PAN African Resources said gold production would increase a quarter were it to develop Mintails, a surface gold resource located near Carletonville, west of Johannesburg.
A definite feasibility study published by the group today focused on development of Mintails’ Mogale section which contains an probable gold reserve of 1.14 million ounces.
Mogale would cost an estimated $161m (R2.5bn) in capital expenditure to develop – by far the largest capital call the company has undertaken. Pan African has a market capitalisation on the London Stock Exchange of £449m ($544m). Funding possibilities, including the provision of debt finance, were being assessed, the company said in an announcement today.
Pan African shares gained nearly 6% taking its year-to-date gains to around 10.56%. In this regard, the firm is an outlier as the share prices of DRDGOLD and Harmony Gold, which also mine the majority of their production in South Africa, are 25% and 18% weaker respectively on a year-to-date basis.
The definitive feasibility study (DFS), completed by DRA Global, estimates annual production of about 50,000 ounces a year for 13 years based on a probable mineral reserve of 123.6 million tons (Mt) of surface gold at a head grade of 0.29 grams per ton. That would take Pan African’s production to 250,000 oz/year based on this year.
Cobus Loots, CEO of Pan African said the company had “an excellent track record” of developing surface tailings retreatment operations. In 2018, it commissioned the 55,000 oz/year Elikhulu retreatment plant near its Mpumalanga mine Evander Gold Mines – a project that was completed at a cost of R1.7bn.
In addition to Elikhulu, Pan African also reprocesses surface gold deposition sites at its Barberton Mines. All in all, it derived about a third of its production from surface gold in the siz months ended December.
“As originally anticipated, the Mogale Gold DFS has demonstrated a compelling project both operationally and financially,” said Loots in a statement. “Mintails has the potential to further improve the group’s overall AISC (all-in sustaining cost), while increased annual production will move Pan African further up the ranks of mid-tier gold producers.”
AISC, which accounts for stay in business and capital costs, is estimated to be $914/oz over the 13 year life of mine. A net present value of just over $1bn has been imputed to the project assuming a gold price of $1,750/oz, the company said.
Payback is estimated to be within 3.5 years after commissioning. Pan African is targeting production within 18 to 24 months from the beginning of project construction. There was also possibility for expansion of Mintails into other adjacent areas.
Pan African is also weighing the development of another gold surface project known as Blyvoor Gold. It has a R110m option over buying control of the project pending a scoping study currently underway. If approved, Blyvoor Gold could produce between 25,000 and 30,000 oz/year for Pan African Resources.
The company is also exploring for new gold in Sudan. It has allocated $7m in total exploration spend over the next three years after securing permits from the Sudanese government.
