Pan African set for strong 2021 after gold production pushes through 200,000 oz

Cobus Loots, CEO, Pan African Resources

PAN African Resources exceeded adjusted production guidance for its 2021 financial year ended June 30, reporting 201,608 ounces in gold. In May, it said it hoped to produce about 195,000 oz.

The increase in gold production was owing to Barberton Gold Mines where operational flexibility resulted in output of 85,000 oz, representing a one quarter improvement in production in Pan African’s 2020 financial year.

Pan African reported gold production of 179,457 oz in 2020. Production for the current (2022) financial year has been guided to about 195,000 oz.

In yet more promising news for shareholders, Pan African CEO, Cobus Loots, said the company had completed the deleveraging of its balance sheet. Relatively high debt was a key reason behind the board’s decision to pass the interim dividend in February.

“Current debt levels are very manageable, enabling the group to fund all its capital requirements from internally generated cash flows and existing facilities,” he said. Net senior debt was reduced by 45.5% to $33.8m as of end-June.

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.

Pan African announced in May that it had restructured its capital project plans to allow for the development of 533,000 oz Mintails, a large gold tailings deposit situated west of Johannesburg. A prefeasibility study would be completed in the third calendar year quarter with a bankable study due in the first quarter of 2022.

As part of its restructuring plans, Pan African said it would take “… a more phased approach for the development of the Egoli project, an R1.2bn an expansion of its Evander Gold Mines in Mpumalanga province. In terms of this, it would lessen the upfront requirement and reduce the long-term debt burden on the project.

Loots said today Pan African would expand its renewable energy capacity “in the coming years” following the government’s surprise decision last month to increase the threshold for unlicenced energy projects to 100MW from 10MW previously.

The National Energy Regulator of South Africa (Nersa) currently has to issue a licence for projects over 10MW. This has been criticised by the Minerals Council SA owing to the time taken to conclude the process.

Pan African already has a renewable project in the works: a 9.975 solar photovoltaic plant which is being installed at its Evander Mines. A Nersa hearing took place on May 6 and the generation licence “is expected imminently,” said the company.

“The project is on track for completion during the third calendar quarter of 2021, and will be one of the first utility-scale solar PV facilities to be commissioned in the South African mining industry,” said Pan African.