Berenberg raises target price on Pan African Resources

Pan African Resources will acquire TCMG for $54.2m, split between an initial cash investment of $3.4m, with the balance due in PAF shares. Berenberg noted that first production from the group's Nobles gold project in Australia was expected in Q225 and has calculated an all-in sustaining cost of $1,242 per ounce, which, given a high gold price of roughly $2,610 per ounce, points to "attractive margins".

The German bank, which reiterated its 'buy' rating on Pan African, expects the site's potential life to be extended to eight years, roughly 100,000 ounces of gold per year, approximately 10,000-15,000 tonnes of copper, and "other upside opportunities".

"We update our model for the TCMG transaction, which is due to close on 18 December, plus our revised gold price deck. We calculate a valuation of the acquisition of $71.0m," said Berenberg. "While the jurisdiction was not expected by the market (given that PAF has focused on Africa as its core market), we think the deal is sensible, and uses its paper as a currency when the shares are at their highs. We also think that as PAF integrates the assets into its business model, more upside will be realised."

Reporting by Iain Gilbert at Sharecast.com