A small South African based precious mining group that produces gold and platinum from high grade ore bodies at a low cash cost. I have a holding in my growth portfolio (epic code: PAF).
Today Pan African announced an amendment to the disposal conditions of the sale of its Manica mine. This disposal was initially agreed on 29 August 2012 and amended on 14 December 2012.
In the initial agreement PAF received 25m shares in Auroch Minerals (the acquiring company) and deferred consideration of AUD 2m to be received 18 months after completion. There were also potential further consideration dependent on future milestones.
This consideration in the initial agreement has now been replaced in whole by the receipt of AUD2m, of which AUD150k will be received on 30 November 2013 and the balance by 1 March 2014. The balance payment can be extended by a further two months on payment of AUD50k per month, this is not an additional AUD50k per month, but part of the AUD2m. So there is little benefit in Auroch paying the balance on 1 March.
The shares of Auroch Minerals currently owned by PAF will be returned on receipt of the AUD2m for no consideration. The shares have a market value of AUD2.625m (£1.496m) and are carried on PAF's books at £1.183m.
I fail to see any benefit to Pan African in agreeing to this, since they were in any case due the AUD2m some months later than now agreed and have given up 25m shares with a market value of £1.5m.
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