(Alliance News) - Shares in Pan African Resources PLC tumbled on Wednesday after the junior gold producer reported dismal annual financial results.
Berenberg kept its recommendation for Pan African, looking past some setbacks the miner encountered in the first six months to December 31. But Peel Hunt plans to review its share price target for the group.
Berenberg maintained share price target at 42 pence, with a 'buy' rating.
In London, Pan African shares shed 5.5% to 35.55 pence, while they were down 9.3% at ZAR7.97 in Johannesburg.
The German lender said Pan African posted a "fairly challenging" set of interim results and, while progress has been made in the group, some of the mines, such as Barberton and Evander in Mpumalanga, are struggling to keep their costs down.
"We look for colour from management on the strategy to cut costs at these mines and what a sensible long-term cost is; taking a step back, the company has some great low-cost assets and growth potential, which we think is compelling, but we would expect a lighter reaction from the shares today given elevated costs and higher net debt," Berenberg said.
Peel retained its 'buy' recommendation, but indicated it intends to review estimates and its 44p share target price.
Adding in the USD17.4 million impact from the gold loan explains the difference between the adjusted earnings before interest, taxes, depreciation and amortisation of USD58 million and Peel's USD75 million forecast, Peel said.
Ebitda for the second half ending June 30 should see a "significant step up half-on-half", given the completion of the Evander shaft and the Mogale tailings retreatment project, plus there being just the last two gold loan instalments, versus the six in the half just completed, Peel said.
"While the headline Ebitda is low versus our expectations, we think the completion of the gold loan this month will lead the market to look through the Ebitda impact for FY25E, but it may take some time to work through the adjustments," Peel said.
For the first six months to December 31, Pan African on Wednesday recorded pretax profit of USD56.1 million, down 2.1% from USD57.3 million a year earlier. Revenue for the first half was USD189.3 million, slightly down from USD191.1 million.
Gold production was 3.3% lower at 84,705 ounces from 87,581 ounces, after Evander Mines' underground production was hit by the delay in commissioning of the subvertical shaft for ore hoisting.
All-in sustaining costs rose 29% to USD1,675 an ounce in the first half, compared to USD1,295.
Earnings per share was up 10.3% to 2.35 US cents per share from restated 2.13 cents, while headline EPS fell 44% to 1.20 cents from 2.13 cents. EPS included a gain on acquisition related to Tennant Consolidated Mining Group Pty Ltd.
By Artwell Dlamini, Alliance News reporter
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