FinnCap today raised its target price for Pan African Resources (LON:PAF) after increasing its valuation of the group’s Evander assets.
The new target of 30.9 pence per share, up from 25.6 pence previously, is more than double the company’s share price of 15 pence at the close of play on Monday.
The current valuation is mostly supported by the group’s Barberton gold mines in South Africa. Analyst Martin Potts added that the deal to acquire the Evander gold mine, also located in South Africa, should have an immediate and positive impact on both valuation and earnings.
The original deal was to buy the mine from Harmony Gold alongside partner Wits Gold for a combined £139 million. But in late May, Pan African said that deal was withdrawn as certain conditions had not been met by the deadline.
Pan African has decided to go it alone, buying the whole of the asset for a reduced price of £115 million.
The acquisition will double Pan African's annual gold production to around 200 000 ounces and increase its resources and reserves significantly.
Potts noted that the deal is expected to complete within the next six to twelve months.
“The company now has a robust and diverse portfolio of assets and a high quality management team that is well equipped to make further acquisitions and grow the business,” said Potts.
“We see this as being an important attribute, and one that distinguishes it from many others within its peer group."