Investment summary

In January, Pan African and Wits Gold formed a consortium to buy Evander Gold Mines (EGM) from Harmony for ZAR1.7bn (then US$219m), equivalent to US$6.37 per resource ounce, an 82% discount to the average value of Wits basin ounces of US$36.27/oz. The principal problem for Evander has been the mining constraints imposed by a lack of refrigeration. Before being sold, however, Harmony invested ZAR256m into refrigeration infrastructure at Evander. In addition, the mine has been reconfigured by the relocation of the main twin decline to the western edge of the Kinross channel. This initiative has both limited and concentrated refrigeration in the mine, while giving it access to the high grade areas of the target ore body. As a result, production will be restricted to six raise lines (cf 18 previously), but at a materially (eg 82%) higher grade.

Last updated on 23/04/2012

Industry outlook

We estimate Evander has the ability to contribute over c £42m and 1.4p annually to Pan African’s free cash flows and attributable EPS, respectively.

Last updated on 23/04/2012