[miningmx.com] – PAN African Resources has come a long way since it shared offices with Metorex. The two companies were linked because Metorex had reverse listed its Barberton gold mines into Pan African Resources and was therefore a major shareholder. The shareholding was eventually sold down and Metorex disappeared in a takeover by Jinchuan Group, the Chinese conglomerate.
Pan African consequently has new offices – and rather fancy looking ones at that.
Jan Nelson, the gold firm’s CEO, acknowledges to having been quizzed about them: “Rob Still [former Metorex chairman and non-executive director of Pan African] asked me about them; how much they cost,’ says Nelson.
It’s a fair question given that Pan African Resources has cut its teeth by being cost conscious. In fact, the firm is in many respects a mirror of its CEO: a down-to-earth guy you’d not associate with fripperies. But in the world of gold mining, Pan African’s focus on margin is not as common as you’d think. The quality over volume theme has only been recently embraced by Gold Fields.
Certainly, Nelson, who emerged from the Harmony Gold stable along with Ferdi Dippenaar, Neal Froneman and Graham Briggs, runs a lean ship. It’s down to this focus that makes Pan African Resources one of the few gold firms in which certain South African asset managers, such as 6.9% shareholder Coronation Fund Managers, will invest.
The basis of the company remains the Barberton Mines, but Nelson recently added Evander Gold Mines following a R1.5bn deal with Harmony Gold last year, recently consummated. Nelson is also building up operating competence in the retreatment of platinum dumps.
The latter is an interesting value creator for Pan African. Nelson says the retreatment efforts are “not going so well’ at the moment, but they could yield R80m to R100m in annual profits, enough to swing Pan African’s profits by 15%, Nelson says.
More to the point, platinum dumps opportunities are more available than growing gold production – about which Nelson is questioned on a regular basis. For any developing gold company, the question is always about scale: when and where will Pan African Resources buy again?
The inference is that with gold production now doubled to 200,000 oz/year following the Evander deal, the company must be on a volume growth charge. The fact is, however, Pan African makes heaps of money by sticking to high grade gold mining. That means there’s no particular desire to do – as Sibanye Gold’s Froneman recently called it – a “pacman’ approach to growth by acquisition.
Froneman himself has disavowed unstinting acquisitions for Sibanye, but sooner or later one expects Froneman and Nelson will be talking, although it’s doubtful that’ll be about a takeover.
“They’ll have to offer us a big premium,’ says Nelson. At a market value of some £336m (R4.63bn), Sibanye Gold would have to pay out more than half of its own market value, currently down a fifth to R10bn following vigorous selling by foreign shareholders.
