PAN African Resources produced 186,039 ounces of gold in its 2024 financial year ended June – 6.2% more than in 2023 owing to an much-improved performance at the Barberton Mines complex in Mpumalanga province.
But it could have been better for the £540m South African gold miner.
In January Pan African raised the prospect of increasing its 180,000 to 190,000 oz production guidance for the year. But it said in an update today that a delay in commissioning a ventilation shaft at Evander Gold Mines “adversely impact production” in the last two months of the financial year.
The delay also “negatively impacted unit costs,” Pan African said. It had previously guided to unit costs of $1,325 to $1,350/oz. All-in sustaining costs (AISC), which includes expansion capital, is expected to be about $1,350/oz – in line with guidance.
While the benefits from the new shaft at Evander will flow, once commissioned, in the current year, the outcome for 2024 is far from bad. Pan African said it received an average gold price of R1.2m per kilogram, equal to $2,021/oz – its highest price received ever. The rand averaged R18.71 to the dollar for the 12 month period.
Cobus Loots, CEO of Pan African, said improvements at Evander underground operations will “substantially improve efficiencies” as it will reduce reliance on the current “cumbersome” conveyor system in place. Evander’s production profile would be “vastly” improved during the current year, he added.
But the main kicker to Pan Africa’s outlook is Mintails, a R2bn gold tailings retreatment project west of Johannesburg. Pan African said the project would be commissioned early, in October, and below budget and help propel production to as much as 225,000 oz annually in terms of previous guidance, which was today maintained.
Amid a current gold price of $2,392/oz (R1.41m/kg), higher gold production has raised expectations Pan African will reward shareholders.
“We think this (higher production) will enable higher dividends to be considered as soon as financial 2025,” said Canaccord analysts Tim Huff and Alex Bedwany in May. They set a target price of 31 pence per share at the time. Shares in Pan African are trading at 28p/share on the London Stock Exchange, a 66% year-to-date gain.
First, however, the company has to contend with rising debt owing to the construction of Mintails. As of June 30, net debt rose to $106m, about $80m more than a year ago. Loots said he was cautious of that scale of debt, being of a conservative mind, but he added that Mintails’ capital – raised without using equity – would be repaid in two-and-a-half years.
Deon Louw, CFO of Pan African since 2015, has announced his retirement. He will be replaced by Marileen Kok. “We would like to thank Deon for his commitment and the significant contribution he has made to the Group over the years,” said Loots.
