Pan African says it’s weighing surface gold projects with potential to double production

Cobus Loots, CEO, Pan African Resources

TWO gold retreatment projects currently under consideration could boost Pan African Resources’ (Pan African’s) current production by 50% if they are approved, said the company’s CEO Cobus Loots today.

In December, Pan African announced a conditional agreement to buy the Blyvoor  Gold operation for R110m subject to a technical study.

It joins Mintails on Pan African’s books which Loots said in 2020 contained two gold tailings resources capable of producing 533,000 ounces of gold over 12 years. Added to Blyvoor, which is scoped to produce 25,000 to 30,000 oz a year for 15 years, the two operations would potentially add 100,000 oz/year to Pan African’s annual output, Loots said.

The company exceeded previous guidance today announcing gold production of 108,805 oz for the first six months ended December 31 of its 2022 finanicial year. The company was on track to produce in excess of 200,000 oz for the year.

Commenting in a results presentation, Loots said Pan African’s option over Mintails had been extended to August after which he expected the firm would make an investment decision. The company has until December to decide on whether to exercise its option over the purchase of Blyvoor Gold.

“These are big capital projects so they would have to be phased in, probably getting one into production and generating cash flow,” said Loots of how they might be funded.

Pan African already derives about a third of production from surface operations at its BTRP and Elikhulu plants which declared a combined half year output of about 36,000 oz. The balance of production is from underground mining at Evander Gold Mines and Barberton Gold Mines, both in Mpumalanga province.

Plans are afoot to extend the life of Evander to 13 years through natural extensions of at-depth mining. A previously floated project – the R1.2bn ‘Egoli’ – has been shelved as pushing through 25 and 26 levels at Evander achieves gold output which, conservatively estimated by Loots to be 65,000 oz/year, is similar in scope to Egoli but at a capital cost of R807m.

A similar extension into an existing orebody is being pondered at Barberton Gold Mines where its current Sheba mine is running at high cost. There are plans to lower the cost structure at the operation through its DIBANISA initiative, but Loots wants the company to start mining Royal Sheba, an adjacent orebody about a kilometre from the Sheba plant.

Loots said Royal Sheba was lower grade – 2.2 grams per ton compared to the 5 to 6g/t at Sheba – but open to mechanised, massive mining which could make all the difference to efficiencies. Royal Sheba has measured gold resources of some 372,000 oz.

Outside of Mintails or Blyvoor, the Evander and Barberton underground projects would be funded internally, especially as Pan African expects to be debt-free in the current six months. Net debt was reduced by nearly 57% to $28.2m as of December 31 following a strong operating performance in the six months.

Pan African reported $46.1m in interim taxed profit, a year-on-year increase of 13%. Earnings per share were 13.3% higher at 2.39 cents a share.

The company previously raised the prospect of a share buy-back only to run into a closed period in December as it completed the purchase option over the Blyvoor Gold assets. But Loots said Pan African would look to acquire shares. “It is a definite prospect,” he said.

Shares in Pan African gained 2% by midday in Johannesburg taking gains over the last six months to 24% valuing the company at R7.8bn.