Pan African Resources - Dividend yield trending higher than P/E ratio

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.