Pan African passes up chance of interim dividend, but hopes high for record year-end payout

Cobus Loots, CEO, Pan African Resources

PAN African Resources intended to pay an improved year-end dividend in lieu of having passed up the chance to sanction an interim payout – a development that had disappointed some people, said Cobus Loots, CEO of the gold producer.

“There was a discussion about an interim dividend but the board just decided it was better to continue deleveraging; get it [debt] down to almost nothing, and then pay an interim dividend the year after,” he said.

Loots was commenting after the firm’s half-year results presentation in which it reported an 81.5% lift in share earnings of $2.11 cents per share (2019: $1.13c/share). This was owing to the vastly improved rand gold price which helped offset losses from having sold gold in a hedging contract below the spot price.

The hedge book was now worked out, said Loots who also clarified a comment he made during his presentation in which he alluded to possibly exceeding the firm’s 190,000 ounces production guidance for the year.

“I can’t be definitive because that would be updating guidance, but you can do the numbers. If we bring an improvement at Evander 8 Shaft, and have another six months like the previous …,” he said.

That would take production comfortably over 200,000 oz given that Pan African produced 98,386 oz in the first half of its year.

Evander 8 Shaft is an underground project at its Mpumalanga province Evander Gold Mines. It ran into technical difficulties during the six months ended December, but an improvement is now a major thrust in the second half of the financial year.

One of the main features of Pan African’s half-year numbers was the reduction in net debt which was reduced 47.3% to $65.2m.

Realised hedge losses totalled $6.7m in the period which contributed towards an increase in all-in sustaining costs (AISC) for the period of $1,252 per ounce. Pan African is aiming for an AISC of less than $1,000/oz.

Pan African has plans to take production to beyond 250,000 oz/year once it has commissioned Egoli, an R1.2bn brownfield underground development project, scoped to produce 70,000 ounces annually.

The company is also considering the R2bn to R3bn development of Mintails, a gold waste deposition site west of Johannesburg. It has an R50m option over the properties which it said today would be subject to a due diligence that has been extended to January 2022.

“It was extended because the provisional liquidator, with whom we’ve got a good relationship, ran into regulatory delays,” said Loots. “It is an option but it’s also an asset with a chequered history, to be kind.”

The company paid the full-year dividend, announced in September, of $17.8m in December – a record level as seen in rands – compared to $2.9m in 2019.