PAN African Resources hoped to capitalise on a second wave of gold investment by registering an ADR programme on the New York Stock Exchange where the focus is increasingly falling on mid-tier and junior gold mining.
However, the company is not talking an aggressive growth story despite setting out plans earlier this week for the R1.3bn Egoli project that will take production to approximately 250,000 ounces of gold annually by about 2022 or 2023.
Cobus Loots, CEO of Pan African, said there was no value in merger and acquisitions. Whilst similarly sceptical of growth by acquisition given the improvement in the gold price, Pan African’s peer group such as Perseus Mining, Centamin, Teranga Gold, and even Endeavour Mining have multi-jurisdictional expansion and exploration footprints.
Reuters reported in September that Toronto-listed firms were seeking UK gold market exposure by listing there whilst investors – many now including generalist funds – were seeking out new ways to benefit from the gold price having first invested in the major gold producers such as Barrick Gold, Newmont Mining, AngloGold Ashanti and Gold Fields.
“If there’s value in the market, I haven’t seen it,” said Loots of potential dealmaking. “There’s one deal we didn’t do in Zimbabwe a few years ago and now the company is too expensive, but we can’t do a deal in the hope of a better gold price.”
He hopes North American investors will, however, warm to Pan African’s conservative approach to mining mature assets with significant organic growth potential in Barberton Gold Mines, a pillar project at the now mothballed Evander Gold Mines, and two gold re-treatment projects.
Production in the year ended June totalled about 179,500 oz whilst guidance for the current year is set at 190,000 oz. The Egoli project, once completed, will represent 40% production growth on 2019.
“The US capital markets have a depth beyond compare,” said Loots. “Just one per cent of that market is about the whole of the Johannesburg Stock Exchange.” He would tell prospective investors Pan African stood for a long-life diversified company with growth in Egoli that “… they don’t have to pay for”.
Loots copped shareholder flak in 2015 after buying the Uitkomst coal mine in KwaZulu-Natal for R200m because they wanted the focus to remain on gold. Pan African later sold Uitkomst to MC Mining for R275m.
“I love to do a deal, I like transactions, but it makes no sense to ‘go for broke’ and ‘hope for the best’. If there is some prospect that would make us fall on our swords, I’m sure shareholders would support us,” he said.
Harmony Gold said on Tuesday that it would consider an African expansion strategy as new prospects in South Africa’s gold sector were no longer available, despite it being the ‘South African gold champion’.
