Panaf’s Loots delivers mining rebuttal to his sceptics

Cobus Loots, CEO, Pan African Resources Pic: Martin Rhodes

PAN African Resources CEO, Cobus Loots, delivered the perfect riposte to those critics who doubted an accountant could run a gold mining company.

Scepticism about Loots, who was appointed CEO in April 2015, was compounded when he sanctioned the purchase of a coal mine in KwaZulu-Natal. Even though the asset, Uitkmost, is expected to deliver payback in four years, there were concerns Loots would take Pan African in a different direction.

Pan African’s reputation is for conservatively sticking to its knitting which is to say: pay dividends from profits earned at the Barberton gold mines in Mpumalanga province. Whilst the rest of the South African gold mining sector struggled, Pan African offered a solid and reliable alternative.

The purchase of Harmony Gold’s Evander Gold Mines several years ago was seen as somewhat risky step, but still within the remit of what Pan African was supposed to deliver.

As it happened, Evander encountered a low grade patch in the Evander orebody shortly before Loots became CEO. This hurt profits which, coupled with the Uitkomst episode, created the impression Loots had lost the plot fairly early in his time at the company.

Interim results ended December, published last month, puts a somewhat different colour on things. Profit more than doubled largely owing to improved grade at Evander whilst the Barberton mines continued to perform.

In short, Loots delivered a mining response to his sceptics.

But his board held the dividend. Loots said this was owing to the share buy-back recently announced after taking the stake Standard Bank owned in Shanduka Gold, the empowerment company with which Pan African is intertwined.

The second half of the firm’s financial year is looking solid, however.

Loots told Miningmx that at R600,000 per kilogram of gold mined, company profits could increase a further 30% year-on-year which raises the question as to whether a final dividend will come into play.

Vying for free cash flow are a couple of organic projects that Loots has dusted off: the Elikhulu surface gold mining project in Mpumalanga province which could increase output a quarter to 250,000 ounces a year, and Evander South – a project that was once part of the Gengold portfolio in the Nineties.

Analysts welcome the fact the debate at Pan African has shifted away from mining performance to capital allocation but they warn against the dangers of taking marginal gold projects off the shelf, especially as optimism developing them may be informed by the gold rand gold spike.

Loots claims not to be tempted into following the gold price. “We will relook at Evander South, but it’s risky,” he said. “It’s an underground project and we have to be comfortable with the economics before going forward,” he added.

“We can’t spend R1bn and hope that the gold price stays where it is. We are very cognisant of that. That’s not the way we run our business,” he said. The Elikhulu project, easier to justify on paper, must also see a pull down in initial capital expectations from R1.8bn to at least R1.5bn, but preferably R1.1bn, said Loots.

“We are conscious of capital and we wouldn’t ask shareholders to fund the project [Elikhulu] so we have to find a funding partner as well as innovative funding solutions,” he said. The group previously funded its Evander Tailings Retreatment Project with a gold loan which paid for construction of the plant.

Then there are the group’s continental ambitions.

Loots confirms that his company is watchful of expansion into the sub-Saharan gold market. “We are looking for a mid-tier gold mine or a development project that wouldn’t compromise the company,” he said.


  1. Loots is an accountant, so there can’t be any excuse for the way in which the company treated it’s zero cost collar on the Rand Gold price.
    Firstly, shareholders weren’t told at the time the contract was entered into.
    Secondly, the initial MtM profits were booked as a reduction of costs.
    Thirdly, when the position suddenly turned into a catastrophic loss, the accounting treatment was suddenly changed so as “not to affect earnings”.
    Oh, and shareholders were finally deemed worthy of knowing about the hedge after more than 30% of the company’s register had changed hands.

    Perhaps Loots could help us all by explaining why the hedge was entered into in the first place. Was it perhaps due to the fact that Std Bank needed to have some margin of safety to underpin the loan to buy Shanduka’s coal mine?

    Then there’s the sweetheart deal to buy Standard Bank’s stake in the BEE Holdco at full value. Why is it Pan African’s duty to make a market in these shares for Standard Bank? Surely they are old enough and ugly enough to find their own buyer for the stake?

    Then the nonsense about Uitkomst Colliery.
    Now here’s an asset that could do with a hedge book.
    The forward price of coal is 20% below spot and there’s an over supply of product in the market.
    So, NO the pay-back period on this mine WON’T be 4 years.
    YES, if the group wanted to invest in coal it could have bought any number of coal groups (such as Keaton and other down and out has beens) for single cents on the Rand.

    Lastly, why was the promsing Manica Gold project sold for small change if the group is supposedly looking to expand into Africa?

    So our friend Mr. Loots and his Board has much to answer for and his supposed rebuttal looks decidedly light. The lagging share price is positively shouting.

  2. I still and will STILL maintain that mining Companies run by Financial so called “Fundi’s” such as Mr Loots and by reading and agreeing in full with PRAVDA -Their objective/training is the so called “bottom Line”
    They have no idea[not enough knowledge] of “Mining Risk profiles'[ In the actual Mining frame work].
    I still maintain let Mining companies be run/Managed with Mining Expertise- Miners are taught the required skills to run/operate mines in line with costs which include-[Mining/surveying/geology/engineering/human resources/law/Financial expertise] – if they do not have these skill -Employ the required skills to assist them
    Does Mr loots have any of these skills other than a Financial Background [Has he employed the skills[Mining] to assist him?
    Mines Closed – Run by Financial Directors
    Great Basin Gold – Ferdi Dipennaar
    Grootvlei -Ferdi Dippenaar
    JCI – Brett Kebble
    Harmony – Ferdi Dippenaar- when Bernard Swanepoel left
    Gold fields on the down – Incompetent CEO – Sibayene took over some of the so called USELESS assets and turned into a ASSET OF NOTE – Froneman having a an excellent Mining Background
    Anglo Gold – Downslide run by incompetent CEO’S -Are but a few
    We will be watching Mr Loots performance with great amount of interest down the road

  3. Would be interesting to get answers to a few of the questions raised by Pravda. These questions hold some value when putting these into context – was the best possible cost effective purchasing/selling taken into consideration especially around Shanduka coal, the selling of Manica Gold Project.

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