Gold miner Pan African Resources achieved a 52.8% year-on-year increase in revenue for the six months to December 31, 2018, to R1.3-billion.
CEO Cobus Loots on Wednesday attributed the higher revenue to an increase in gold production, which rose by 54.2% year-on-year to 81 014 oz on the back of robust performances from the Barberton Mines’ underground operations, the Barberton tailings retreatment plant and the newly commissioned Elikhulu tailings retreatment plant (ETRP).
Commenting on the gold market in general, he said gold’s safe haven status was returning, with last year’s improvement in the dollar gold price continuing, ever-increasing geopolitical risk, as well as significant central bank demand and the “collapse” of bitcoin further endorsing gold’s fundamentals.
Loots added that, with expected rand weakness on top of a favourable gold price, this could be a good year for South African gold miners. However, he suggested that the poor condition, and subsequent impact on the mining sector, of the local economy could not be understated and that challenges remain.
Nonetheless, Pan African’s profit after tax increased by 136.8% year-on-year to R137.8-million, while its earnings before interest, taxes, depreciation and losses from discontinued operations increased by 92.3% year-on-year to R342.5-million.
CFO Deon Louw noted that earnings a share had increased by 121.4% year-on-year to 7.15c and that headline earnings a share had increased by 135% to 7.15c, despite an increase in the weighted average number of shares.
The group achieved all-in sustaining costs of $975/oz, a reduction of 23.1% compared with first half of the prior financial year.
Louw noted that financing Elikhulu’s construction resulted in the group’s net debt increasing from R1.2-billion to R1.88-billion. “Net debt, we believe, has now peaked and the balance sheet should commence to leveraging from these levels,” he added.
Further, he commented that the capital expenditure (capex) of R587-million that was incurred during the period should also decline in the second half of the financial year, with the capex requirement for the Elikhulu tailings storage facility coming to an end in the next few months.
He noted that the suspension of the dividend in 2018 was necessary but that the group remained committed to reintroducing a dividend “when it is expedient” .
Gold production from the Barberton complex was up 24.5% to 50 556 oz, benefitting from increased underground mining flexibility at the high-grade Fairview 272 and 358 mining platforms. The Barberton tailings retreatment facility also improved production, on the back of the successful commissioning of a regrind mill in May 2018.
The ETRP contributed 15 292 oz in its first four months of operation and reached its nameplate capacity of one-million tonnes throughput in October 2018.
Pan African noted that the incorporation of the existing 200 000-t-a-month ETRP throughput capacity into Elikhulu, had increased the latter’s processing capacity to 1.2-million tonnes a month.
Loots expects the group to achieve production guidance of about 170 000 oz for the full-year.
“We have a very attractive internal growth profile,” Loots stated, noting that the group had reversed the declining trend of production at the Barberton underground operation. Moreover, the group will progress to the next 11-block high-grade platform 256 in July.
Drilling at Barberton Mines’ Royal Sheba prospect was completed, indicating a near-surface mineral resource of 370 000 oz with a 900 m strike and 150 m down-dip extension. The total mineral resource is now 760 000 oz, comprising the near-surface resource of 370 000 oz and the underground mineral resource of 390 000 oz.
The feasibility study on the Royal Sheba project, which will include a review of possible near-term improvements to underground ore handling logistics, infrastructure and existing processing plant throughput capacity, is on track to be completed by next month.
The group is also investigating the viability of Project Dibanisa, which will transfer ore from the Sheba Mine to the Fairview infrastructure, saving costs and freeing up the Sheba infrastructure (the shaft and plant) for use for the Royal Sheba project.
Additionally, Loots noted that a feasibility study on Evander’s Shaft 8 pillar project is under way. The project would have a life-of-mine of three years, with a throughput of 11 500 t/m producing around 30 000 oz/y.
The project would have a minimal capital requirement of R40-million, and the board’s final investment decision is expected next month.
Pan African has also started an extended exploration drilling programme at Barberton Mines’ mining right at New Consort mine, targeting the Main Maiden Reef orebody as a potential satellite deposit for the Royal Sheba project.
Meanwhile, Evander Mines’ Egoli project remains a viable underground mining project and the group is reviewing options to advance the project.
“These projects, together with improvements to our underground ore handling and processing plant infrastructure, have the potential to significantly boost Barberton Mines' production in the coming years,” Loots concluded.