PAN African Resources has signed a five year wage deal with the National Union of Mineworkers for members employed at the gold miner’s Barberton operations in Mpumalanga province.
In terms of the agreement, category 4 to 8 employees (including entry-level miners) will receive an average 5.3% annual increase starting in June this year and concluding on 30 June, 2029. The agreement would ensure labour relations stability, said Pan African CEO Cobus Loots in a statement on Tuesday.
The agreement appears to signal stability in union relationships with mining companies given that Harmony Gold also signed a five-year agreement with NUM in April – the first of this duration in the company’s 76 year history. Harmony’s agreement guaranteed an average 6% improvement over the period of the agreement.
Pan African said its current five year wage deal with UASA, which is the other representative union at Barberton Mines, is valid for another two years. This agreement, entered into in 2021, provides for a 5% increase or an increase in line with consumer price inflation, whichever is higher, capped to a maximum of 6%.
This agreement gives the parties a once-off option to re-negotiate these increases, in the event of CPI being lower than 4% or higher than 7.5%, said Pan African.
The gold miner also announced that an employee share ownership plan at Barberton Mines, which was to mature this month, had been taken early in April.
“Qualifying employees received dividends of more than R40m during the scheme’s tenor, with the final maturity benefits paid to employees during May 2024,” said Pan African. More than 2,200 employees qualified to receive final maturity payments, with payments dependent on the number of completed years of service, it said.
Buoyant
Shares in Pan African, up 75% over the last 12 months, all but matched a four year high in May amid a buoyant gold price, up 20.7% over the same period.
In rand terms, gold miners are currently receiving R1.4m for each kilogram produced. Based on all-in sustaining cost guidance of between $1,325 to $1,350/oz, Pan African would expect to report an average operating margin of between 70% and 80%.
The company said in May that the improvement in the gold price would result in a doubling in returns for its R2.5bn Mintails project, due to be commissioned in December. Commenting in a production update on May 9, the London- and Johannesburg-listed gold miner also said it was studying a $113m extension of Mintails.
Initiating coverage in mid-April, Canadian bank Canaccord Genuity has forecast Pan African’s gold production at about 238,000 oz a year by 2027 as a result of Mintails. It forecasts a reduction in costs and expanded margins in the coming three to four years as well as $100m in free cash flow from 2026. This will trigger a “dramatic” improvement in the firm’s balance sheet position, peaking this year at about $90m.
Canaccord analysts Tim Huff and Alex Bedwany say: “We think this will enable higher dividends to be considered as soon as financial 2025 and further growth investments like Egoli (an already announced growth prospect from Barberton Mines) as soon as financial 2026.” Citing its London Stock Exchange price, currently 25p a share, they set a price target of 31p a share.
