Track market-moving stories before they get noisy

Shore Capital has told clients it is time to buy back into Pan African Resources PLC (LSE:PAF, OTCQX:PAFRY, JSE:PAN), arguing that a brutal sell-off in the gold miner's shares has run well ahead of the fall in the metal itself.

The broker has kept its buy rating and 185p price target on the AIM-listed producer, implying 94% upside from the current 95p.

That gap exists because Pan African's shares have dropped below 100p, down 48% since 2 March.

Over the same stretch, the gold price has fallen 23%, and the GDX, an exchange-traded fund tracking gold miners, is down 35%.

In other words, the equity has fallen twice as far as the commodity that drives its earnings.

Analyst Edward Maravanyika at Shore Capital puts the metal's retreat down to two things: inflation expectations stoked by war-driven oil prices, and remarks from new Federal Reserve chair Kevin Warsh that markets read as hawkish.

Gold fell 12% in June alone, breaking below $4,000 an ounce in its worst month since 2008.

The broker's view is that Warsh has since softened his tone, and that the pullback may have left the metal set up attractively.

There is a floor argument too.

Central banks have been net buyers throughout the decline, with China's central bank stepping up purchases as prices fell.

The People's Bank of China added 480,000 troy ounces in June, its biggest monthly purchase since October 2023, extending a buying streak to 20 consecutive months.

Shore Capital thinks $4,000 an ounce may prove a policy-driven demand floor as a result.

For Pan African specifically, the question exercising investors is whether the dividend survives.

The company targets a payout of 40% to 50% of free cash flow after capital spending, tax and finance costs.

At the broker's base-case gold assumptions, the modelled dividends imply a 50% payout, comfortably within policy.

At the current spot price of $4,100 an ounce, that rises to 57%, and on consensus dividend estimates it reaches 64%.

Shore Capital's answer is the balance sheet: Pan African ended the financial year with net cash, which the broker expects to grow, providing a buffer.

It calculates the company can fund its growth plans and still deliver an average 7% dividend yield each year through to the 2031 financial year.

On production, management has pinned the recent shortfall on a slower ramp-up at its Tennant Mines operations in Australia and delays at the Nobles processing facility.

A full year from the White Devil deposit should drive a stronger 2027, with only 10% of that orebody drilled below 150 metres.