PAN African Resources said it had received offers from potential co-investors in a proposed underground gold expansion in South Africa.
The miner announced in February it was running a study of Poplar, a satellite deposit about 6km north of its Evander Gold Mines in Mpumalanga province. Poplar last received serious attention in the Nineties when it was part of Gengold, but its economics have vastly improved amid a 115% improvement in the gold price in the last three years.
“I don’t want to elaborate too much because it’s at an early stage, but it’s not often that you find this sort of deposit in this gold price environment,” said Cobus Loots, CEO of Pan African Resources. “There’s been a lot of interest from other parties in potentially participating in the likes of Poplar,” he said.
While Poplar is an option, Loots is concerned its development might be viewed negatively by shareholders. The project will be underground, potentially accessed through a decline, but could sap substantial capital. “So there’s a bit of water to flow under the bridge here,” said Loots who added shareholders want cash over promises.
“I think before we make any final decision on Poplar, we need to do final feasibility work and have a look at permitting, and then we’ll come back. But it’s seven grams a ton, about 6.6 million ounces. It’s attractive and not massively deep (500 metres). It’s sitting on our mining right and we have processing capacity at the Kinross plant. It’s an interesting one.”
Pan African has guided to a near doubling in capital outlay next financial year of $328m, mostly owing to the ramp up of its Australian mine Tennant Mines. Despite this, Pan African is strongly cash generative. Loots is upbeat on paying dividends.
“I think we can give shareholders a good dividend,” he said. “Production is up by 40%, and given the gold price we’ve received and the fact that we have about $200m on the balance sheet, even after commissioning two new large-scale projects in 18 months, we are financially good. You can imagine” he said.
Pan African has a dividend policy of paying out 40% to 50% of free cash flow after capex. Loots declined to be more specific, but said: “We’ve got some pretty good numbers coming”. The company is due to close its 2026 financial year on June 30, and is scheduled to publish its results on September 9.
