Our opinion on the current state of PAN

Pan African Resources (PAN) is a re-treatment gold producer listed on both the London Stock Exchange (LSE) and the Johannesburg Stock Exchange (JSE). Thanks to its Elikhulu plant, the company has the capacity to produce approximately 700,000 ounces of gold annually, with a production cost of around R450,564 per kilogram. Considering the current gold price is close to R1 million, this positions Pan African Resources to generate significant revenue, totaling around R15 billion over its operational life. Of this revenue, approximately R5.3 billion will be reinvested into the economy to cover mine-related expenses, establishing a highly profitable entity with minimal risks. The company also plays a role in employment by providing jobs for 350 people. Moreover, Pan African Resources has received approval for the construction of a 10-megawatt solar power plant.

In its financial results for the year ending on June 30, 2023, Pan African Resources reported a gold production of 175,209 ounces, compared to 205,688 ounces in the preceding year. Headline earnings per share (HEPS) amounted to 3.15 cents (US), down from 3.93 cents in the previous period. The company emphasized its healthy liquidity position, with access to immediately available cash and undrawn facilities totaling US$84.7 million (compared to US$69.4 million in 2022) at the financial year-end.

Providing an update on the six months to December 31, 2023, Pan African Resources noted a 13.7% increase in the received gold price and a 6.7% rise in gold production. The all-in sustaining costs for producing one ounce of gold amounted to $1,300, compared to the prevailing gold price of $2,022. In a trading statement for the six months to December 31, 2023, the company estimated that HEPS would increase by a range of 41% to 51% (in US dollars). This anticipated growth is primarily attributed to an 8.9% increase in the volume of gold sold and a 13.7% boost in the average gold price received.

From a technical perspective, the share price of Pan African Resources experienced a decline from its peak of 623 cents in August 2020 to levels around 295 cents in September 2021. Subsequently, it embarked on an upward trajectory, reaching a high of 458 cents in March 2022. Following this peak, the share exhibited a period of volatility and entered a downward trend. It is currently trading at 434 cents. This pattern suggests that Pan African Resources is a somewhat marginal and volatile investment, accompanied by inherent risks. Caution is advised, but with the gold price poised to potentially surpass long-term resistance at $2,070, it could offer speculative opportunities.