Pan African Resources


Has anyone been watching PAF.L?

Pan African is a mid tier gold miner based in South Africa, it’s had a tough year but has recovered well, and I reckon it respresents a bit of a bargain.

Bull Case:

1- Forward p/e in low single digits, industry average is 10.

2- Potential for takeover (see recent Wheaton International deal)

3- Smart management. Moves to invest fairly heavily in solar panels; and plans to invest in wind power look very smart now, and save the company a few £100,000 a year. Projects are delivered consistently on time and on budget.

4- Oversold due to lowered production guidance (~185,000 this year, rather than 200,000oz) which was mostly caused by South African national grid problems.

5- Reliable dividend (~5% yield at current prices.

6- High gold price at the moment ($2,000 per oz) and decently low aisc (all in sustaining cost) around ~$1400 per oz.

7- Organic growth. Mintails project set to deliver in 2024 will increase production by 50,000oz

8- Rock solid finances, high margins, low debt, consistent positive cash flows.

Risks:

1- Price of gold could go down.

2- South African national grid (partly mitigated by solar panel projects)

3- South African currency risk

4- Geo-political risk for it project in Sudan.

Just today this has broken through 17p a share, but has recently been trading around 15p. This seems ridiculously cheap.

Am I missing something or is this stock a bit of a bargain?


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