Daily Brief Energy/Materials: Pan African Resources, Alkane Resources, iShares MSCI ACWI ETF, Canacol Energy and more

On 7 August, Pan African Resources (PAF) announced FY23 production of 175,209oz, which was within 0.1% of its guidance of 175,000oz on 26 May. It also indicated all-in sustaining costs (AISC) of US$1,325–1,350/oz (at ZAR17.77/US$), reiterated output guidance of 178–190koz for FY24 and reported net senior debt of US$18.9m as at end-June (cf US$49.9m as at end-H123). In response to the announcement, we have reduced our FY23 normalised HEPS forecast for PAF by 8.3%, from 3.82c/share to 3.50c/share to reflect dollar costs, which were stickier at higher levels than we had hoped. However, our forecast remains above the market consensus. Moreover, our life-of-mine valuation of the company remains almost completely unchanged at 34.24c/share (see Exhibit 7 for full explanation), notwithstanding recent rand strength.

Tomingley delivered Q423 gold production of 15,822oz, meeting its quarterly forecasts at an AISC of A$2,174/oz. These results concluded a strong year, with full year production of 70,253oz at an AISC of A$1,602/oz beating original FY23 guidance of 55,000–60,000oz production (at an AISC of A$1,650–1,900/oz), and meeting April 2023 production guidance of 65,000–73,000oz (at an AISC of A$1,550–1,750/oz). Full year gold sales totalled 70,498oz, generating revenue of A$190.5m at an average price of A$2,703/oz. FY24 guidance has been set for Tomingley at 60,000–65,000oz production at an AISC of A$1,750–2,100/oz as Alkane anticipates increased costs in wages, and electricity, fuel and reagent prices. Following Alkane’s updates since our last note in April, we have increased our FY23 EPS estimate by 26.8% to 7.38c (cf 5.82c previously).

• Global equities under pressure; we discussed in our August 3,2023 Int’l Compass how it could be the start of a ~15% pullback in $ACWI, which would put it at $84-$85.
• We also discussed how it is possible that this is a normal 3%-6% pullback to the major $93 support level (which it tested today).
• If the 10-year Treasury yield and DXY remain below their respective resistance levels, we remain buyers on this pullback to $93 on ACWI-US.

Canacol Energy released its 2022 ESG Report on 9 August. It highlights the company’s desire for a 50% reduction in Scope 1 and 2 emissions by 2035, to achieve carbon neutrality by 2050 and to have no methane emissions by 2026. This reflects Canacol Energy’s position as a top decile upstream performer in the S&P Global Corporate Sustainability Assessment.