- Rising production through a step-up at Barberton Mines
- A marked reduction in net borrowings
A pleasing operational performance at Barberton Mines enabled Pan African Resources (PAF) to boost gold production by 5.9 per cent to 98,386 ounces (oz) at the half-year mark, leaving it on track to match full-year production guidance of around 190,000 oz.
Comparative figures for the Aim-traded miner benefited from a 22 per cent increase in the gold price through 2020. The combination of favourable pricing and rising production fed through to a 178 per cent increase in net operating cash to $28.1m (£20.2m). In turn, this enabled the company to bring down net debt by almost half.
Pan African is moving ahead with projects to bolster its environmental, social and governance credentials, most notably the 9,975 megawatt (MW) solar photovoltaic plant at Evander Mines, with commissioning planned for the third quarter of this year.
A laudable operational performance, but the price outlook for gold depends to a large extent on US dollar weakness tempered by the yield on 10-year Treasuries. On balance, we think the long-term outlook for the underlying commodity is generally favourable. Buy.
Last IC view: Buy, 12.7p, 18 Feb 2020
| PAN AFRICAN RESOURCES (PAF) | ||||
| ORD PRICE: | 21.9p | MARKET VALUE: | £355m | |
| TOUCH: | 21.8-21.9p | 12-MONTH HIGH: | 28.2p | LOW: 8.3p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 15¢ | NET DEBT: | 27% | |
| Half-year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
| 2019 | 133 | 27.2 | 1.14 | nil |
| 2020 | 184 | 60.0 | 2.11 | nil |
| % change | +38 | +121 | +85 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.39 | ||||
