Pan African Resources - Taking the rough with the smooth

In its operational update, released last week, Pan African Resources (PAF) reduced its production guidance for FY23 by c 12.5% from 195–205koz to 175koz. The reduction was due to instability and disruptions in the electricity supply to PAF’s operations (c 10koz), a slower ramp up to continuous operations at Barberton and faulting at the Kimberley reef at Evander, coupled with a delay in transitioning to full production at 24 Level. In addition, we anticipate that PAF will record a small loss of US$5.3m on account of the synthetic forward sale of ounces announced in February regarding its Mintails financing. However, these effects have also been mitigated by a weak rand and a strong gold price such that, while we have reduced our FY23 normalised EPS forecast by 8.4% (from 4.17c/share to 3.82c/share) our core valuation of PAF has risen by 4.8% (see below).