PAN African Resources (Pan African) could add a fifth to its current annual gold production if a feasibility study to mine from a closed shaft at Evander Gold Mine (EGM) checks out.
“We need to see what the feasibility study finds, but potentially it could add between 30,000 to 40,000 ounces,” said Cobus Loots, Pan African CEO in an interview. “I hate to put numbers on it at this stage though.”
Pan African produced 173,000 oz of gold in its 2017 financial year which Loots said was “disappointing”. It would normally mine 190,000 oz and has plans to extend this to 250,000 oz on completion of the R1.74bn Elikhulu Tailings project which is also at the EGM premises. As a result, Pan African has ambitions to take output to nearly 300,000 oz/year.
The feasibility, which will study the economics of dewatering and reopening Shaft 7 at EGM, is due to be completed in the first quarter of next year, Pan African’s third quarter of its financial year. It is due to report its 2017 operating and financial figures on September 20.
The 2010 Pay Channel project, as it is known, accesses a shaft that had been closed by its previous owner, Harmony Gold, in 2009 owing to capital constraints and a poor gold price at that time.
Loots said, however, that at a distance of only some four kilometres from its Kinross plant, the 2010 Pay Channel project at Shaft 7 was closer than Shaft 8 which was about 13km from the plant. The question with which the feasibility study must contend is whether it was possible to extend the width of the reef channel without compromising the grade. A grade of 10 grams per tonne might be achieved, said Loots.
The project, which doesn’t yet carry a capital figure, represents another attempt by Pan African to improve the economics of EGM which has been a variable asset for the company.
This year’s gold production, down 4.4% year-on-year, was put down to the interruption caused by the re-equipping of Shaft 8 at EGM and production problems at Pan African’s Barberton Mines. “It’s by far the most difficult year I’ve had since I’ve been with the company,” said Loots.
Pan African also believed it could add up to 10,000 additional oz per year after spending R105m over two years on the Fairview section Barberton Mines. Elikhulu, meanwhile, was progressing well, said Loots who added that the company had already deployed R200m after raising equity to help finance the endeavour.
Although Pan African’s financials are due out in September, it disclosed today that net debt had fallen to R66.7m following the equity raise – in which R125m was raised in a offer 50% over-subscribed – and the sale of its Uitkomst coal colliery to Coal of Africa (CoAL) for shares and cash.
Loots said Pan African would continue to hold CoAL shares which were now worth R127.5m compared to R125m at the time of the Uitkomst sale. “We are not a seller of that company at these levels,” said Loots.
Asked to comment on regulatory uncertainty in the South African mining sector, Loots said he hoped “sanity would prevail. But we have got good courts so let it play out there”.
Mines minister, Mosebenzi Zwane, published a notice in the Government Gazette on July 18 in which he said he would suspend new prospecting and mining licence applications – a startling turn of events critics believe is an attempt to intimidate the mining sector which has opposed his redraft of the Mining Charter by having an interdict issued against it.
