Pan African sets out R50m option over mothballed Mintails prospects, west of Johannesburg

Typical South African gold dumps

PAN African Resources is to buy Mintails, a surface gold resource, if a six-month due diligence study stacks up, the company said today.

If it does, Pan African will buy two properties in Mintails for a total of R50m in cash. These are Mogale Gold and Mintails SA Soweto Cluster (MSC), situated west of Johannesburg, for which it will pay R37.5m and R12.5m respectively.

Pan African said the combined mineral resources of Mogale Gold and MSC comprised historic tailings storage facilities of an estimated 243 million tons with an in-situ grade of 0.30 grams per ton of gold for an estimated gold content of 2.36 million ounces.

Mintails was put into provisional liquidation in 2018 and comes with potentially massive rehabilitation liability of an estimated R460m. At the time of the liquidation, Mintails had only a R28m provision in its fund, according to reports.

“It gives us an option. Good gold tailings deposits are few and far between,” said Cobus Loots, CEO of Pan African. “It’s also hard to find value in the sector, but we will take six months to look at this.”

If proved viable, Pan African would have to construct processing facilities similar in scale to Elikhulu, its Mpumalanga gold tailings project which it built at a cost of R1.74bn.

The fact that Pan African is considering the project underlines its intention to grow. It announced the R1.3bn Egoli project at its Mpumalanga mine, Evander Gold, earlier this year which is forecast to take annual gold production to 250,000 oz by 2022 or 2023.

“There’s a lot to digest at the moment,” Loots said of Mintails, adding that a plant would have to be built as the existing infrastructure had been “carried away (stolen)”.

Pan African reported full-year production of about 175,000 oz whilst guidance for the current year has been put at 190,000 oz. The Egoli project, if built, would represent a 40% increase on 2019 output.

Pan African’s financial position is vastly improved over the last 18 months, partly owing to lower capex and the improvement in the rand gold price. The firm proposed a dividend payment of 14 South African cents/share in September.

As of June 30, net senior debt was 51.9% lower at some $62m. “At current gold prices we would expect to be debt-free by the end of 2021,” said Deon Louw, CFO of Pan African during an investor presentation in September.

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