Pan African nudges up gold output forecast as Evander comes to party in first half

Gold pour

PAN African Resources has nudged up its full year gold production guidance to 200,000 ounces, a record for the mining and tailings treatment company.

This comes following steady half year production numbers published today – to December 31 – in which it produced 108,085 oz of gold, 9.9% higher year-on-year.

Full year guidance of 195,000 oz was provided in September.

The production performance was thanks to Evander Gold Mines which produced 33,068 oz in the six months, nearly double last year’s output. It made up for slippages at Pan African’s Barberton Mines and Elikhulu, a tailings treatment operation – albeit minor year on year reductions.

Pan African CEO, Cobus Loots said he was confident that Barberton was still “on track” to end the year with production of 100,000 oz.

The company also reduced net senior debt 60% to $23.9m even after paying a record net dividend of $21.8m in December.

The production report and bullish year-end forecast cap a busy period for Pan African Resources which in December announced it had bought the surface dumps at Peter Skeat’s Blyvoor Gold operation for R110m.

The acquisition, which still has to meet a fatal flaw assessment, put the kibosh on Katoro Gold’s attempts to buy the dumps and list them on the London Stock Exchange. The fatal flaw assessment could take up to three months to complete.

In terms of a conditional purchase agreement, Pan African then has a further nine months – to December 2022 – to complete a definitive feasibility study after which “at its sole discretion and subject to fulfilment of suspensive conditions customary for a transaction of this nature’ it will pay R110m in cash for the dumps”.

A technical pre-feasibility study indicates the potential to produce 25,000 oz to 30,000 oz of gold through processing six million tons of tailings annually over a mine life of 15 years which is extendable to 25 years if the inferred mineral resources are included.

The Blyvoor Gold project potentially adds to Pan African’s growth strategy which has been vigorously pursued in the last two years.

In May, the company overhauled its capital expenditure plans following positive concept study results into Mintails, a large gold tailings deposit situated west of Johannesburg. A definitive feasibility report is due this quarter.

It subsequently decided to phase in production at the Egoli project which aims to expand the firm’s Evander Gold mine in Mpumalanga province.

The reprioritisation of capital was also to allow for the development of Evander’s 8 Shaft No. 2 decline project which is expected to begin in the 2023 financial year.

A 10MW solar PV plant at Evander Mines would be commissioned in late February. The project had hit delays related to port disruptions and inclement weather. Pan African also said it was studying the feasibility of expanding the solar plant to 26MW in order to accommodate Evander’s underground growth projects, such as Egoli.

Pan African is due to report its interim numbers on February 16.