.9
Impact of 10%
exchange rate
movement
on profit
USD thousand
12,783.6
(15,624.4)
14,660.0
(17,917.8)
Impact of 10%
increase on
exchange rate
translation
USD thousand
Impact of 10%
decrease on
exchange rate
translation
USD thousand
USD thousand
29,964.4
63,854.5
26,513.8
44,394.6
(2,724.0)
(5,805.0)
(2,410.3)
(4,035.9)
3,329.4
7,094.9
2,946.0
4,932.7
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
189
ANNUAL FINANCIAL
STATEMENTS
29. FINANCIAL INSTRUMENTS continued
Categories of financial instruments continued
Derivative financial instruments – zero cost collar hedges
Zero cost collar hedges
Opening balance
Financial instruments (receipts)/settlements during the year
Profit arising from unrealised financial instruments from discontinued operations
Losses arising from unrealised gains
Profit arising from realised financial instruments
Profit arising from realised financial instruments from discontinued operations
Foreign currency translation reserve
Closing balance
Zero cost collar derivative losses/(gains)
Losses/(gains) from fair value measurement
Profit realised on the statement of comprehensive income
Consolidated
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
289.5
(1,572.4)
–
(1,083.3)
1,572.4
–
(15.9)
(809.7)
(1,083.3)
1,572.4
489.1
–
(1,212.7)
309.1
–
–
1,212.7
(19.6)
289.5
309.1
1,212.7
1,521.8
Interest rate risk
The group is exposed to interest rate risk as Funding Company, on behalf of the group, borrows and invests funds at both fixed and
floating interest rates. Fluctuations in interest rates impact on short-term investment and financing activities, giving rise to an 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 while 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 has been performed.
The group is exposed to interest rate risk as entities within the group borrow and invest funds, via Funding Company, at both fixed and
floating interest rates.
Interest rate sensitivity
The groups’ revolving credit and term loan facility incurs interest based on JIBAR rates (refer to note 30). Refer to the following for 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
USD thousand 2019
USD thousand 2018
12,341.3
13,026.9
13,712.5
14,398.1
15,083.8
6,191.1
6,535.1
6,879.0
7,223.0
7,566.9
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190
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
29. FINANCIAL INSTRUMENTS continued
Derivative financial instruments – interest rate hedge
Interest rate hedges
Opening balance
Losses arising from unrealised financial instruments
Foreign currency translation reserve
Closing balance
Interest rate hedge derivative profit/(loss)
Gains from fair value measurement
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Consolidated
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
–
(107.2)
(0.8)
(108.0)
(107.2)
(107.2)
–
–
–
–
–
Interest rate hedge terms
Notional amount
Trade date
Termination date
Group entity
Financial institution
Fixed rate (yield)
Floating rate option
Floating rate designated maturity
R750 million
5 April 2019
6 April 2020
Pan African Resources Funding Company Proprietary Limited
Rand Merchant Bank
7.11%
ZAR-JIBAR-SAFEX
Three months
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board, but is delegated to the executive management, which has an
established liquidity risk management framework for 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
USD63.2 million (2018: USD63.0 million) of revolving credit facility was utilised, and USD71.0 million (2018: USD56.1 million) was utilised
on the term loan facility. The general banking facility was utilised to the extent of USD50,991 (2018: nil) at year-end. In the prior year, the
group settled the Evander Mines gold loan in full (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.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
191
ANNUAL FINANCIAL
STATEMENTS
29. FINANCIAL INSTRUMENTS continued
Liquidity risk continued
Group
2019
Trade and other payables
Long-term liabilities (interest-bearing)
Derivative financial instrument liabilities
2018
Trade and other payables
Long-term liabilities (interest-bearing)
Parent company
2019
Trade and other payables
2018
Trade and other payables
Weighted
average
interest rate
%
Less than
12 months
USD thousand
1 – 5 years
USD thousand
Total
USD thousand
–
10.71
–
–
9.73
–
–
35,274.3
38,091.6
917.7
–
134,186.8
–
35,274.3
172,278.5
917.7
36,279.4
21,377.2
–
115,312.8
36,279.4
136,690.0
778.9
389.1
–
–
778.9
389.1
Fair value of financial instruments
The directors consider that 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.
30 June 2019
Financial assets (note 1)
Rehabilitation fund (note 2)
Derivative financial instrument liability (note 3)
30 June 2018
Financial assets (note 1)
Rehabilitation fund (note 2)
Derivative financial instrument assets (note 3)
Level 1
USD thousand
Level 2
USD thousand
Level 3
USD thousand
Total
USD thousand
6,802.0
–
–
4,133.9
–
–
–
25,021.1
917.7
–
26,550.0
289.5
–
–
–
–
–
6,802.0
25,021.1
917.7
4,133.9
26,550.0
289.5
Note 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.
Note 2: The rehabilitation fund is treated as Level 2 per the fair value hierarchy as the premiums are invested in interest-bearing short-term deposits and equity share portfolios
held in an insurance investment product which is managed by independent fund managers.
Note 3: The derivative financial asset and liability is treated as a Level 2 per the fair value hierarchy due to the following market-related inputs used in the valuation:
USD Gold price as at 30 June 2019
ZAR Gold price as at 30 June 2019
1,410
637,865
In the current and prior financial year, cash-settled share option and ESOP transactions liabilities have not been disclosed as financial
instruments as they are IFRS 2 instruments. Refer to note 14.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
192
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
30. LONG-TERM PROVISIONS
Opening balance
Rehabilitation cost incurred (note 1)
Rehabilitation provision capitalised
Charge for the year
Finance costs (note 2)
Foreign currency translation reserve
Closing balance
Consolidated
Parent company
Decommissioning and rehabilitation
30 June 2019
USD thousand
30 June 2018
USD thousand
30 June 2019
USD thousand
30 June 2018
USD thousand
19,929.5
(4,005.4)
338.0
–
59.6
(540.4)
15,781.3
15,147.5
(49.0)
837.8
5,050.1
–
(1,056.9)
19,929.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 1: During the year, Evander Mines commenced with the rehabilitation of old shafts and associated infrastructure.
Note 2: The finance costs relates to the unwinding of the rehabilitation provision.
Rehabilitation provision
The provision includes an estimate of the costs of decommissioning, the cost of environmental and other remedial work such as
reclamation costs, closure, restoration and pollution control. 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. Estimates are made annually, based on the estimated life of the mine,
following which any deficit is funded by means of premiums to an approved insurer.
The current year’s movement in the group's rehabilitation liability has been impacted by 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)
Year ended 30 June 2019
Year ended 30 June 2018
Period to
rehabilitation
Years
Risk-free rate
(real)
%
Period to
rehabilitation
Years
Risk-free rate
(nominal)
%
20.00
19.00
6.00
9.00
3.00
13.00
3.50
3.40
3.00
3.20
2.60
3.40
20.00
17.00
7.00
11.00
2.00
13.00
10.90
10.00
9.00
9.70
7.70
9.90
0792 PAR IAR 2019 AFS FA.indd 192
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
193
ANNUAL FINANCIAL
STATEMENTS
31. 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
Executive directors total
Non-executive directors
Emoluments
Non-executive directors total
All directors total
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1,265.0
–
1,265.0
229.4
229.4
1,494.4
1,339.3
438.8
1,778.1
241.3
241.3
2,019.4
1,265.0
–
1,265.0
229.4
229.4
1,494.4
1,339.3
438.8
1,778.1
241.3
241.3
2,019.4
Share
option
taxable
benefit
USD
thousand
Basic
remune-
ration
USD
thousand
Retirement
fund
USD
thousand
Life and
disability
plan
USD
thousand
Allowances
USD
thousand
Leave
payout
USD
thousand
Total
USD
thousand
Incentives
(note 1)
USD
thousand
30 June 2019
Executive directors
Mr JAJ Loots
Mr GP Louw
Total
–
–
–
358.2
311.2
669.4
–
–
–
–
–
–
14.7
0.7
15.4
20.0
–
20.0
392.9
311.9
704.8
299.5
260.7
560.2
Note 1: These incentives were approved by the remuneration committee following the successful completion of Elikhulu.
Share option
taxable
benefit
USD
thousand
Basic
remune-
ration
USD
thousand
Retirement
fund
USD
thousand
Life and
disability
plan
USD
thousand
Allowances
USD
thousand
Leave
payout
USD
thousand
Total
USD
thousand
Incentives
(note 2)
USD
thousand
30 June 2018
Executive directors
Mr JAJ Loots
Mr GP Louw
Total
438.8
–
438.8
376.1
327.3
703.4
–
–
–
–
–
–
15.3
1.3
16.6
21.0
–
21.0
851.2
328.6
1,179.8
358.1
240.2
598.3
Note 2: During the 2018 financial year, the executive directors and senior management, in consultation with the remuneration committee, agreed to forgo any qualifying short-
term incentives in light of the group's financial position following the cessation of underground operations at Evander Mines. These incentives disclosed were paid in the 2018
financial year but were accrued for in the 30 June 2017 financial year.
0792 PAR IAR 2019 AFS FA.indd 193
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194
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
31. DIRECTORS’ EMOLUMENTS continued
Non-executive directors are entitled to the following emoluments as approved annually by the Remco for services rendered, which are
based on the sub-committees on which they serve:
Non-executive
Mr KC Spencer
Mrs HH Hickey
Mr TF Mosololi
Mr RM Smith (note 1)
Total
30 June 2019
Board of directors
Remuneration committee
Audit committee (Mrs HH Hickey as chairperson)
SHEQC committee
Nomination committee
30 June 2018
Board of directors
Remuneration committee
Audit committee (Mrs HH Hickey as chairperson)
SHEQC committee
Nomination committee
Total
30 June 2019
USD thousand
Total
30 June 2018
USD thousand
86.3
51.3
47.7
44.1
229.4
91.0
53.9
50.1
46.3
241.3
KC Spencer
(Chairman)
USD thousand
HH Hickey
USD thousand
TF Mosololi
USD thousand
RM Smith
USD thousand
70.4
–
–
10.8
5.1
86.3
28.2
–
10.8
7.2
5.1
51.3
28.2
7.2
7.2
–
5.1
47.7
28.2
10.8
–
–
5.1
44.1
KC Spencer
(Chairman)
USD thousand
HH Hickey
USD thousand
TF Mosololi
USD thousand
RM Smith
USD thousand
74.3
–
–
11.4
5.3
91.0
29.6
–
11.4
7.6
5.3
53.9
29.6
7.6
7.6
–
5.3
50.1
29.6
11.4
–
–
5.3
46.3
Note 1: Rowan Smith resigned as an independent non-executive director on 3 April 2019 and did not receive a portion of his annually approved emolument relating to the last
quarter of the financial year.
Subsequent to year-end, Yvonne Themba and Charles Needham were appointed as independent non-executive directors with effect from
17 July 2019.
No fees were paid during the year for serving on the social and ethics sub-committee.
No retirement fund contributions are made by the company on behalf of non-executive directors.
The company has directors' and public officers' liability insurance in place that provides insurance cover in the event of a claim or legal
action. The insurance cover was in place throughout the financial year and remains in place.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
195
ANNUAL FINANCIAL
STATEMENTS
31. DIRECTORS’ EMOLUMENTS continued
Share
option
taxable
benefit
USD
thousand
Basic
remune-
ration
USD
thousand
Retire-
ment
fund
USD
thousand
Life and
disability
plan
USD
thousand
Allowances
USD
thousand
Other
remune-
ration
USD
thousand
Bonuses
USD
thousand
Total
30 June
2019
USD
thousand
Total
30 June
2018
USD
thousand
Prescribed officers
Mr AD van den Bergh
Mr AA van den Berg
Mr NA Reynolds
Mr CA Strydom
Mr JDV Thirion
(appointed
12 March 2018)
Mr L Motshwaiwa
Mr MS Ndlozi
Mr JD Symington
Mr MM Dlamini
Mr P Naicker
Mr P Tendaupenyu
(retrenched
9 March 2018)
Mr O Shikwambana
(appointed
1 April 2019)
–
–
–
–
–
–
–
–
–
–
–
–
290.4
153.3
150.6
–
120.2
150.9
76.0
115.3
96.3
129.7
–
24.9
20.0
–
22.2
13.0
11.7
15.3
12.8
25.7
–
3.1
3.1
–
–
3.2
–
2.3
2.0
–
0.6
5.0
8.3
–
98.3
8.1
45.3
8.6
1.3
5.1
–
–
–
–
37.6
3.8
0.9
3.2
Directors' dealings in shares
All the shares held by directors are direct beneficial interests.
–
–
–
–
253.7
88.1
77.5
–
12.4
60.9
33.6
59.9
66.9
77.5
544.7
274.4
259.5
–
253.1
248.8
166.6
201.4
185.3
246.4
468.4
232.7
325.5
448.6
208.3
189.4
153.6
199.3
148.0
211.9
–
–
224.0
84.6
130.1
–
–
12.7
–
–
6.0
8.4
–
–
Financial year 30 June 2019
Mr JAJ Loots entered into the following company shares transactions:
◗ On 20 September 2018: entered into a contract for difference derivative (CFD) for 64,280 shares at an average price of
GBP0.0825 per share
◗ On 21 September 2018: entered into a CFD for 50,000 shares at an average price of GBP0.085 per share.
Mr JAJ Loots had 668,675 shares and 514,280 CFDs at year-end, representing 0.05% of the total issued shares of the company.
Mr GP Louw had 257,450 shares at year-end, representing 0.01% of the total issued shares of the company.
Mr KC Spencer transferred 3,000,000 shares at R1.75 per share in an off-market transaction from the Strode Trust into his personal
capacity on 17 October 2018. Following this transaction, Mr KC Spencer held 3,000,000 shares at year-end, representing approximately
0.13% of the total issued shares.
No dealings in the securities of the company by the directors took place between the year-end and the date of approval of the annual
financial statements.
Financial year 30 June 2018
Mr JAJ Loots entered into the following company shares transactions:
◗ On 22 February 2018: entered into a CFD for 200,000 shares at a price of GBP0.08 per share
◗ On 27 September 2017: purchased 108,000 shares at an average price of R2.35 per share
◗ On 29 September 2017: entered into a CFD for 200,000 shares at an average of GBP12.747p per share.
Mr JAJ Loots had 668,675 shares and 400,000 CFDs at period end, representing 0.05% of the total issued shares of the company
as at 30 June 2018.
Mr GP Louw entered into the following company shares transactions:
◗ On 28 September 2017: purchased 45,000 shares at an average price of R2.35 per share
◗ On 23 February 2018: purchased 75,000 shares at R1.30 per share.
0792 PAR IAR 2019 AFS FA.indd 195
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196
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
31. DIRECTORS’ EMOLUMENTS continued
Mr GP Louw had 257,450 shares at period end, representing 0.01% of the total issued shares of the company as at 30 June 2018.
Mr TF Mosololi, on 6 October 2017, purchased 20,000 shares at R2.30. Mr TF Mosololi had 50,000 shares outstanding as at period end,
representing 0.01% of total issued shares of the company as at 30 June 2018.
Mr KC Spencer had 3,000,000 shares at period end, representing 0.13% of the total issued shares of the company as at 30 June 2018.
Cash-settled share options
Total
options
1 July
2018
Exercise
price in
R
Grant date
Options
granted/
(exercised)
during the
period
Grant/
exercise
price in
R
Options
forfeited/
discontinued
Total
options
30 June
2019
Grant/
exercise date
2 August 2017
1 March 2015
1 March 2018
1 May 2014
30 July 2015
2 August 2017
2,500,000
29 August 2013
Mr JAJ Loots
1,533,334 28 February 2015
Mr JAJ Loots
1 March 2018
5,000,000
Mr JAJ Loots
–
Mr JAJ Loots
2,114,979
Mr GP Louw
3,100,000
Mr GP Louw
–
Mr GP Louw
Mr AD van den Bergh 1,230,199
Mr AD van den Bergh 2,822,167
Mr AD van den Bergh 3,268,219
–
Mr AD van den Bergh
1,671,309
Mr AA van den Berg
Mr AA van den Berg
–
750,442
Mr NA Reynolds
1,591,318
Mr NA Reynolds
1,676,713
Mr NA Reynolds
–
Mr NA Reynolds
Mr CA Strydom
–
317,051
Mr CA Strydom
1,882,465
Mr CA Strydom
1,876,026
Mr P Human
823,719
Mr P Human
1,074,126
Mr P Naicker
2,490,692
Mr P Naicker
517,138
Mr P Naicker
Mr P Naicker
–
542,471
Mr JD Symington
1,052,158
Mr JD Symington
–
Mr JD Symington
1 May 2014
30 July 2015
30 July 2015
2 August 2017
13 July 2012
30 July 2015
2 August 2017
1 May 2014
2 August 2017
30 July 2015
30 July 2015
2 August 2017
2.09
–
–
2.05
1.64
2.38
–
2.38
–
2.05
2.38
1.64
–
–
2.05
–
–
–
–
– 12,427,686
–
–
8,690,599
–
–
–
8,109,463
–
4,049,587
–
–
–
4,049,587
–
–
–
–
–
–
–
–
3,471,074
–
–
3,140,496
2.05
1.64
1.64
2.38
1.95
1.64
2.38
–
1.64
2.38
–
Mr MM Dlamini
Mr MM Dlamini
Mr MM Dlamini
Mr MM Dlamini
Mr MS Ndlozi
Mr MS Ndlozi
Mr L Motshwaiwa
Mr O Shikwambana
Mr JDV Thirion
100,000
167,012
1,097,576
–
865,303
571,542
–
–
6,543,624
47,179,583
27 May 2014
30 July 2015
2 August 2017
30 July 2015
2 August 2017
–
12 March 2018
–
–
–
1,239,669
–
–
2,776,777
3,977,901
2.67
1.64
2.38
–
1.64
2.38
–
–
1.49
1.06 51,932,839
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
1 July 2018
23 August 2018
1 April 2019
1.21
–
– (2,500,000)
1,533,334
–
–
5,000,000
–
–
– 12,427,686
1.21
–
3,100,000
8,690,599
–
–
–
8,109,463
–
4,049,587
–
–
–
4,049,587
–
–
–
1,876,026
823,719
–
–
–
3,471,074
–
–
3,140,496
– (2,114,979)
–
–
–
1.21
– (1,230,199)
– (2,822,167)
– (3,268,219)
–
– (1,671,309)
–
1.21
–
(750,442)
– (1,591,318)
– (1,676,713)
–
1.21
–
–
(317,051)
–
– (1,882,465)
–
–
–
–
– (1,074,126)
– (2,490,692)
(517,138)
–
1.21
–
(542,471)
–
– (1,052,158)
–
1.21
(100,000)
–
(167,012)
–
– (1,097,576)
–
–
–
–
–
–
–
–
1,239,669
865,303
571,542
2,776,777
3,977,901
6,543,624
0.83 (26,866,035) 72,246,387
1.21
–
–
1.36
1.81
0792 PAR IAR 2019 AFS FA.indd 196
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
197
ANNUAL FINANCIAL
STATEMENTS
32. AUDITORS’ REMUNERATION
The audit of the company's annual financial statements
The audit of consolidated annual financial statements
Under/(over) provision of audit fee in the prior year
Total audit fees
Other services rendered by the auditors
External auditor
Total non-audit fees
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1.8
317.8
19.7
339.3
–
–
2.3
386.5
72.5
461.3
17.6
17.6
1.8
89.5
38.6
129.9
–
–
2.3
111.1
–
113.4
–
–
All audit fees are paid locally in South Africa with the exception of the PwC UK auditor fee of USD0.1 million (2018: USD0.1 million paid
to Deloitte LLP).
Details of the company’s policy on the use of the statutory auditors' non-audit services and the safeguards to ensure their independence
and objectivity is disclosed in the audit committee report on
pages 131 to 133. No services were provided by the statutory auditors
pursuant to contingent fee arrangements.
33. TAXATION
Income taxation expense
South African normal taxation
– current year
– prior year
Deferred taxation (note 1)
– current year
Total taxation (income)/expense
Profit/(loss) before taxation
Taxation at the domestic taxation rate of 28%
Taxation rate differential (note 2)
Exempt income:
Other exempt income
Rate change (note 3)
Non-deductible expenses:
Impairment (reversal)/costs
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
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
2,861.3
0.1
5,312.6
8,174.0
46,216.2
12,941.0
(4,391.1)
(79.9)
(678.4)
–
382.3
0.1
–
–
–
8,174.0
2,350.6
(229.9)
(4,946.7)
(2,826.0)
12,763.4
3,574.0
(1,837.5)
(27.8)
(7,907.2)
3,013.8
–
(229.9)
1,642.6
(1,054.0)
–
(2,826.0)
–
–
(247.5)
(247.5)
(1,230.3)
(345.0)
–
–
–
–
97.5
–
–
–
–
(247.5)
–
–
(369.1)
(369.1)
(1,438.4)
(403.0)
–
–
–
–
–
–
–
–
33.9
(369.1)
Note 1: Deferred taxation components are disclosed in note 35.
Note 2: Taxation rate differential is the difference between the statutory company taxation rate of 28% and the effective gold mining taxation rate calculated in terms of the
gold mining formula.
Note 3: The rate change is as a result of a decrease in the deferred tax rates, applied to the taxable and deductible temporary differences prevailing at year-end within the
group's entities (refer to note 35).
0792 PAR IAR 2019 AFS FA.indd 197
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2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
198
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
33. TAXATION continued
Effective taxation rates
South African statutory rates
Taxation rate differential (note 1)
Exempt income:
Other exempt income
Rate change (note 2)
Non-deductible expenses:
Impairment (reversal)/costs
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
Parent company
Year ended
30 June 2019
%
Year ended
30 June 2018
%
Year ended
30 June 2019
%
Year ended
30 June 2018
%
28.0
(9.5)
(0.2)
(1.5)
–
0.8
–
–
–
–
17.6
28.0
(14.4)
(0.2)
(62.0)
23.6
–
(1.8)
12.9
(8.3)
–
(22.2)
28.0
–
–
–
–
(7.9)
–
–
–
–
20.1
28.0
–
–
–
–
–
–
–
–
(2.4)
25.6
Note 1: Taxation rate differential is the difference between the statutory company taxation rate of 28% and the effective gold mining taxation rate calculated in terms of the
gold mining formula.
Note 2: The rate change is as a result of a decrease in the deferred tax rates, applied to the taxable and deductible temporary differences prevailing at year-end within the
group's entities (refer to note 35).
South African income taxation on gold 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.
Capital expenditure not deducted is carried forward as unredeemed capital expenditure, to be deducted from future mining income.
Refer to note 35 for the unredeemed capital expenditure carried forward and deductible against future taxable income.
The assessed losses carried forward are summarised by entity in note 35.
34. CURRENT TAXATION
Current taxation asset
Current taxation liability
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1,888.6
(476.9)
910.6
(762.0)
103.4
–
99.1
–
Current taxes payable and receivable by the group relate to SARS.
0792 PAR IAR 2019 AFS FA.indd 198
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
199
ANNUAL FINANCIAL
STATEMENTS
35. DEFERRED TAXATION
Deferred taxation liabilities
Arising from temporary differences
Property, plant and equipment
Provisions
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
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
Other
Net deferred taxation assets
Reconciliation of deferred taxation assets
Net deferred assets at the beginning of the year
Transfer from deferred tax liabilities
Deferred taxation credit for the year
Deferred taxation (debit)/ credit for the year
raised in equity
Foreign currency translation reserve
Net deferred taxation assets at the end
of the year
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Note
23,428.5
(1,633.1)
(3,058.8)
(169.5)
18,567.1
19,664.3
(753.1)
–
–
18,911.2
18,911.2
50,616.5
33
5,976.9
(4,895.2)
–
(5,884.2)
(436.8)
(32,764.9)
6,038.6
(83.8)
18,567.1
18,911.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,364.1
270.9
–
506.1
2,141.1
8,186.4
(5,884.2)
664.3
(616.5)
(208.9)
(2,289.3)
3,220.2
8,475.7
(2,354.6)
1,134.4
8,186.4
991.0
6,038.6
51.5
1,235.4
(130.1)
–
830.0
257.0
–
506.1
1,593.1
2,016.5
–
247.5
(616.5)
(54.4)
–
364.9
494.6
–
1,157.0
2,016.5
540.2
–
369.1
1,235.4
(128.2)
2,141.1
8,186.4
1,593.1
2,016.5
33
0792 PAR IAR 2019 AFS FA.indd 199
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
200
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
35. DEFERRED TAXATION continued
Assessed loss
carried forward
Unredeemed capital
carried forward
Total
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Evander Mines
Pan African Resources PLC
PAR Management Services
19,532.3
1,661.5
49.6
21,243.4
41,267.6
1,766.4
151.4
43,185.4
185,642.8
–
–
185,642.8
144,118.2
–
–
144,118.2
205,175.1
1,661.5
49.6
206,886.2
185,385.8
1,766.4
151.4
187,303.6
Deferred taxation assets have been raised on the basis that the individual group companies will, in the future, 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 current estimates of future profitability when and temporary differences will
be recognised in the statement of comprehensive income. The respective rates are calculated based on management's best estimate, at
which the temporary differences 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)
Other companies
Consolidated
Year ended
30 June 2019
%
Year ended
30 June 2018
%
21.05
15.66
15.66
28
23.1
19.2
15.6
28
0792 PAR IAR 2019 AFS FA.indd 200
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
201
ANNUAL FINANCIAL
STATEMENTS
36. DISCONTINUED OPERATIONS
Discontinued operations
The group had no discontinued operations in the current year, however, in the prior year, discontinued operations comprised of the
following:
◗ Evander Mines' underground operations, which includes 8 Shaft, 7 Shaft and the run-of-mine circuit in the Kinross metallurgical plant
◗ Phoenix Platinum.
Evander Mines underground operations
Due to the cessation of Evander Mines’ underground operations, the financial results from this operation was classified as a discontinued
operation in the prior year.
Phoenix Platinum
Pan African Resources PLC disposed of Phoenix Platinum to Sylvania Platinum Limited on 6 November 2017. Phoenix Platinum was
disclosed as a discontinued operation in the prior year.
Loss after taxation before inter-company charges from discontinued
operations (note 1)
Earnings per share (USD cents)
Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations
Net cash flows from discontinued operations (note 2)
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
Discontinued operations
Year ended 30 June 2018
Year ended 30 June 2018
Evander Mines
(underground
operations)
USD thousand
Phoenix
Platinum
USD thousand
Total
USD thousand
(137,907.6)
(497.4)
(138,405.0)
(7.62)
(7.62)
–
–
(7.62)
(7.62)
Year ended 30 June 2018
Year ended 30 June 2018
Evander Mines
(underground
operations)
USD thousand
Phoenix
Platinum
USD thousand
Total
USD thousand
(16,563.9)
(113,635.2)
130,428.2
229.1
414.6
(47.3)
596.4
(209.2)
–
139.4
(69.8)
69.8
–
–
(16,773.1)
(113,635.2)
130,567.6
159.3
484.4
(47.3)
596.4
Note 1: Refer to the segment report note 6 for additional disclosure on the discontinued operations.
Note 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.
0792 PAR IAR 2019 AFS FA.indd 201
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
202
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
36. DISCONTINUED OPERATIONS continued
Impairment costs (continuing and discontinued operations)
Evander Mines
The carrying value of 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 machinery (note 1)
Intangible assets
Capital under construction
Consolidated
Continuing
operations
USD thousand
Discontinued
operations
USD thousand
Total
USD thousand
–
–
10,763.4
–
–
10,763.4
16,705.8
12,352.9
77,752.6
31.7
22,694.5
129,537.5
16,705.8
12,352.9
88,516.0
31.7
22,694.5
140,300.9
Note 1: The impairment costs recognised in the continuing operations relate to the plant and machinery of the ETRP and surface operations forming part of Evander Mines'
Kinross metallurgical plant.
Phoenix Platinum
The sale of Phoenix Platinum 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
Impairment
Adjustment on sale of asset held for sale
Proceeds on sale of investment
Foreign currency translation reserve
Consolidated
Parent
company
Year ended
30 June 2018
USD thousand
Year ended
30 June 2018
USD thousand
–
(11,341.8)
18,005.7
–
(346.0)
(6,317.9)
–
7,281.0
–
18,005.7
(16,412.7)
626.8
(6,317.9)
(3,182.9)
As at 30 June 2019, there were no major classes of assets and liabilities classified as held for sale (30 June 2018: nil).
0792 PAR IAR 2019 AFS FA.indd 202
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
203
ANNUAL FINANCIAL
STATEMENTS
37. GOODWILL
Goodwill acquired in a business combination is allocated at acquisition. The group's goodwill was historically created on 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
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Opening and closing balance
21,554.8
22,120.4
–
–
The group tests Barberton Mines’ goodwill carrying amount annually for impairment or more frequently if there are indications that
goodwill may be impaired. The impairment assessment was performed in accordance with the group’s accounting policies and did not
indicate the goodwill carrying amount was impaired.
The recoverable amount of Barberton Mines' mining operation CGU is determined from discounted life-of-mine model cash flows to
indicate fair value less cost to sell. The key assumptions for the fair value less cost to sell calculation include the discount rate, changes
to the gold price and direct costs expected over the life-of-mine. These key assumptions are disclosed in the impairment considerations
section of note 17.
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 nominal gold price to R543,000/kg, assuming
all other variables remain constant. The outcome of this sensitivity analysis would result in an impairment of goodwill by approximately
USD15.7 million.
Below are additional sensitivities on impairment for goodwill:
Unit
Sensitivity
Gold price
Nominal post-tax discount rate
South African rand
South African rand
(ZAR/kg) 5% decrease in USD gold price
1% increase in discount rate
5% stronger
3% weaker
(%)
(ZAR:USD)
(ZAR:USD)
569,535
16.4
13.38
14.50
(Reduction)/
increase in
impairment
on goodwill
USD thousand
Potential
goodwill
impairment
USD thousand
(22,644.0)
6,554.5
(23,835.8)
10,924.5
(21,554.8)
(4,731.2)
(21,554.8)
–
0792 PAR IAR 2019 AFS FA.indd 203
0792 PAR IAR 2019 AFS FA.indd 203
2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
204
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
38.
INVESTMENTS
Country of
incorporation
Principal
activity
Registered
address
Barberton Mines (note 1)
Evander Gold Mining Proprietary Limited (note 1)
Evander Gold Mines Proprietary Limited (Evander Mines)
Funding Company (note 2)
Pan African Resources SA Holding Company Proprietary Limited
(PAR SA Holdings) (note 3)
Pan African Resources Management Services Company Proprietary
Limited (PAR Management Services) (note 4)
Concrete Rose Proprietary Limited (note 5)
PAR Gold Proprietary Limited (PAR Gold) (note 6)
Barberton Mines BEE Company Proprietary Limited
(Barberton Mines BEE Company) (note 7)
Barberton Mines' ESOP Trust (note 7)
Evander Mines BEE Company Proprietary Limited
(Evander Mines BEE Company ) (note 8)
Evander Mines' ESOP Trust (note 8)
MC Mining Limited (MC Mining) (note 9)
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Gold mining
Gold mining
Gold mining
Treasury services
Holding company
Administration
services company
BBBEE company
Investing
South Africa
South Africa
ESOP arrangement
ESOP arrangement
South Africa
South Africa
Australia
ESOP arrangement
ESOP arrangement
Coal mining
The FIRS, corner
Biermann and
Cradock Avenue,
Rosebank,
Johannesburg, 2196
Suite 8, 7 The
Esplanade, Mt Pleasant
WA 6153, Australia
Refer to notes 1 to 9 on
page 206.
0792 PAR IAR 2019 AFS FA.indd 204
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2019/10/02 2:43 PM
2019/10/02 2:43 PM
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
205
ANNUAL FINANCIAL
STATEMENTS
Consolidated
Parent company
30 June 2019
Statutory
holding %
30 June 2018
Statutory
holding %
Holding
effectively
held by
company for
consolidation
purposes %
Accounting method
in parent company
Carrying
amounts
30 June 2019
USD thousand
Carrying
amounts
30 June 2018
USD thousand
Carrying
amounts
30 June 2019
USD thousand
Carrying
amounts
30 June 2018
USD thousand
95.00
95.00
100.00
100.00
95.00
95.00
100.00
100.00
100.00
100.00
100.00
100.00
Investment in subsidiary
Investment in subsidiary
Investment in subsidiary
Investment in subsidiary
89.00
89.00
100.00
Investment in subsidiary
100.00
49.90
49.90
100.00
100.00
100.00
100.00
100.00
49.90
49.90
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Investment in subsidiary
Investment in subsidiary
Investment in subsidiary
100.00
100.00
Investment in subsidiary
Investment in subsidiary
100.00
100.00
Investment in subsidiary
Investment in subsidiary
Measured at fair
value through other
comprehensive income
9.30
9.30
9.30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
–
–
–
0.4
154,460.2
154,460.2
1,562.9
–
–
1,562.9
–
–
–
–
–
–
–
–
–
–
6,802.0
6,802.0
4,133.9
4,133.9
6,802.0
162,825.6
4,133.9
160,157.4
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
206
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
38.
INVESTMENTS continued
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Investments reconciliation
Opening balance
Fair value adjustment (through other comprehensive income)
Subscription of shares in Emerald Panther Investments 91
Disposal of investment
Foreign currency translation reserve
Closing balance
4,133.9
2,876.3
–
–
(208.2)
6,802.0
9,776.5
(5,165.3)
–
–
(477.3)
4,133.9
160,157.4
2,876.3
–
–
(208.1)
162,825.6
238,368.6
(5,165.2)
47,903.8
(82,345.7)
(38,604.1)
160,157.4
Note 1: Employees own 5% of the issued shares of Barberton Mines and Evander Mines, through an employee share ownership scheme (ESOP). During the prior financial year,
the group's South African investments were restructured, resulting in Barberton Mines and Elikhulu being transferred to PAR SA Holdings. In the prior year, Evander Mines' ESOP
scheme was terminated. Refer to note 16 for further details.
Note 2: Funding Company was established to centrally provide treasury services to the group entities.
Note 3: PAR SA Holdings is the group's South African holding company for the South African mining investments.
Note 4: The purpose of PAR Management Services is to provide management services to the mining operations.
Note 5: Concrete Rose is the group's new BBBEE entity, following the BBBEE restructure concluded on 15 January 2018. Concrete Rose is held 49.9% by Funding Company and
50.1% by the following strategic BBBEE 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
Note 6: During the 2016 financial year, the group concluded a share buy-back transaction in which 49.9% of PAR Gold’s issued share capital was acquired. The transaction
translated to a share buy-back for accounting purposes due to Funding Company receiving the majority of the economic benefits from PAR Gold. Following the conclusion of the
BBBEE restructure on 15 January 2018, PAR Gold's shareholders now comprises, 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 voting rights. During the prior financial year, 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 26).
Note 7: The Barberton Mines' ESOP arrangement was established through two entities which are effectively controlled by the group. These entities are Barberton Mines BEE
Company which owns 5% of the issued shares of Barberton Mines, and the Barberton Mines ESOP Trust which holds all the issued shares in Barberton Mines BEE Company.
Barberton Mines' employees are beneficiaries of the ESOP Trust. The financial position and results of the Barberton Mines ESOP Trust and BEE company are consolidated into
the group. (Refer to note 16).
Note 8: The Evander Mines' ESOP arrangement was set up through two entities which are effectively controlled by the group. These entities are Evander Mines BEE Company
which owns 5% of the issued shares in Evander Mines and the Evander Mines ESOP Trust which holds all the issued shares in Evander Mines BBBEE Company. Evander Mines'
employees are beneficiaries of the ESOP Trust. The financial position and results of the Evander Mines ESOP Trust and BBBEE company are consolidated into the group. The
Evander Mines' ESOP is in the process of being terminated following an agreement with organised labour, after the cessation of underground operations at Evander Mines.
(Refer to note 16).
Note 9: The company holds 9.3% or 13,064,381 of MC Mining's issued shares. MC Mining is an emerging coal exploration, development and mining company operating in
South Africa.
0792 PAR IAR 2019 AFS FA.indd 206
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
207
ANNUAL FINANCIAL
STATEMENTS
39. OPERATING LEASES
As 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:
Not later than one year
Later than one year but no later than five years
Minimum lease payments under operating leases
recognised in other expense in the year
Minimum lease payments under operating leases
recognised in costs of production in the year
Consolidated
Parent company
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
Year ended
30 June 2019
USD thousand
Year ended
30 June 2018
USD thousand
1,224.4
2,727.6
3,952.0
1,186.6
3,850.7
5,037.3
314.8
277.2
910.3
1,225.1
1,056.6
1,333.8
–
–
–
–
–
–
–
–
–
–
–
–
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 as at
year-end relate to the corporate office and metallurgical plant equipment leased on the mining operations, with the following terms as at
30 June 2019.
Duration of lease
Commencement of lease
Remaining lease term
Escalation rate
Tenant/lessee
Landlord/lessor
Monthly lease payment in USD terms
Corporate office leases
Aachen reactor equipment
Three years
April 2018
23 months
8%
Pan African Resources Management
Services Company Proprietary Limited
Investec Property Fund Limited
14,766
Five years
August 2018
48 months
Consumer price index
Evander Gold Mining Proprietary
Limited
Mealgwyn Mineral Services Africa
70,345
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208
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
40. RELATED PARTY TRANSACTIONS
30 June 2019
Statement of comprehensive income transactions
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to Evander Gold
Mining Limited
Statement of financial position
Pan African Resources receivables/payables
Funding Company receivables/payables
PAR Management Services receivables/payables
Payables to PAR Gold
Barberton Mines receivables/payables
Evander Mines payables
30 June 2018
Statement of comprehensive income transactions
Dividends received from subsidiaries (note 2)
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to Evander Gold
Mining Limited
Statement of financial position
Pan African Resources receivables/payables
Funding Company receivables/payables
PAR Management Services receivables/payables
Payables to PAR Gold
Barberton Mines receivables/payables
Evander Mines payables
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
Pan African
Resources PLC
USD thousand
Funding
Company
USD thousand
PAR
Management
Services
USD thousand
1,973.2
–
–
(140.9)
13,047.8
–
3,162.2
(501.5)
–
–
–
–
93,672.9
90,876.2
2,796.7
–
–
–
2,586.0
778.2
–
–
(90,876.2)
95,495.2
6,632.2
(11,792.9)
(25,809.8)
–
–
(155.6)
4,847.8
–
(2,796.7)
(6,632.2)
633.0
–
5,549.4
–
–
2,412.4
(461.5)
–
–
–
–
95,653.6
94,970.8
682.8
–
–
–
(94,970.8)
70,091.9
5,863.9
(12,102.3)
2,732.1
168,323.0
(682.8)
(5,863.9)
(761.8)
–
3,102.4
2,682.8
Note 1: Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited are collectively referred to as Evander Mines due to an interim mining arrangement being in
place since 1 March 2013 and until such time that the inter-company mining right transfer occurs.
Note 2: Dividend received from subsidiaries related to the PAR Gold reciprocal dividend. Refer to the statement of changes in equity and additional disclosure relating to PAR
Gold in note 26.
Refer to investment in subsidiaries (note 38) for the nature of relationships of the related parties to the company.
Refer to directors' emoluments (note 31), for key management remuneration under related parties.
Inter-company loans provided by Funding Company have no specific repayment terms but do bear interest in relation to the cost
incurred by the treasury function provided.
0792 PAR IAR 2019 AFS FA.indd 208
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
209
ANNUAL FINANCIAL
STATEMENTS
Evander Gold
Mining
Proprietary
Limited
(note 1)
USD thousand
Evander
Gold Mines
Limited
(note 1)
USD thousand
Barberton
Mines
USD thousand
PAR SA
Holdings
USD thousand
PAR Gold
USD thousand
K Company
USD thousand
Concrete
Rose
USD thousand
(2,889.8)
696.8
–
(2,104.7)
(13,217.3)
(60,646.2)
–
–
60,646.2
–
60,045.7
(60,045.7)
–
25,809.8
(5,549.4)
–
1,128.3
–
–
(217,085.6)
(4,512.5)
–
–
(70,059.4)
–
(2,645.9)
(401.9)
–
–
(389.1)
(3,958.5)
(94,008.5)
–
–
–
–
–
70,059.4
–
–
–
94,008.5
–
93,077.8
(93,077.8)
–
–
–
–
–
8.9
–
–
19,132.1
–
–
–
–
–
–
–
(2,732.1)
(3,102.4)
–
(25,468.6)
–
–
(168,323.0)
(2,682.8)
–
–
(243,476.6)
–
–
–
–
–
72,472.2
–
(0.2)
–
–
19,634.1
(1.4)
–
–
–
–
–
11,792.9
–
11,792.9
–
–
(2,586.0)
–
–
–
–
–
12,102.3
–
12,102.3
–
–
–
(25.8)
–
–
–
(271.2)
–
–
–
–
–
–
(25.9)
–
–
–
(251.6)
–
–
–
–
–
–
–
–
–
6.0
–
–
–
–
–
–
–
–
–
–
5.8
0.3
–
–
–
0792 PAR IAR 2019 AFS FA.indd 209
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2019/10/02 2:43 PM
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210
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
41. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES
Group
Commitments
The group had contracted outstanding open orders at year-end of USD7.2 million (2018: USD31.6 million). Outstanding orders in the
prior year related primarily to Elikhulu.
Authorised commitments for the new financial year, not yet contracted for, totalled USD26.5 million (2018: USD18.5 million).
Contingent liabilities
The group identified no material contingent liabilities in the current or prior year.
Guarantees
As at 30 June 2019, the group had guarantees in place of USD1.3 million (2018: USD1.8 million) in favour of Eskom Holdings SOC
Limited and USD26.5 million (2018: USD1.0 million) in favour of the Department of Mineral Resources.
Parent company
The company had no commitments, contingent liabilities and guarantees for the company for the current or prior year, except for the
operating lease commitments disclosed in note 39.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
211
ANNUAL FINANCIAL
STATEMENTS
42. EVENTS AFTER THE REPORTING PERIOD
Subsequent to year-end, Yvonne Themba and Charles Needham were appointed as independent non-executive directors with effect from
17 July 2019.
Evander Mines entered into a gold loan for 20,000oz or USD28.3 million (R394 million) on 15 July 2019. The terms of the gold loan are
as follows:
Gold loan ounces
Gold loan value
Number of instalments
Ounces per instalment
Term of loan
First instalment date
Last instalment date
Effective ZAR gold price
20,000
USD28.3 million
12
1,666.67
15 July 2019 – 30 June 2020
31 July 2019
30 June 2020
R633,347/kg
The gold loan is an IFRS 15 contract liability as Evander Mines has an obligation to transfer gold to RMB for the gold received on
15 July 2019. The group has elected the practical expedient to not adjust the consideration amount of the gold loan for the effects of
financing. The practical expedient was applied as the gold loan’s term is less than 12 months and the financing component does not
represent a significant financing component of the gold loan’s value. The gold loan will consequently not be carrying financing costs during
the 30 June 2020 financial year.
In light of the prevailing strong rand gold price environment, and given our emphasis on financial risk management and de-gearing the
balance sheet, the group entered into the following zero-cost collar derivatives:
Gold hedged
Average floor price
Average ceiling price
1 July 2019 –
31 December
2020
120,010
654,166
828,303
Unit
(oz)
(R/kg)
(R/kg)
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212
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
43.
IMPACT OF APPLYING SIGNIFICANT ACCOUNTING POLICIES EFFECTIVE IN THE CURRENT FINANCIAL YEAR
The group applied IFRS 15 and IFRS 9 from 1 July 2018. A number of other new standards are also effective from 1 July 2018 but they do
not have a material effect on the group's financial statements. The group also changed its reporting currency to USD from GBP.
IFRS 15: Revenue from Contracts with Customers
The group adopted IFRS 15 as of 1 July 2018. The implementation of IFRS 15 has not had an impact on revenue recognition (timing or
quantum) for the group's gold sales. The group also produces silver which is an insignificant by-product. Silver sales have similar trading
terms as gold sales, resulting in revenue from silver being reclassified to revenue in the current year. The group has adopted the full
retrospective adoption with regards to revenue.
Identify the contract(s) with a customer
Identify the performance obligations in the contract
The standard describes a five-step approach for the recognition of revenue:
◗
◗
◗ Determine the transaction price
◗ Allocate the transaction price to the performance obligations in the contract(s)
◗ Recognise revenue when (or as) the entity satisfies the performance obligation.
The group’s significant revenue is from the sale of gold, which is a commodity priced relative to quoted benchmarks. Sales contracts
contain a single obligation to deliver gold at which point in time title and risk pass to the purchaser. The quantum and the price of gold
ounces traded are agreed upfront between parties before delivery.
IFRS 9: Financial Instruments
The group has adopted IFRS 9 as of 1 July 2018. The requirements of IFRS 9 represents a change from IAS 39: Financial Instruments:
Recognition and Measurement. The impact of the change in accounting policy is disclosed below.
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other
comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). The standard eliminates the previous IAS 39 categories of
held to maturity, loans and receivables and available-for-sale. Refer to the table below for a summary of the classification changes relating
to the transition to IFRS 9.
IFRS 9 replaces the 'incurred loss model’ in IAS 39 with an 'expected loss’ model. The new impairment model applies to financial assets
measured at amortised cost and financial assets measured at FVOCI. Under IFRS 9, credit losses are recognised earlier than IAS 39. Refer
to the credit risk disclosure in note 29. An assessment was performed to determine the expected credit losses of financial assets and no
credit losses were recognised.
IFRS 9 indicates a revised approach to hedge accounting, however, this has not impacted the group as hedge accounting is not applied.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
213
ANNUAL FINANCIAL
STATEMENTS
43.
IMPACT OF APPLYING SIGNIFICANT ACCOUNTING POLICIES EFFECTIVE IN THE CURRENT FINANCIAL YEAR
continued
The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for
each class of the group’s financial assets and liabilities at the beginning of the current financial year.
New classification
under IFRS 9
Original classifi cation
under IAS 39
Measured at amortised cost
Measured at amortised cost
Financial assets
Cash and cash equivalents
Long-term receivables
Current portion of long-term
Measured at amortised cost
receivables
Measured at amortised cost
Trade receivables
Measured at FVTOCI
Investments (note 1)
Rehabilitation funds
Measured at FVTPL
Derivative financial instruments asset Measured at FVTPL
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Available-for-sale
Measured at FVTPL
Measured at FVTPL
Financial liabilities
Trade and other payables
Revolving credit facility
Term loan facility
Measured at amortised cost Measured at amortised cost
Measured at amortised cost Measured at amortised cost
Measured at amortised cost Measured at amortised cost
1 July 2018
Carrying
amount
under IFRS 9
USD thousand
Carrying
amount
under IAS 39
USD thousand
921.8
1,746.6
1,252.2
11,102.9
4,133.9
26,550.0
289.5
36,815.3
63,131.2
56,122.4
921.8
1,746.6
1,252.2
11,102.9
4,133.9
26,550.0
289.5
36,815.3
63,131.2
56,122.4
Note 1: As permitted by IFRS 9, the group has designated these investments at FVOCI. Unlike IAS 39, the accumulated fair value reserve related to these investments will never
be reclassified to profit or loss.
Financial assets and liabilities of the company were not impacted by the adoption of IFRS 9.
Change in presentation currency
The group changed the presentation currency for its 2019 financial results from GBP to USD. This change in presentation currency
represents a voluntary change in an accounting policy in terms of IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors.
A change in presentation currency requires the restatement of comparatives.
Management believes that reporting in USD provides more comparable representation of:
◗
◗
◗
◗
the group’s financial position
funding and treasury functions
the group's financial performance
cash flows.
The functional currency (i.e. the currency of the primary economic environment in which the group entities operate) is the South African
rand (ZAR), which remains unchanged. Foreign exchange exposures will therefore be unaffected by the change, although the foreign
currency translation reserve would be presented in USD due to the differential in reporting the functional and presentation currencies.
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214
ANNUAL FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED AND PARENT COMPANY
ANNUAL FINANCIAL STATEMENTS continued
for the year ended 30 June 2019
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
44. CORRECTION OF PRIOR PERIOD ERRORS
Goodwill
During the current financial year, and as a result of restating the group’s presentation currency from GBP to USD, the group identified
goodwill was incorrectly disclosed in the prior financial years at GBP21,000,714. The goodwill related to Barberton Mines mining
operation’s CGU (refer to note 37) and was originally recorded at R303,491,818 upon acquisition of Barberton Mines in July 2007 in its
functional currency (ZAR). The goodwill disclosed in the 30 June 2019 and 30 June 2017 financial years was not translated from ZAR
into the group’s presentation currency at the closing exchange rate. As a consequence this error resulted in the goodwill and total equity
being overstated.
The impact of the error in the 30 June 2018 and 30 June 2017 financial years is summarised below:
Statement of financial position
Goodwill – Previously disclosed in GBP
Goodwill – in USD (translated to USD presentation currency at closing rates)
Goodwill – in USD (corrected to ZAR translation)
Impact through the foreign currency translation reserve
Statement of profit and loss and other comprehensive income
Items that will not be reclassified to the statement of profit or loss (net of taxes):
Foreign currency translation differences impact
30 June 2018
Thousand
30 June 2017
Thousand
21,000.7
27,737.7
22,120.4
5,617.3
21,000.7
27,315.6
23,256.1
4,059.5
5,617.3
4,059.5
The correction of this prior year error impacts total assets and total equity in the statement of financial position, and other comprehensive
income in the statement of profit or loss and other comprehensive income. The corrected goodwill disclosure has no impact on:
◗ The group’s profit after taxation
◗ Basic and diluted earnings per share
◗ The consolidated statement of cash flows.
Reclassification of the realisation costs to cost of production
To ensure alignment with the new revenue standard IFRS 15, and the group’s focus on decluttering the annual financial statements, the
group reclassified realisation costs of USD2.7 million from net on-mine revenue to cost of production in the 30 June 2018 statement
of profit or loss and other comprehensive income. The realisation costs relate to refining costs and by nature is more appropriately
disclosed as a cost of production.
The reclassification impacts the line item disclosure in the 30 June 2018 statement of profit or loss and other comprehensive income
between on-mine revenue and cost of production.
The reclassification of realisation costs in the statement of profit or loss and other comprehensive income for the year ended
30 June 2018 had no effect on the:
◗
group’s profit after taxation
◗
consolidated statement of financial position and cash holdings
◗
group’s basic and diluted earnings per share .
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
215
ANNUAL FINANCIAL
STATEMENTS
44. CORRECTION OF PRIOR PERIOD ERRORS continued
Classification of proceeds from derivative financial instruments in the statement of cash flows
In the prior financial year, the group received USD1.2 million on settlement of derivative financial instruments which was disclosed
as a financing activity in the statement of cash flows. Derivative financial instruments are zero cost collar hedges entered into with
various financial institutions to protect operational cash flows, therefore cash flows associated with these derivative financial instruments
are by nature more closely related to operating activities. On this basis, the proceeds received on settlement of these derivative
financial instruments should have been disclosed in operating activities and not financing activities in the statement of cash flows.
As a consequence this error resulted in the net cash generated from financing activities and net cash used in operating activities being
overstated.
The impact of restating the settlement of derivative financial instruments from financing activities to operating activities is summarised
below:
Net cash generated from financing activities – before
Net cash generated from financing activities – after
Impact on net cash generated from financing activities
Net cash used in operating activities – before
Net cash used in operating activities – after
Impact on net cash used in operating activities
Increase/(decrease) in cash and cash equivalents
30 June 2018
USD thousand
124,830.20
123,617.50
(1,212.70)
(14,608.10)
(13,395.10)
1,212.70
–
The correction of the classification of the proceeds received on settlement of derivative financial instruments from financing activities to
operating activities in the consolidated statement of cash flows for the year ended 30 June 2018 had no effect on the:
◗
◗
◗
group’s profit after taxation
consolidated statement of financial position and cash holdings
group’s basic and diluted earnings per share.
0792 PAR IAR 2019 AFS FA.indd 215
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2019/10/02 2:43 PM
ETHICAL GOLD
Investors and consumers around the world are raising
the alarm regarding where their products, food and raw
materials are being sourced. The rise of impact investing
is causing major funds to divert their investments from
companies with questionable or opaque human and
environmental practices.
WHAT IS IT?
Each of the accrediting organisations in the field such as Fairtrade, Fairmined
and the World Gold Council have slightly differing definitions for ethical,
‘green’ or responsible gold.
In essence, ethical gold can be defined as ‘gold that is mined and recovered
with minimal ecological disruption mining and with environmental
rehabilitation plans in place’. Ethical gold should ideally be recovered without
using toxic chemicals such as cyanide or mercury, although rigorously safe use
and disposal of these is acceptable if so proved.
WHY IS ETHICAL GOLD RELEVANT?
Traditional gold mining is a messy business that can generate volumes of
toxic waste containing cyanide and other harmful chemicals. Irresponsible
mining can destroy irreplaceable ecosystems and has caused much human
suffering and loss of life.
Illegal miners do what they like, while mining companies safeguard their
working environments and employees under the increasingly watchful gaze
of investors and regulators.
The swift rise of illegal mining around the globe is bringing back the worst
mining practices – indentured labour, dangerous working conditions,
environmental damage and social conflict. Criminal syndicates are setting
up or seizing control of illegal mining operations and linking these to supply
networks that underpin human, animal and drug trafficking, as well as money
laundering and corruption.
With an estimated 10 million people1 in sub-Saharan Africa involved in
small-scale or artisanal mining, including at least 30,000 illegal miners in
South Africa2, this situation cannot be wished away.
Government are introducing legislation to legalise and regulate small-scale
mining, with Ghana’s Small-Scale Gold Mining Law of 1989 providing an
early example.
Evander Mines – 8 Shaft sheave wheel and headgear
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WHERE DO I FIND ETHICAL GOLD?
For starters, all gold produced by Pan African Resources
can be defined as ethical gold. Our gold sources are
legal and production is closely tracked. The group’s
safety standards are far superior to industry averages
and our BIOX® and tailings retreatment methodologies
are intrinsically cleaner than traditional chemical
processes.
Organisations such as Fairtrade and Fairmined certify
ethical and recycled gold for general sale. Jewellers and
buyers in growing numbers are switching to certified
gold sources.
A GLEAMING FUTURE FOR ETHICAL GOLD
The World Gold Council launched its Conflict-Free
Gold Standard in 2012 as a precursor to its draft
Responsible Gold Mining Principles3, which will likely be
released within the next year. This framework sets out
clear environmental, social and governance principles on
what constitutes responsible mining. Recognised miners
will have to assure their responsible mining principles
in terms of an Assurance Framework presently
being drafted.
“Clean gold is going to be the
trend of the future, it’s a better
investment in the long run. Dirty
gold is going down the same road
as fur and ivory.”
Stephanie Boyd,
writer, filmmaker and activist in Peru.
1 DELVE: State of the Artisanal and Small-Scale Mining Sector 2019.
2 Martin A. Enact: Uncovered. The dark world of the Zama Zamas
April 2019.
3 Responsible Gold Mining Principles
www.gold.org/about-gold/gold-supply/responsible-gold/
responsible-gold-mining-principles
O
T
H
E
R
I
N
F
O
R
M
A
T
I
O
N
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218
OTHER INFORMATION
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
SHAREHOLDERS’ ANALYSIS
for the year ended 30 June 2019
Register date:
Issued share capital: 2,234,687,537 shares
28 June 2019
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
984
1,773
1,687
452
220
5,116
Number of
shareholders
263
21
41
22
4,093
39
2
5
109
230
38
160
85
8
5,116
Number of
shareholdings
7
5
2
5,109
5,116
Number of
shares
338,892
8,306,064
58,147,753
148,428,888
2,019,465,940
2,234,687,537
Number of
shares
584,482,735
23,107,639
2,823,176
18,929,572
102,459,815
64,145,215
389,777
7,316,371
691,275,851
22,047,021
1,604,181
391,205,339
321,232,941
3,667,904
2,234,687,537
Number of
shares
938,269,699
3,976,125
934,293,574
1,296,417,838
2,234,687,537
%
19.23
34.66
32.97
8.84
4.30
100
%
5.14
0.41
0.80
0.43
80.00
0.76
0.04
0.10
2.13
4.50
0.74
3.13
1.66
0.16
100
%
0.14
0.10
0.04
99.86
100
%
0.02
0.37
2.60
6.64
90.37
100
%
26.16
1.03
0.13
0.85
4.58
2.87
0.02
0.33
30.93
0.99
0.07
17.51
14.37
0.16
100
%
41.99
0.18
41.81
58.01
100
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
219
OTHER INFORMATION
BENEFICIAL SHAREHOLDERS’ HOLDING OF 3% OR MORE
PAR Gold Proprietary Limited
South African State Controlled Entities
Allan Gray Balanced Fund
Allan Gray Equity Fund
Investec Emerging Companies Fund
Investec IAL Special Focus Fund
SHAREHOLDERS’ HOLDING OF 5% OR MORE
Allan Gray Investment Management
PAR Gold Proprietary Limited
Investec Asset Management
Coronation Fund Managers
Public Investment Corporation SOC Limited
Number of
shares
306,358,058
144,072,367
121,435,661
87,917,224
84,185,871
68,209,619
Number of
shares
627,935,516
306,358,058
171,691,227
135,120,604
120,380,866
%
13.71
6.45
5.43
3.93
3.77
3.05
%
28.10
13.71
7.68
6.05
5.39
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220
OTHER INFORMATION
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ALTERNATIVE PERFORMANCE MEASURES
INTRODUCTION
When assessing and discussing Pan African Resources’ reported
financial performance, financial position and cash flows, management
makes reference 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, non-financial APMs and ratio’s,
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 IFRS
measurements and disclosures to aid the user of the integrated
annual report in understanding the activity taking place across the
group’s portfolio. The directors are responsible for preparing and
ensuring the APMs comply with Practice Note 4/2019 (Performance
Measures) of the JSE Listings Requirements.
Financial APMs: These financial measures are usually derived from
the annual financial statements, prepared in accordance with IFRS.
Certain financial measures cannot be directly derived from the annual
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 annual financial statements for
the year ended 30 June 2019.
Non-financial APMs: These measures incorporate certain non-
financial information that management believes is useful when
assessing the performance of the group.
Ratios: Is a ratio calculated using any of the APMs referred to above,
IFRS measures, or a combination of APMs and IFRS measures.
APMs are not uniformly defined by all companies and may not be
comparable with APM disclosures made by other companies, and
they exclude:
◗ Measures defined or specified by an 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 annual 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 the 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.
Their use is driven by characteristics particularly visible in the
mining sector:
◗ Earnings volatility: The sector is characterised by significant
volatility in earnings driven by movements in macroeconomic
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, for example
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 (such as 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.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
221
OTHER INFORMATION
Financial APMs
Group APM
Performance
Equivalent IFRS
measure
Adjustments to reconcile to primary statements
Rational for adjustment
All-in sustaining costs Gold cost of
production
◗ Other related costs as defined by the World Gold Council, including royalty
costs, community costs, sustaining and development capital (excluding non-
gold operations)
All-in cost
Gold cost of
production
◗ Once-off capital (excluding the Elikhulu capital expenditure)
Adjusted EBITDA
Profit after taxation
from continuing
operations
◗ Taxation
◗ Mining depreciation and amortisation
◗ Net finance costs
◗ Impairments or impairment reversals
◗ Profit/loss after tax from discontinued operations
Net adjusted
EBITDA
Profit after taxation
◗ Taxation
◗ Mining depreciation and amortisation
◗ Net finance costs
◗ Impairments or impairment reversals
◗ Profit/loss after tax from discontinued operations
◗ Unrealised fair value gains or losses on financial derivative instruments
undertaken in the normal course of business
Total finance costs
on interest- bearing
facilities
Finance costs
Excludes costs such as:
◗ Agency fees
◗ Commitment fees
◗ Arranging fees
◗ IFRS 9 accounting adjustments
Includes capitalised borrowing costs
Free cash flow
Profit after taxation
◗ Taxation
◗ Mining depreciation and amortisation
◗ Net finance costs
◗ Impairments or impairment reversals
◗ Profit/loss after tax from discontinued operations
◗ Unrealised fair value gains or losses on financial derivative instruments
undertaken in the normal course of business
◗ Adjusted for working capital changes
◗ Adjusted for non-cash flow items as determined in accordance with IAS 7
◗ Less capital expenditure funded through permitted indebtedness
◗ Less dividend paid to shareholders
◗ Less taxation paid
◗ Indicates whether the group
is generating sufficient
revenue to cover other
indirect production costs
and sustaining capital that
is imperative for ongoing
production
◗ Indicates and measures the
group’s ability to fund once-
off capital with internal cash
flows
◗ 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 or certain
accounting adjustments that
can mask underlying changes
in performance
◗ Excludes the impact of
accounting adjustments and
finance costs other than
interest
◗ Reflect available cash flow
to service debt obligations
Headline earnings
Profit after taxation
◗ Profit on disposal of property, plant and equipment and mineral rights
◗ Taxation on profit on disposal of property, plant and equipment and
mineral rights
◗ Fair value movement on assets held for sale
◗ Impairment (reversal)/impairment
◗ Taxation on impairment (reversal)/cost
◗ IFRS 9 accounting adjustments
Statement of financial position
Net debt
Borrowings from
financial institutions
less cash and
related hedges
◗ Indicates to shareholders the
robustness of the group’s
financial position
◗ Excludes the impact of
accounting adjustments from
the net debt obligations of
the group
◗ Refer to note 29
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222
OTHER INFORMATION
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ALTERNATIVE PERFORMANCE MEASURES
continued
Cash cost
Direct production costs attributable to gold sold by the group.
All-in sustaining costs
Incorporates costs related to sustaining current production. All-in sustaining costs are defined by the World Gold Council as operating costs plus
costs not already included therein relating to sustaining the current production, including sustaining capital expenditure. The value of by-product
revenue is deducted from operating costs as it effectively reduces the cost of gold production.
All-in costs
Includes additional costs which relate to the growth of the group. All-in costs start with all-in sustaining costs and adds additional costs which
relates to the growth of the group, including non-sustaining capital expenditure not associated to current operations and includes costs such
voluntary severance pay.
All-in sustaining costs and all-in costs are reported on the basis of a rand per kilogramme of gold and USD per ounce of gold. The USD
equivalent is converted at the average exchange rate applicable for the current financial year as disclosed in the groups operational production
table on
pages 54 to 55. A kilogramme of gold is converted to an ounce of gold at a ratio of 1: 32.1509.
The following tables set out a reconciliation of Pan African Resources’ cost of production as calculated in accordance with IFRS to all-in sustaining
costs and all-in costs for the financial year ended
30 June 2019 and 30 June 2018. The equivalent of a rand per kilogramme- and USD per ounce-basis is disclosed in the group’s operational
production table on
pages 54 to 55.
Mining operations
Tailings operations
Total operations
Year ended
30 June 2019
Bar-
berton
Mines
R million
Evander
Mines
R million
Total
R million
BTRP
R million
ETRP
R million
Elikhulu
R million
Total
R million
Gold cost of production
Cash cost (note 1)
1,118.3
1,118.3
421.7
421.7
0.9
1,540.0
1,540.0
7.5
187.9
187.9
0.3
Bar-
berton
Mines
total
R million
1,306.2
1,306.2
6.9
Evander
Mines
total
R million
864.7
864.7
2.4
Group
total
R million
2,170.9
2,170.9
9.3
–
–
21.2
(0.6)
3.3
(3.7)
24.5
(4.3)
630.9
630.9
1.8
360.5
360.5
1.5
–
–
19.0
19.0
49.4
25.1
74.5
–
–
–
–
–
–
(3.6)
(4.7)
(8.3)
69.7
70.2
–
–
69.7
70.2
82.5
82.5
–
–
–
–
–
–
–
–
–
–
–
–
–
6.6
21.2
(0.6)
3.3
(3.7)
24.5
(4.3)
49.4
6.1
55.5
(3.6)
(4.7)
(8.3)
69.7
70.2
–
–
69.7
70.2
Royalties
Community cost related
to gold operations
By-products credits
Corporate, general and
administrative costs
Reclamation and
remediation – accretion
and amortisation
(operating sites)
Sustaining capital –
development
Sustaining capital –
maintenance
All-in sustaining costs
(note 1)
Expansion capital –
capital expenditure
All-in costs (note 1)
1,331.2
423.5
1,754.7
188.1
82.5
381.0
651.6
1,519.3
887.0
2,406.3
81.2
1,412.4
38.1
461.6
119.3
1,874.0
8.1
196.2
–
82.5
534.6
915.6
542.7
1,194.3
89.3
1,608.6
572.7
1,459.7
662.0
3,068.3
Note 1: This total may not reflect the sum of the line items due to rounding.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
223
OTHER INFORMATION
Mining operations
Tailings operations
Total operations
Bar-
berton
Mines
R million
Evander
Mines
R million
Total
R million
BTRP
R million
ETRP
R million
Elikhulu
R million
Total
R million
Bar-
berton
Mines
total
R million
Evander
Mines
total
R million
Group
total
R million
1,050.2
1,050.2
2,040.4
2,040.4
4.1
10.2
155.5
155.5
0.4
201.7
201.7
0.7
990.2
990.2
6.1
10.4
–
36.6
3.1
(1.9)
13.5
(1.9)
58.4
95.0
(0.3)
(0.3)
(0.6)
68.1
48.4
116.5
–
–
–
–
–
–
–
–
–
–
–
42.4
127.8
170.2
0.6
1,153.4
1,289.7
2,443.1
156.5
202.3
–
161.0
161.0
–
–
14.6
1,168.0
5.3
1,456.0
19.9
2,624.0
84.8
241.3
–
202.3
–
–
–
–
–
–
–
–
–
–
–
–
–
357.2
357.2
1.1
1,145.7
1,145.7
1,251.9
1,251.9
2,397.6
2,397.6
6.5
4.8
11.3
–
–
–
–
–
10.4
–
3.1
(1.9)
13.5
(1.9)
36.6
58.4
95.0
(0.3)
(0.3)
(0.6)
68.1
48.4
116.5
0.6
43.0
127.8
170.8
358.8
1,309.9
1,492.0
2,801.9
–
–
161.0
161.0
84.8
443.6
99.4
1,409.3
5.3
1,658.3
104.7
3,067.6
Year ended
30 June 2018
Gold cost of production
Cash cost (note 1)
Royalties
Community cost related
to gold operations
By-products credits
Corporate, general and
administrative costs
Reclamation and
remediation –accretion
and amortisation
(operating sites)
Sustaining capital –
development
Sustaining capital –
maintenance
All-in sustaining costs
(note 1)
Voluntary
severance pay
Expansion capital –
capital expenditure
All-in costs (note 1)
Note 1: This total may not reflect the sum of the line items due to rounding.
Sustaining capital
Sustaining capital is capital needed to sustain the current production base.
Expansion capital
Expansion capital relates to capital expenditure for the growth of the production base.
Mining operations
Tailings operations
Total operations
Bar-
berton
Mines
USD
million
Evander
Mines
USD
million
Total
USD
million
BTRP
USD
million
ETRP
USD
million
Elikhulu
USD
million
Total
USD
million
9.9
8.6
5.7
1.1
15.6
9.7
–
13.7
2.7
0.4
2.7
14.1
9.9
22.3
8.4
1.5
18.3
23.8
–
0.1
0.6
6.6
0.6
6.7
–
–
–
–
–
–
–
–
37.7
97.8
37.7
97.8
–
0.1
38.3
104.4
38.3
104.5
Bar-
berton
Mines
total
USD
million
Evander
Mines
total
USD
million
9.9
8.7
6.3
7.7
16.2
16.4
–
13.7
40.4
98.2
40.4
111.9
Group
total
USD
million
9.9
22.4
46.7
105.9
56.6
128.3
Sustaining capital
Expansion capital
Total capital
Year
ended
2019
2018
2019
2018
2019
2018
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224
OTHER INFORMATION
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
ALTERNATIVE PERFORMANCE MEASURES
continued
Market capitalisation (no direct IFRS equivalent)
Market value of Pan African Resources’ outstanding shares measured as at 30 June 2019. USD equivalent has been calculated at the closing
ZAR:USD exchange rate of 14:08:1 (2018: 13.72) for the current financial year.
Total shares outstanding (number million)
Share price on 30 June 2019 (USD cents)
Market capital (USD million)
30 June 2019
30 June 2018
2,234.7
13.21
295.2
2,234.7
9.84
219.9
Net debt
Net debt is calculated as total borrowings from financial institutions (before IFRS 9 accounting adjustments) less cash and cash equivalents
(including derivatives that are entered into in connection with protection against, or benefit from, fluctuation in exchange rate or commodity prices).
A reconciliation to the consolidated balance sheet is provided in note 29 to the consolidated annual financial statements.
Adjusted EBITDA
Adjusted EBITDA is a measure of the group’s operating performance and is calculated as net profit or loss for the group before interest and
tax, before any amount attributable to the amortisation of intangible assets and the depreciation of tangible assets and before any extraordinary
items or the impairment of assets.
Mining operations
Tailings operations
Total operations
Bar-
berton
Mines
R million
Evander
Mines
R million
Total
R million
BTRP
R million
ETRP
R million
Elikhulu
R million
Total
R million
Bar-
berton
Mines
total
R million
Evander
Mines
total
R million
Group
total
R million
206.9
218.3
425.2
145.4
61.3
318.6
525.3
352.3
598.2
950.5
71.0
277.9
–
0.2
218.5
(251.4)
71.2
496.4
(251.4)
32.6
178.0
–
3.7
65.0
–
122.8
441.4
–
159.1
684.4
–
103.6
455.9
–
126.7
724.9
(251.4)
230.3
1,180.8
(251.4)
277.9
(32.9)
245.0
178.0
65.0
441.4
684.4
455.9
473.5
929.4
190.0
(2,181.6)
(1,991.6)
78.8
1.7
57.0
247.0
–
–
106.1
(2,075.5)
161.0
1,644.5
163.1
(1,828.5)
161.0
1,644.5
15.8
94.6
–
–
12.3
14.0
–
136.6
247.0
(270.0)
(23.0)
94.6
150.6
–
–
–
–
–
–
80.5
268.8
(2,179.9)
(1,911.1)
28.1
108.6
–
136.6
72.8
341.6
–
–
118.4
(2,061.5)
161.0
1,781.1
191.2
(1,719.9)
161.0
1,781.1
245.2
341.6
(119.4)
222.2
Adjusted EBITDA
by operation
Net income before
finance income and
finance costs
Mining depreciation
and amortisation
EBITDA
Impairment reversal
Adjusted EBITDA
– 2019
Net income before
finance income and
finance costs
Mining depreciation
and amortisation
EBITDA
Retrenchment costs
Impairment
Adjusted EBITDA
– 2018
Adjusted EBITDA group
Net income before finance income and finance costs
Mining depreciation and amortisation
EBITDA
Impairment (reversal)/impairment
Adjusted EBITDA
30 June 2019
USD thousand
30 June 2018
USD thousand
58,408.1
16,227.8
74,635.9
(17,853.5)
56,782.6
14,985.3
6,625.5
21,610.8
10,763.4
32,374.0
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OTHER INFORMATION
Net adjusted EBITDA
Net adjusted EBITDA starts with adjusted EBITDA adjusted for any
entries made to unrealised fair value gains or losses on financial derivative
instruments that are undertaken in the normal course of business. A
reconciliation from adjusted EBITDA to net adjusted EBITDA is provided
in note 29 to the consolidated annual financial statements.
Net debt to net adjusted EBITDA ratio
This ratio measures the number of years it would take for Pan
African Resources to pay back its debt if net debt and net adjusted
EBITDA are held constant and is calculated as net debt divided by
net adjusted EBITDA.
Total finance costs on interest-bearing facilities
Is defined as interest payable on the group’s debt facilities and has
been calculated in note 29 to the consolidated annual financial
statements.
Free cash flow
Free cash flow starts with adjusted EBITDA and is adjusted for
changes in net working capital, non-cash flow items as determined
by IAS 7, cash flow expenditure not funded from permitted
indebtedness, distributions to shareholders and taxation payments.
A reconciliation from adjusted EBITDA to free cash flow has been
calculated in note 29 to the consolidated annual financial statements.
Headline earnings
Headline earnings, a JSE-defined performance measure, is reconciled
from profit/(loss) after taxation in note10 to the consolidated annual
financial statements.
RATIOS
Return on shareholder funds
This ratio measures how much is returned to equity shareholders as
a percentage of the amount invested in Pan African Resources.
It is calculated as profit/(loss) after taxation divided by total equity.
Net debt to equity ratio
This ratio measures the degree to which Pan African Resources
finances its operations through debt and is calculated as net debt
divided by total equity. This ratio has been calculated in note 29 to
the consolidated annual financial statements.
Interest cover ratio
This ratio measures the group’s ability to pay interest on its
outstanding debt and is calculated as total finance costs for interest-
bearing facilities divided by net adjusted EBITDA. This ratio has been
calculated in note 29 to the consolidated annual financial statements.
Debt service cover ratio
This ratio measures the cash flow available for the group to pay its
debt obligations and is calculated as free cash flow divided by total
finance costs from interest-bearing facilities.
Net asset value per share
Is calculated as total equity divided by the total number of shares in
issue less treasury shares held by the group.
Total equity
Shares in issue (million)
Treasury shares
Net asset value per share
(USD cents)
30 June 2019
USD thousand
30 June 2018
USD thousand
183.6
2,234.7
(306.4)
147.0
2,234.7
(306.4)
9.52
7.62
Current ratio
This ratio liquidity ratio that measures the group's ability to pay
short-term debt obligations and is calculated as current assets divided
by current liabilities and has been calculated in the group’s five year
review on
pages 48 and 49.
Price earnings ratio
Is calculated as the last sale price for the year divided by the earnings per share either in cents or in pence per the table below:
30 June
2019
Cents
2019
Pence
2018
Cents
2018
Pence
2017
Cents
2017
Pence
2016
Cents
2016
Pence
2015
Cents
2015
Pence
Earnings per share
27.89
1.54
(86.03)
(5.15)
19.81
1.14
30.20
1.41
11.48
0.64
Dividend yield
Is calculated as last traded price divided by dividend per share either in cents or in pence per the table below:
30 June
2019
Cents
2019
Pence
2018
Cents
2018
Pence
2017
Cents
2017
Pence
2016
Cents
2016
Pence
2015
Cents
2015
Pence
Dividends per share
–
–
8.28
0.45
15.44
0.88
11.47
0.53
14.10
0.82
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OTHER INFORMATION
GLOSSARY
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
DEFINITION OF TERMS USED IN THIS REPORT
AEL
AGM
Aids
AIM
Air Emissions Licence
Annual general meeting
Acquired Immune Deficiency Syndrome
Alternative Investment Market, the London Stock Exchange’s international market for smaller growing
companies
African National Congress
Alternative performance measures
Broad-based black economic empowerment
Black economic empowerment
Barberton Mines Proprietary Limited
The Biological Oxidation (BIOX®) gold extraction process was developed at Barberton Mines. It is an
environmentally friendly process of releasing gold from the sulphide that surrounds it by using bacteria
Barberton Mines’ Transformation Trust
The board of directors of Pan African Resources, as set out on
pages 100 and 101
TSF located at Fairview which the BTRP treated historically
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
Carbon dioxide emissions
An act of the Parliament of the United Kingdom which forms the primary source of UK company law
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, social and governance
Electricity Supply Commission, South African electricity supplier
Exchange-traded funds
Evander Tailings Retreatment Plant commissioned in October 2015
European Union
Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited
Executive committee of Pan African Resources
Financial Accounting Standards Board
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
Gas chromatography
Gas chromatography mass spectrometry
Greenhouse gas
Gigajoule
Grams/tonne
Global Reporting Initiatives
Harmony Gold Mining Company Limited
Historically disadvantaged South African
Human immunodeficiency virus
Heads of departments
International Accounting Standards
International Accounting Standards Board
ANC
APMs
BBBEE
BEE
Barberton Mines
BIOX®
BMTT
the board
Bramber
Brownfield project
BTRP
CIL
Co2e
Companies Act 2006
CSI
Deloitte
DMR
DRA Global
Elikhulu
Elikhulu term loan facility
ESG
Eskom
ETF
ETRP
EU
Evander Mines
Exco
FASB
FIFR
FRC
FTSE
Funding Company
GBP
GC
GCMS
GHG
GJ
g/t
GRI
Harmony
HDSA
HIV
HODs
IAS
IASB
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
227
OTHER INFORMATION
DEFINITION OF TERMS USED IN THIS REPORT
IFRIC
IFRS
IIRC
IT
JSE
King IV™
km
Koz
KPIs
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
International Integrated Reporting Council
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)
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
Main Reef Complex
Mineral Resource Management
Mass spectrometry
Million tonnes
Multi-lateral trading facility
Nominated adviser appointed in accordance with the London Stock Exchange’s AIM Rules for
Companies
National Union of Mineworkers
Operations committee of Pan African Resources
ounces
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 Resources Senior Management Share Scheme
Pan African Share Appreciation Bonus Plan (previous scheme for corporate senior managers)
Pay as you earn income tax
Platinum group elements: platinum, palladium, rhodium and gold
Platinum group metals
Phoenix Platinum Mining Proprietary Limited, a subsidiary of Pan African Resources
A person is a prescribed officer of the company for all purposes of the South African 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
PricewaterhouseCoopers Inc.
Rand Refinery Limited
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
Rand Merchant Bank, a division of FirstRand Bank Limited
South Africa
LED
LSE
LTIFR
Manco
MC Mining
Metorex
Mining Charter
MMR
Moz
MPRDA
MRC
MRM
MS
Mt
MFT
Nomad
NUM
Opsco
oz
PACOS
Pan African Resources
PAR Gold
PARSMSS
PASABP
PAYE
PGE
PGMs
Phoenix Platinum
Prescribed officers
PwC
Rand Refinery
Remchannel
Remco
RIFR
RMB
SA
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228
OTHER INFORMATION
GLOSSARY continued
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2019
DEFINITION OF TERMS USED IN THIS REPORT
SA HoldCo
SAICA
SAMESG Guideline
Pan African Resources SA Holdings Proprietary Limited
South African Institute of Chartered Accountants
South African guideline for the reporting of environmental, social and governance parameters within
the mining, oil and gas industries
South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves,
2016 edition
South African Revenue Services
Skills Development Levy
Safety, health, environment, quality and community
Social and labour plan
South African Council for Natural Scientific Professions
South African Companies Act 71 of 2008
Tonnes
Tuberculosis
The financial year ended 30 June 2019
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 2018
Pan African Resources’ 2019 integrated annual report
UK Corporate Governance Code, which sets out standards of good practice in relation to board leadership
Total recordable injury frequency rate
Tailings storage facility
United Association of South Africa
Unemployment Insurance Fund
Uitkomst Colliery Proprietary Limited
United Kingdom
United Nations Sustainable Development Goals
United States dollar
15% value-added tax in South Africa
Volume weighted average price
South African rand
Zwartkoppie
SAMREC Code
SARS
SDL
SHEQC
SLP
SACNASP
South African Companies Act
t
TB
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
TSF
UASA
UIF
Uitkomst Colliery
UK
UN SDGs
USD
VAT
VWAP
ZAR or R
ZK
FREQUENTLY USED FINANCIAL TERMS
CFD
CGU
CTC
ECL
EBITDA
EPS
ESOP
FVOCI
FVTPL
GDP
HEPS
JIBAR
NPV
OCI
PPI
RCF
STI
WACC
Contract for difference
Cash-generating unit
Cost to company
Expected credit losses
Earnings before interest, taxes, depreciation and amortisation
Earnings per share
Employee share ownership plan
Fair value through other comprehensive income
Fair value through profit and loss
Gross domestic product
Headline earnings per share
Johannesburg Inter-bank Acceptance Rate
Net present value
Other comprehensive income
Producer price inflation
Revolving credit facility
Short-term incentive
Weighted average cost of capital
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229
OTHER INFORMATION
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 that the expectations
expressed in such forward-looking statements
or forward-looking information are based on
reasonable assumptions, expectations, estimates
and projections. These statements, however,
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.
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
REGISTERED OFFICE
Suite 31
Second Floor, 107 Cheapside
London
EC2V 6DN
United Kingdom
Office: +44 (0) 20 7796 8644
CHIEF EXECUTIVE OFFICER
Cobus Loots
Pan African Resources PLC
Office: +27 (0) 11 243 2900
FINANCIAL DIRECTOR
Deon Louw
Pan Africa Resources PLC
Office: +27 (0) 11 243 2900
NOMINATED ADVISER AND
JOINT BROKER
John Prior
Numis Securities Limited
Office: +44 (0) 20 7260 1000
JOINT BROKERS
Ross Allister/David McKeown
Peel Hunt LLP
Office: +44 (0) 20 7418 8900
Jeffrey Couch/Thomas Rider/Neil Elliot
BMO Capital Markets Limited
Office: +44 (0) 20 7236 1010
COMPANY SECRETARY
Phil Dexter/Jane Kirton
St James's Corporate Services Limited
Office: +44 (0) 20 7796 8644
JSE SPONSOR
Ciska Kloppers
Questco Corporate Advisory
Proprietary Limited
Office: +27 (0) 11 011 9200
PUBLIC AND INVESTOR
RELATIONS SA
Julian Gwillim
Aprio Strategic Communications
Office: +27 (0) 11 880 0037
PUBLIC AND INVESTOR
RELATIONS UK
Bobby Morse/Chris Judd
Buchanan
Office: +44 (0) 20 7466 5000
paf@buchanan.uk.com
SHAREHOLDERS’ DIARY
Financial year-end
Results announcement
Integrated annual report posted
Annual general meeting
Interim results announcement
30 June 2019
18 September 2019
28 October 2019
28 November 2019
18 February 2020
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www.panafricanresources.com
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