[miningmx.com] – A R200m investment in thermal coal mine Uitkomst looks like the first, and last, unusual left-field investment Pan African Resources is likely to make based on the comments of the firm’s CEO, Cobus Loots.
The investment, unveiled by Loots in July, was made only four months into the job at Pan African and coincided with a sharp decline in the share price of the company, a development most likely tied to heavy selling on the South African gold sector in general.
Nonetheless, Loots is reluctant for Pan African to spread its wings, especially if the company were to threaten its dividend promises. “We like our gold exposure and our dividend which is close to sancrosanct,” said Loots in an interview with Miningmx.
“We have paid out about 30% of our market capitalisation in the last three years. We can’t buy an asset on future market prices improving; we just don’t have that approach. We have to see a business case first,” he said.
Pan African produces about 200,000 ounces of gold a year from two core operations: the Barberton and Evander Gold Mines which are both set in Mpumalanga province. It also produces about 8,000 oz a year of platinum group metals through the retreatment of tailings dams.
So it’s a small operation but with a market value of R2.7bn, it is worth only R1bn less than Harmony Gold which produces just over one million oz of gold and which is building R8bn worth of attributable copper/gold project in Papua New Guinea.
Loots has heard the comparison before but claims it doesn’t surprise him. “Investors don’t care about resources from valuation point of view. They look at profitability and yield which is the bottom line which is a changing enviroment. They want to see us contniue to pay out dividends,” he said.
Asked them if that precludes Pan African from seeking scale, perhaps by participating in the long-expected, much-vaunted consolidation of the South Africa gold sector, Loots said: “Pan African won’t invest in any more deep level gold assets in South Africa.”
The company will, however, sniff around possible prospects beyond South Africa’s borders in the African continent, as well as seek organic growth from within its existing gold portfolio. “Maybe early next year we will have the licence to look outside.
“Anything else we do, it will be with gold. So we are looking for an African strategy. It won’t be massive, but we’d like to prove our operational credentials outside of South Africa; something that will help move the needle a bit,” he said.
