PAN African Resources, once considered an also-ran in South Africa’s gold sector, has been admitted to the FTSE 250 index following its recent shift to London’s main board.
“We had expected to see Pan African join [that index], and we think its entry will increase the company’s awareness in the UK market and beyond,” said Richard Hatch at Berenberg Bank in London. “The company continues to offer attractive growth and shareholder return potential, and we see plenty of upside from current levels.”
Days after the company was included in the London Stock Exchange’s list of likely index additions and deletions in late November, Pan African, headed by Cobus Loots, also announced it is planning to fast-track the R2.8bn expansion of its Johannesburg gold-from-tailings project at MintailsTailings Retreatment (MTR).
The project aims to increase output from the region by 30,000 – 35,000 oz a year to 100,000 oz. This will be either from a new plant or from expanding the existing plant, which is the more likely and lower-risk option Pan African is considering. Either way, the increased processing capacity will treat gold-bearing ore at the Soweto dump, which neighbours the current Mogale dumps.
Apart from producing more gold at elevated gold prices, the project, which is due for an investment decision in June, helps derisk the overall business, which previously relied more on underground gold from Barberton and Evander, both in Mpumalanga. About 58% of Pan African’s 2026 gold production is already from the surface.
In the wake of the potential expansion at MTR, Berenberg placed a target value of £1.12 a share on Pan African, which compares with its current value of £1.05 a share, a year-to-date improvement of nearly 200%.
“Certainly the production growth potential from an expansion at MTR, plus the shift to fresh ore mining at Tennant Creek [Pan African’s newly acquired Australian mine], as well as the rising rates of ore mining expected at Evander now that the new subvertical shaft is running, warrant an elevated near-term multiple,” say analysts at UK brokerage Peel Hunt, Pan African’s nominated adviser.
“[This] likely has further to go as management provides more details over the precise timings and spend levels to achieve this volume potential”.
A version of this article first appeared in the Financial Mail.
