‘Innovative’ Pan African funding avoids dilution, says analyst
UK-based Edison analyst Lord Ashbourne has hailed dual-listed Pan African Resources’ funding package for its Mintails dump retreatment project, outside Johannesburg, as an “innovative” transaction that avoided dilution.
The funding, which was completed early this week, entails a synthetic forward sale agreement with Rand Merchant Bank (RMB), whereby the mining company will sell 4 846 oz a month of gold to RBM for 24 months, starting in March at a fixed price of R1.025-million a kilogram ($1 750/oz) in return for an upfront premium of R400-million.
Including the upfront premium, the effective price at which Pan African will sell these ounces will be R1.36-million a kilogram ($1 938/oz) over the full 24-month period.
“At a gold price of $1 750/oz, we estimate that this funding will be free to Pan African. At a gold price of $1 938/oz, we estimate that RMB will recoup its capital. At a gold price of $1 956/oz, we estimate that it will provide RMB with a 10% (annualised) internal rate of return.
“As such, we believe that this transaction represents an innovative form of financing for Pan African as well as avoiding unnecessary equity dilution for its shareholders,” said Ashbourne.
Pan African Resources said early this week that it was finalising detailed engineering optimisation studies for its Mintails dump retreatment project, with environmental authorisation and related permitting expected within the next four months.
Thereafter, it will start with construction on the project and reach steady state production by December 2024.
The company in October 2022 acquired all the shares of Mogale Gold and Mintails South Africa Soweto Cluster, which are tailings storage facilities.
Pan African also produces gold from the Barberton retreatment project, the Elikhuku and Evander underground projects, as well as the Egoli project.
Comments
The
functionality
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation