Pan African Resources (PAF)

From the company's website:

"Pan African Resources is a precious metals producer quoted on AIM:PAF and JSE:PAN operating in South Africa and Mozambique.             

100,000oz per annum Gold Producer

- Production and gold sales are increasing year on year

- Measured and Indicated gold resources total 3.43Moz               

Near Term Platinum Production

- Production expected ahead of schedule

- Chrome Tailings Retreatment Plant

- Total Platinum resources currently stand at 469,000oz

                               

Pan African has no debt and is unhedged."           

PAF appeals to me because it fits in with my macro investment views, specifically

•  companies with low/no debt will prosper during this period of global deleveraging,

•  the current commodities bull market has further to run given that they typcially last for 18 years and
   this one began in 1998,

•  dividends will appeal to investors during a period of overall sideways markets.

PAF has no debt, has a dividend yield of 3.0% (forecast to rise to 4.7% in 2012 and 5.1% in 2013) which is well covered and has consistently grown earnings and dividends over recent years.  In addition, earnings per share are forecast to grow 14.4% next year.  These factors combined with the commodity bull market make PAF a compelling buy in my opinion.  Also investors are being paid a reasonable dividend whilst waiting for capital appreciation. 

The two brokers who cover PAF rate it a strong buy.  PAF has recently won approval from directors for the first phase of its Barberton Tailings Retreatment Project situated close to the Barberton Gold Mining Operations. The firm anticipates that the project will increase the production profile at Barberton from 95,000 onces (oz) to 120,000oz per annum. 

Chief Executive Officer Jan Nelson said: "This project will further increase the margins resulting in increased cash flow. This should ensure that Pan African can increase its dividend as well as pursue other accretive growth opportunities in the near term."

So further increases in dividends and metal prices will hopefully lead to continued capital appreciation.

As always, do your own research.

Welcome

This is my new blog to record my the rationale behind my investment decisions.

I, like many, am prone to swings in emotion during bull and bear moves in the stock market.  One way to avoid selling during pessimism, or buying near tops, is to document the reasons for buying into a stock in the first place and then reviewing these reasons to confirm that nothing has changed.  As I am not very good at keeping notes I have decided to record my decisions here.

I have also been guilty of over-trading in the past and intend to reduce my purchases to a handful a month when funds allow.

My preference is the macro picture and investing according to long term trends/cycles.               

My plan is to initially have 20 individual positions of £1k, 20% will be physical commodities, 80% equities, but no more than 30% (of the 80%) dedicated to commodity stocks.

This allocation is because I believe that we are in a commodity bull market that started in 1998 and should run through to 2015 (they typically last around 18 years).

Anyway that's the theory, lets see what really happens.