Pan African cuts output guidance up to 15% as Eskom outages result in 10,000 oz hit

Cobus Loots, CEO, Pan African Resources

PAN African Resources could report up to 15% less gold than guided in the 12-months ended June after losing 10,000 ounces to Eskom loadshedding. The group’s underground production also underperformed, it said in an update.

The outcome for shareholders is an escalation in guided costs only partially offset by the improvement in the rand gold price – itself a function of rand weakness that will see inflation of imported goods.

Cobus Loots, CEO of Pan African said in an operational update, however, that he was heartened by a recent improvement at Evander underground which underperformed year-to-date. Barberton Gold Mines also demonstrated that its recently implemented transition to continous operations were gaining traction after a slow start.

“Despite lower than expected production, the group is positioned to deliver a robust financial performance for the current financial year as a result of the excellent rand gold prices being received and also disciplined operational cost control,” he said.

Production would come in at about 175,000 ounces for the year to June compared to previous guidance of 205,000 to 195,000 oz. The result was an unwanted increase in all-in sustaining costs which would be between $1,325/oz and $1,350/oz. They were previously estimated to be around $1,250/oz.

Year-to-date, the realised rand gold price received of was R1,003,374/kg. The current price is higher yet at R1,220,000/kg after the rand was slammed again, this time following the South African Reserve Bank’s 50 basis point rate hike.

Commenting on the impact of Eskom, Loots said that in addition to loadshedding (or load curtailment for mining companies and other industries) “outages and surges” as well as “difficulties related to transformers and other Eskom infrastructure” contributed to the lower gold production.

Pan African also provided guidance for its 2024 financial year saying production would be between 178,000 to 190,000 oz. The company would have to wait until the 2025 financial year before breaching 200,000 oz in output (it achieved this last year) which is when it commissions the R2.5bn Mintails project.

Pan African said the project’s integrated environmental authorisation was due imminently, based on a guarantee from the Department of Mineral Resources and Energy. Construction would therefore begin next month with steady state output expected in December 2024.

Mintails, which will see the processing of gold dumps from nearby mines, is scoped to produce 50,000 to 60,000 oz a year in gold at an all-in sustaining cost of $1,000/oz.

Pan African confirmed that it had withdrawn all expatriate staff from Sudan where it last year began an exploration programme. This follows the outbreak of hostilities, principally in Khartoum but nonetheless dangerous for the company’s staff operating near the Port of Sudan. About $5m had been spent on exploration to date.

“Pan African remains positive that the in-country situation will stabilise to the extent that it can resume exploration activities in the near future,” said Loots.