ARTICLES

Pan African Update

Pan African (PAN) is undoubtedly one of our best picks for this year. The share price has doubled in less than 12 months from when we added it to the Winning Shares List (WSL) at the end of January at 430c to last Friday’s close at 861c. Consider the chart:

Shortly after we added it to the WSL, in our March Confidential Report (published on the 6^th of March 2024), we drew your attention to the fact that the gold price in US dollars had broken convincingly above its long-term resistance level at $2060. We suggested then that gold would continue to rise from that level.

Gold now stands at $2660 – a gain of 29%.

Then, on 13^th May, 7 months ago, we ran an article on PAN suggesting that it remained a very good buy at the price of 589c. This assertion was based on its low cost of production, the fact that much of its production came from reprocessing of existing mine dumps. We also expected the gold price to continue rising, saying “In our opinion, the gold price in US dollars should continue to perform well for the rest of 2024.”

The share price has since risen by a further 46% in seven months.

In an operational update last week, the company said that it expected gold production for the year to 31^st December 2024 to be 16% higher than in 2023 at 215 000 ounces. It also announced that it had acquired the remaining 92% of the Australian mining company, Tennant Consolidated Mining Group (TMCG) to give it 100% control. This will obviously diversify the company and give it a further rand hedge element.

In 2026 the company expects to further increase gold production to between 235 000 ounces and 250 000 ounces.

From a financial perspective, the company expects to be completely debt-free in 12 to 18 months. This substantially reduces the risk of investing in its shares.

The gold price is obviously a critical factor for this share. It is a combination of the international US dollar price of gold and the strength of the rand against the dollar. We are expecting the dollar price of gold to continue rising. This is a direct function of large international investors and central banks hedging their bets against further military confrontations around the world and the fact that equities and other assets are rising to historically high levels.

Gold itself offers no income return in the form of interest, dividends or rent, but it remains the most secure asset on the planet. PAN is a very low-cost producer of gold and will benefit disproportionately from any further rises in the rand price of gold. Obviously, PAN is a speculative investment – but it is one that has paid off handsomely during 2024. We are optimistic that it will continue to perform well.

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