[miningmx] — PAN African Resources (Pan African) is close to announcing the final
details on the spin-off of its Manica gold project in Mozambique, saying it would
largely be a shares-based transaction.
This was one of the reasons why the company decided to seek more funds than
initially indicated from shareholders for the R1.5bn acquisition of Evander Mines
from Harmony Gold Mining Company.
Pan African announced on Friday it has secured R700m through rights-offer
subscription commitments from its major institutional shareholders and black
economic empowerment partner, Shanduka Resources, for the Evander transaction.
These shareholders’ holdings represent around 57% of Pan African’s shares in issue.
The commitment was made at an issue price of R1.90 per share, representing a
discount of 4.2% relative to the volume weighted average share price over the
period when the Evander transaction was announced in May to August 15.
CEO Jan Nelson told Miningmx in May the company would’ve generated
R500m for the deal from the sale of non-core assets, including the spin-off of
Manica.
Another R500m would’ve been financed from ring-fenced debt facilities, with the
remaining R500m sourced from a combination of existing cash holdings and income
generated from operations, as well as a rights offering. At the time, the upper limit
of rights offering was thought to be around R280m.
Nelson told Miningmx on Monday the company would “very soon’ make an
announcement on Manica, but that Pan African would for most part receive shares as
payment, locked in for at least a year.
As for the financing of Evander, R500m was still to come from debt finance, with
another R500m from income and cash resources. Evander’s cash holdings were
R98m at end-June – all cash and profits generated by Evander from April 1 are for
the benefit of Pan African – and Nelson said the mine should add another R100m by
the time the company has to pay Harmony a R1bn deposit by end-November.
Baberton Mines is earmarked to contribute the remaining R300m.
Should this scenario work out according to plan, Pan African would need R500m
from its shareholders – significantly less than the R700m in undertakings the
company has received so far. “I prefer to have some margin than going back to
shareholders for a second time,’ Nelson said.
He said the company’s minority shareholders would still be given the opportunity to
follow their rights once the rights offer was announced.
Friday’s announcement came with the disclosure that the company would not pay a
dividend for the 2012 financial year (to end-June). Nelson said Pan African would
resume its normal final dividend policy in 2013.
The Evander transaction is earmarked to double Pan African’s annual gold production
to some 200,000 ounces per year and add significant reserves and resources. The
asset generated a production profit of R638m, before tax and other charges, in the
year to end-June – up from R183m in 2011.
The company’s shares traded down 3.69% during early-afternoon trade on Monday,
a movement that Nelson attributed to negative sentiment towards South Africa over
the violence at Lonmin’s Marikana mine.
