Pan African gets funds for mine

Pan African Resources raised R705m in a discounted share placement in a “well-supported” accelerated bookbuild and it will secure a further R1bn in a debt facility in coming months to build its Elikhulu tailings retreatment project at Evander gold mine.

London- and Johannesburg-listed Pan African placed the maximum shares its investors had permitted it to issue, adding 291.5-million shares at 14p, or R2.42, each to raise the R705m. The stock closed at 16p and R2.72 on Tuesday.

The share issue was said to be oversubscribed but CEO Cobus Loots declined to give any details, instead pointing out that more than half the shares placed had been taken by UK-based investors.

“There’s still appetite for a South African mining project showing that a good, quality project can be funded here,” Loots said. “We have to make it work now.”

The seven-year R1bn underwritten debt facility was agreed to in principle with Rand Merchant Bank. The capital would be repaid in equal quarterly instalments after a two-year grace period “at a competitive prevailing interest rate”.

Pan African said the debt facility had credit approval but remained subject to finalisation of definitive legal agreements, and the fulfilment of conditions precedent including licensing approvals. Loots said he expected a signed deal by early June. Elikhulu, the second tailings retreatment project at Evander in Mpumalanga, will deliver 56,000oz of gold a year for eight years starting at the end of 2018 and then 45,000oz of gold for five years.

“The debt redemption profile is matched to that of the Elikhulu project’s cash flows and the projects funding is not expected to impact on Pan African’s ability to pay dividends during the construction period,” the company said. Pan African’s definitive feasibility study showed that at a gold price of $1,180/oz the project had a net present value of $75.6m and an internal rate of return of 34%.

Elikhulu is forecast to have an all-in sustaining cost of $527/oz over its 13-year life.

Additional capital inflows will come from the R275m realised from the sale of its Uitkomst colliery in KwaZuluNatal to Coal of Africa.