Pan African to cut 1,700 jobs as rand gains claim scalp in Evander

THE strengthening of the rand against the dollar which has taken a large portion of South Africa’s precious metals industry into loss-making territory, claimed its first major scalp in Pan African Resources which today bowed to the inevitable by deciding to shut Evander 8 shaft, the Mpumalanga province mine’s underground operation.

The firm said in an announcement that some 1,700 employees will most likely be shed by the end of this month at a cost of R160m to be funded from debt facilities. Efforts would be made to provide new jobs to affected workers, but CEO Cobus Loots said the the firm’s viability was under threat by the loss-making mine which posted all-in sustaining costs in February of R673,444/kg – some R140,000 more than the current spot rand price.

“The decision to cease mining from Evander Mines’ underground operations was not taken lightly, particularly given the socio-economic conditions prevailing in the country and the impact on a large number of our employees,” said Loots in a statement. “All South African gold producers have been adversely affected by the recent strengthening of the rand, and it is imperative that we act decisively to ensure the future of our group and stakeholders that rely on our operations.”

The writing appeared to be on the wall for Evander 8 when in March Pan African said it had embarked on restructuring talks with unions in terms of Section 189 of the Minerals & Petroleum Resources Development Act. Commenting today, the company said there was “… no realistic prospect of mining on a sustainable and profitable basis from this operation in the current weak rand gold price environment”.

As if the highlight the crisis of lower income, especially from the turn of the year when currency investors found favour in rands and the dollar simultaneously weakened, Pan African said it was negotiating an additional standby facility of some R100m which would partly be used for working capital purposes. The facility was also to continue funding for growth projects which include Elikhulu a surface gold retreatment project at Evander.

Pan African also announced today that it would expand the capacity of Elikhulu to 200,000 tonnes of previously mined gold ore per month in order to extract better economies of scale from Evander’s tailings currently being processed through the Evander Tailings Retreatment Project (ETRP).

The additional construction associated with this increased capacity of the Elikhulu plant will not delay the initial gold production in August and the full commissioning in September 2018, said Pan African. The cost of the increased processing capacity is R65m and will be funded from existing debt facilities, it said.

Loots said Pan African would continue to look at employment activities in other projects currently on the company’s books including the possible mining of the Evander 8 Shaft pillar, currently under consideration. If approved, the mini-project would extend the final closure date of the shaft, generate positive cash flows, and assist with further employment opportunities for those affected by the Section 189 Process.

The group was also assessing the technical and economic merits of its Egoli underground project at Evander’s 7 Shaft and was “… in the process of updating the feasibility study on a project stand-alone basis, post cessation of the underground operations at Evander 8 Shaft”.

The Evander Mines’ Kinross metallurgical plant, which houses the run-of-mine and Evander Tailing Retreatment Plant (“ETRP”) circuits, will continue to operate until material from surface sources, tolling and underground mining operations tonnages have been exhausted or become uneconomical, it added.

“Post the cessation of Evander’s current underground mining operations, the balance of the group’s production ounces will be low cost and cash flow positive, which will ensure the sustainability and profitability of the Group in the prevailing low rand gold price environment,” said Loots.