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Polished year from gold miner Pan African Resources

Higher production, profits, and payouts from South African gold miner
September 15, 2021
  • Miner announces buy-back programme, 1.27¢ final dividend 
  • Profits climb but costs also up

Gold miners have had two years of strong prices and cash flow to fix up shoddy balance sheets, invest in new projects and hand investors cash at record levels. Even with rising costs now eating into profits, Pan African Resources (PAF) is certainly making the most of the good times.

The South African miner saw its adjusted cash profits climb almost a third last year and now the figure is up another two thirds in the year to 31 June, hitting $144m (£105m). 

This was driven by a 16 per cent increase in the average gold price received, at $1,826 per ounce (oz), and a 12 per cent increase in gold produced, to 201,777oz. 

Pan African’s all-in sustaining cost (AISC), a measure that includes capital spending as well as production costs, climbed 10 per cent in its financial year. This was driven by higher power costs and a stronger South African rand, and also included a $7m loss on from hedging contracts. Overall production costs were almost a fifth higher than broker Peel Hunt’s forecast of $176m. 

The company had an “excellent” year, said chief executive Cobus Loots. He said Pan African’s focus was able to cut down debt as well as “continuing to invest in our assets and increasing dividends to shareholders”. The company has also announced a buyback programme, although has not outlined the size or timeline. 

Peel Hunt forecasts Pan African's adjusted earnings per share will climb from 3.9¢ this year to 6.5¢ in 2022. Pan African has consistent operations and shareholder returns should encourage yield buyers. Buy. 

Last IC View: Buy, 22p, 16 Feb 2021

PAN AFRICAN RESOURCES (PAF)  
ORD PRICE:17pMARKET VALUE:£ 330m
TOUCH:17-17.1p12-MONTH HIGH:27.1pLOW: 15.2p
DIVIDEND YIELD:5.4%PE RATIO:6
NET ASSET VALUE:15¢NET DEBT:8%
Year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201712544.92.600.49
201814612.8-6.79nil
201921846.21.970.13
202027452.22.300.84
20213691053.871.27
% change+35+101+68+52
Ex-div:02 Dec   
Payment:14 Dec   
£1=$1.37