21 May - 11 min read

Operational and growth projects update

Operational and growth projects update

Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985 with registered
number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
ADR ticker code: PAFRY
(Pan African or the Company or the Group)


OPERATIONAL AND GROWTH PROJECTS UPDATE

Pan African is pleased to provide shareholders with an update on the Company’s operations and
growth projects.

HIGHLIGHTS

   -   FY 2021 production guidance increased to ca. 195,000oz of gold for the financial year
       ending 30 June 2021, exceeding the previous production guidance of ca. 190,000oz.
   -   The Group continues to maintain stringent policies and protocols to mitigate the effects of
       the ongoing COVID-19 pandemic on employees and operations.
   -   Production from Evander’s 8 Shaft pillar has significantly improved in the 2nd half of the
       2021 financial year, with average production of ca. 3,400oz per month, for the last three
       months. The 8 Shaft pillar has a remaining life in excess of 2 years, and is expected to
       produce ca. 80,000oz of gold during its remaining life of mine (LoM) (ca. 34,000oz per
       annum).
   -   As part of its continuous evaluation of the respective merits of its growth opportunities and
       capital expenditure priorities, the Group has completed an internal study into the extensive
       gold resources at the 24 level at Evander’s Underground operations (24 Level project), with
       ca. 100,000oz recoverable, and accessible through the 8 Shaft number 2 decline. The 24
       Level project will extend the LoM of Evander with a minimum of two and a half years.
   -   The independent fatal flaw analysis and subsequent concept study completed on the
       Mintails SA’s tailings resources (Mintails Transaction) has yielded positive results. The
       initial phase of this project has the potential to produce some 533,000oz of gold over an
       estimated 12 year LoM at an AISC of ca. $800/oz, according to the initial studies.
   -   In light of the positive concept study on the merits of the Mintails Transaction and the
       reassessment of the mining opportunity at the 24 Level project, the Group has reprioritised
       its capital expenditure programmes as follows:
            o It will now implement a phased approach for the development of the Group’s Egoli
                project, with significantly reduced upfront capital requirements, materially
                reducing the requirement to raise debt to fund this project in the ensuing years
            o It will complete a pre-feasibility study (PFS) during the third quarter of the 2021
                calendar year and a definitive feasibility study during the first quarter of the 2022
                calendar year on the Mintails Transaction;
            o It has commenced preparatory work for the mining of the 24 Level project
   -   Site clearance and procurement of major components for the Evander Mines’ solar
       photovoltaic plant (Evander Solar Plant) has commenced and the project is on track for
       commissioning during the third calendar quarter of 2021.
   -   The Group expects to maintain a similar production level for the 2022 financial year.


Pan African CEO Cobus Loots commented:
“We are pleased with the robust operational performance for the year to date, and that we again
expect to exceed our original full year production guidance.

We are encouraged by the outcome of the recently completed concept study for the Mintails
Transaction, which confirms our initial assessment of the asset’s potential. Our team is now focussed
on completing the pre-feasibility study early in our next financial year.
The Evander 8 Shaft pillar project is now performing in line with our expectations, and generating the
anticipated returns on this capital investment.

We have re-evaluated our capital expenditure priorities following the receipt of the positive Mintails
concept study and the 24 Level project study, resulting in a more phased approach for the
development of the Egoli project. This approach will extend the life of Evander 8 shaft and reduce our
reliance on debt funding for Egoli’s development, enabling the Group to maximise the value of our
assets and also returns to our shareholder.

The successful completion of the Evander Solar Plant in the next months will pave the way for further
renewable energy initiatives, so as to further reduce our carbon footprint and further increase
operating margins”



INCREASED PRODUCTION GUIDANCE FOR 2021 FINANCIAL YEAR

The Group now expects to produce ca. 195,000oz for the 2021 financial year, representing an
increase of 5,000oz relative to the previous production guidance of 190,000oz.

Based on current planning, the Group expects to maintain similar production levels for the 2022
financial year.



COVID-19 UPDATE

The Group remains vigilant in its efforts to prevent and mitigate the impact of the COVID-19 virus on
its people and operations. It continues to diligently implement operating procedures and protocols and
to monitor the impact of COVID-19 on our operations and surrounding communities.



UPDATE ON GROWTH PROJECTS

Mintails Transaction

1. Transaction background and rationale

As announced on 6 November 2020, Pan African entered into conditional sale-of-shares agreements
(Sale Agreements) to acquire the total share capital and associated shareholder loans and other
claims of Mogale Gold Proprietary Limited (Mogale Gold) and Mintails SA Soweto Cluster Proprietary
Limited (MSC), collectively Mintails SA.


2.   Initial fatal flaw analysis and concept study update
In January 2021, Pan African commissioned DRA Global to complete a fatal flaw analysis on Mintails
SA’s assets to be acquired which identified no fatal flaws on either the Mogale Gold or MSC assets.
Following the positive findings of the fatal flaw analysis, a concept study was conducted on the
Mogale Gold assets, including a high-level financial evaluation. This study indicated an optimal tailing
throughput feed of ca. 800,000 tonnes per month, with anticipated recoveries of ca. 53%. The
anticipated upfront capital required of ca. ZAR1 000 million and ZAR1,700 million capital over the
LoM will be confirmed during the next stage of the project planning.
The concept study did, however, identify areas that would require further evaluation during the pre-
feasibility stage of the project, including:
    •    TSF deposition capacity constraints, which would require additional development to support
         the anticipated life of the project; and
    •    The availability of water sources in the area to supply the re-mining of the Mogale Gold or
         MSC assets.
    •    Additional confirmatory process test work to confirm gold recoveries.


Key inputs used in the concept study’s financial evaluation include:
    •    Real discount rate post tax – 10.71%
    •    Gold price – US$1,770/oz
    •    Exchange rate – US$/ZAR14.50
    •    NPV – ZAR1,469 billion (US$101.3 million at an exchange rate of US$/ZAR: 14.50)
    •    RATIRR* – 42.8%
    •    Project capital – ZAR1,000 million (US$68.9 million at an exchange rate of US$/ZAR: 14.50)
    •    Expected LoM – 12 years
    •    Average annual production – 44,400oz
    *Real after-tax internal rate of return



3. Future development


Pan African and its subsidiaries have a proven track record of successfully commissioning and
operating tailings retreatment projects, as demonstrated by the Barberton tailings re-treatment
plant, the Evander tailings re-treatment plant and most recently its flagship Elikhulu operation.

A pre-feasibility study will be completed during the third quarter of the 2021 calendar year, and, if
positive, will be progressed to a definitive feasibility study, expected to be completed during the first
quarter of the 2022 calendar year.


EVANDER MINES UNDERGROUND STRATEGY

8 Shaft pillar

Following technical challenges experienced during the initial phases of the 8 Shaft pillar mining,
production levels anticipated in the original feasibility study have now been achieved. This operation
is expected to produce an average of 34,000 oz per year over its remaining LoM of two years and
five months, measured from end of the 2021 financial year.
The Group reassesses the respective merits of its growth opportunities and its capital expenditure
priorities on an ongoing basis. This process, together with the early-stage attraction of the Mintails
Transaction, has resulted in the reappraisal of the current Egoli project development plan, as well as
a re-evaluation of existing underground mining opportunities at Evander Mines’ 24 level.

This capital expenditure reprioritisation is expected to result in improved cash returns and will
require a substantially reduced capital outlay and commensurate reduced debt levels, when
compared to the previous Egoli development plan.

The table below details the available Mineral Reserves and Resources as at 30 June 2020 (prepared
in accordance with SAMREC Code), accessible through existing 8 Shaft infrastructure, at Evander’s
Underground operations.

 Category                           Tonnes            Grade (g/t)      Gold (kg)         Gold (oz)

                                          Evander 8 Shaft Pillar

 Proved Mineral Reserves                  342 068               9.83             3 362          108 000

                                   Phase 1 (Evander 8 Shaft 24 level)

 Measured Mineral Resources*              301 788              10.46             3 158          101 523

                            (Possible Phase 2) (Evander 8 Shaft 25-26 level)

 Measured Mineral Resources               759 781              11.99             9 110          292 878

 Indicated Mineral Resources              698 700              12.63             8 827          283 790

 Inferred Mineral Resources               328 950              12.93             4 252          136 715

                                               Egoli Project

 Proved Mineral Reserves                  447 163               5.90             2 640           85 000

 Probable Mineral Reserves              2 987 864               6.72           20 076           645 000

 Total Mineral Inventory                5 866 315               8.77           51 424         1 652 907

*The Phase 1 Mineral Resources can be converted to a Proved Mineral Reserve at 30 June 2021.

8 Shaft decline

Following the cessation of deep level underground mining at Evander during May 2018, after a
decline in the Rand gold price at the time, the Group has continued to maintain the infrastructure’s
integrity, to preserve the mineral resources, and conduct limited vamping operations.

As part of its medium-term capital deployment strategy, an internal technical and economic study,
to assess merits of mining the number 2 decline on 24 Level project (Phase-1). This study will be
followed by a Phase-2 study that will assess the merits of extending mining to 25 and 26 levels. Phase-
2 will also be designed to utilise a proven on-reef mining layout, minimising waste and significantly
reducing the time for ore body access development.

Phase-1 mining will extend Evander’ 8 shaft production profile, post cessation of the 8 Shaft pillar
mining, for an additional two and a half years and maintain annual production of approximately
34,000oz per year. The 24 Level project will result in a five-year life for the Evander 8 Shaft complex.
An integral component of the Phase-1 study was the identification of risk mitigating measures to
address the major challenges previously encountered during the mining of the Kinross orebody and
ensure economical extraction.

The principal challenges identified and the planned mitigation measures are outlined below:

 Factors                               Prior to 2018 curtailment of         Current Study mitigation
                                       operations                           measures

 Low efficiencies                      High temperatures due to             Installation of a new
                                       inadequate refrigeration capacity    refrigeration plant at a
                                                                            capital investment of
                                                                            approximately ZAR170
                                                                            million.
 Ore and waste separation              Waste was previously hoisted to      Underground waste
                                       surface                              handling and storage
                                                                            facilities are to be installed
                                                                            at a capital investment of
                                                                            approximately ZAR60
                                                                            million

 Face time                             Limited face time due to excessive   Installation of a man
                                       underground travelling distances     carriage on 24 level

 Labour intensive ore                  Production requirements entailed     Reduced tonnage profile
 handling infrastructure               three shifts to operate on a         requires only one shift to be
                                       continuous basis                     manned to meet planned
                                                                            production targets



Key inputs used in the internal technical and financial assessment include:
    •    Real discount rate post tax – 10.71%
    •    Gold price – US$1,770/oz
    •    Exchange rate – US$/ZAR14.50
    •    NPV – ZAR126.1 million (US$8.7 million at and exchange rate of US$/ZAR: 14.50)
    •    RATIRR* – 26.6% (calculated based on Phase-1 cash flows only)
    •    Project capital required – ca. ZAR320 million, to be funded internally and from existing
         facilities
    *Real after-tax internal rate of return



Egoli Project (Egoli)

Following the reprioritisation of the Group’s capital expenditure programmes, a more phased
approach for the development of the Egoli Project will be followed, concurrent with the 8 Shaft
Phase-1 and possible Phase-2 developments at 24, 25 and 26 level, as described above.

Egoli’s first phase development will entail the dewatering of the number 3 decline infrastructure to
19 level, where a drilling platform will be established to enable infill drilling, in order to finalise short-
term mine planning.
The Egoli project’s phased development approach and production profile will coincide with the
depletion of the 24 Level mineral resources.



EVANDER MINES’ SOLAR PHOTOVOLTAIC PLANT

During the first calendar quarter of 2021, the Group contracted with juwi Renewable Energies
Proprietary Limited, to construct a 9,975MW solar photovoltaic plant at Evander Mines. Civil works
and the procurement of major components have commenced and commissioning is anticipated in
the third calendar quarter of 2021.

The solar photovoltaic plant will provide an estimated 30% of Elikhulu’s power requirements,
resulting in a reduction of fossil fuel-generated power and an expected annual CO2 saving of more
than 26,000t in the first full year of operation. A feasibility study for a similar solar photovoltaic plant
at Barberton Mines is currently being undertaken as well as expanding the Evander plant currently
being constructed to meet the Evander underground power requirements and to reduce the
escalating cost of electricity.



COMPETENT PERSON

The competent person for Pan African Resources, Hendrik Pretorius, the manager for group mineral
resource management, 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, Gauteng
Province, South Africa), as well as a member in good standing of the Geological Society of South
Africa (GSSA – CSIR Mining Precinct, Corner Rustenburg and Carlow Roads, Melville, Gauteng
Province, South Africa). Hendrik has 17 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) degree in
Geology from the University of Johannesburg as well as a Graduate Diploma in Mining Engineering
from the University of the Witwatersrand. Hendrik has reviewed, and approved, in writing the
information contained in this document as it pertains to Mineral Resources and Mineral Reserves.

For more detail on the reported Mineral Resources and Mineral Reserves, the FY2020 annual Mineral
Resource and Mineral Reserve Report is published on our website www.panafricanresources.com



The information contained in this update is the responsibility of the Pan African board of directors
and has not been reviewed or reported on by the Group’s external auditors.



Rosebank

21 May 2021

This announcement contains inside information.

For further information on Pan African and its ESG initiatives, please visit the Company's website at
www.panafricanresources.com
Contact information

Corporate Office                                 Registered Office

The Firs Office Building                         Suite 31

2nd Floor, Office 204                            Second Floor

Cnr. Cradock and Biermann Avenues                107 Cheapside

Rosebank, Johannesburg                           London

South Africa                                     EC2V 6DN

Office: + 27 (0)11 243 2900                      United Kingdom

info@paf.co.za                                   Office: + 44 (0)20 7796 8644

Cobus Loots                                      Deon Louw

Pan African Resources PLC                        Pan African Resources PLC

Chief Executive Officer                          Financial Director

Office: + 27 (0)11 243 2900                      Office: + 27 (0)11 243 2900

Phil Dexter/Jane Kirton                          Ross Allister/David McKeown

St James's Corporate Services Limited            Peel Hunt LLP

Company Secretary                                Nominated Adviser and Joint Broker

Office: + 44 (0)20 7796 8644                     Office: +44 (0)20 7418 8900

Ciska Kloppers                                   Thomas Rider/ Nick Macann

Questco Corporate Advisory Proprietary Limited   BMO Capital Markets Limited

JSE Sponsor                                      Joint Broker

Office: + 27 (0)11 011 9200                      Office: +44 (0)20 7236 1010

Hethen Hira                                      Website: www.panafricanresources.com
Pan African Resources PLC

Head: Investor Relations
Tel: + 27 (0)11 243 2900
E-mail: hhira@paf.co.za

Date: 21-05-2021 07:57:00
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