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Pan African Resources – issues “well disseminated to the market”, so why the share price decline?

By Steve Moore | Friday 14 September 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A “Trading Statement and Production Update” from Pan African Resources (PAF) sees CEO Cobus Loots emphasise “issues, as well as the definitive remedial actions we implemented, were well disseminated to the market” and “we are well on track to deliver into our 2019 targets and look forward to the year ahead”. The shares have though currently responded around 9% lower, below 8p…

The company updates that the impact for its year ended 30th June 2018 is a continuing operations adjusted (“headline”) earnings per share in South African Rand terms “57% to 47% lower than the 38.72 cents for the prior reporting period. Therefore the expected HEPS range is between 16.77 cents to 20.65 cents” (“56% to 46% lower than the 2.24 pence for the prior reporting period. Therefore the expected HEPS range is between 0.97 pence to 1.20 pence”).

Though for the now current year it includes “the conclusion of a three-year wage agreement with the National Union of Mineworkers and the United Association of South Africa, which was announced on 7 September 2018, is expected to assist with operational stability and productivity at Barberton Mines” and “the Elikhulu project is progressing according to schedule with all phases of the five-phase technical commissioning processes now successfully completed… Elikhulu is expected to produce at steady-state from October 2018”.

Paid-for researcher Edison was looking for earnings per share of 1.55p for the now current year and argued a 13p per share valuation, though potentially 20p+. However, I’d at least want to see some consistent quarterly operational progress from here before considering – and then there’s also, as well as company-specific factors, a self-admitted “incredibly challenging operational environment” to factor in – something Tom discussed in Bearcast today HERE.

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