Pan African Resources PLC (JSE: PAN) has enjoyed a golden run, but recent weeks have seen its share price lose some lustre. Despite a commendable 4% year-to-date gain and over 26% increase in the previous year, February has brought a 6% decline. However, the company’s fundamentals remain robust, painting a promising picture for the future.
PAN recently reported a significant jump in net cash from operating activities, surging 134.5% to $27.2 million in its interim results. Profits for the six months ended December 31st also saw a healthy 46.7% increase to $42.4 million. Gold production reached 98,458 ounces, a commendable 6.7% increase compared to the previous period. This growth can be attributed to the company’s surface mining operations, boasting an impressive AISC below $900/oz.
Despite inflationary pressures, PAN effectively managed production costs, leading to a reduction in AISC per ounce to $1,287. Renewable energy and water recycling initiatives are further contributing to cost reductions. Lastly, the company is actively pursuing expansion, with the long-life MTR project expected to contribute 50,000 ounces annually and significantly boost production. Exploration activities in Sudan also hold promise for future growth.
Technical Analysis:
The daily chart shows that Pan African Resources’ share price is currently trading around the 23.60% Fibonacci retracement level within an ascending channel. Despite the recent decline, the share price remains above the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), indicating long-term bullishness. However, the RSI is hovering around 50, suggesting neutral momentum.
The recent decline found support at the 23.60% Fibonacci retracement level, and the price reaction around this level could determine the short-term trajectory. Therefore, A sustained push higher could offer trading opportunities towards the last swing high of R4.51. A successful bridge of the initial resistance could trigger a run, with the major resistance at R4.85 acting as the next significant level higher.
However, a sustained push lower, on significant volume, could offer short-term trading opportunities towards the initial support at the 38.20% Fibonacci retracement level (R3.87) price level. The next significant levels lower lie at the 50.00% Fibonacci retracement level (R3.68) and 61.80% Fibonacci retracement level (R3.49).
Summary
Pan African Resources presents a compelling opportunity but with some near-term uncertainty. The company’s fundamentals are strong, and its growth prospects are promising. However, the technical picture suggests potential volatility. Key resistance levels lie at R4.51 and R4.85, while support levels are at R3.87 and R3.68.
Sources: TradingView, Mining Weekly, ProActive Investor, BNN Breaking, Mining Review.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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