JOHANNESBURG (miningweekly.com) – Despite falling short on planned gold production, Africa-focused precious metals producer Pan African Resources reported record earnings for the six months ended December.

CEO Jan Nelson on Wednesday attributed the strong performance to a high gold price, a significant effort to increase production at its Barberton gold mining operations (BGMOs) and effective cash cost management.

The company reported a 90.5% increase in attributable profit to £14.44-million, compared with £7.58-million in 2010, and a 33.7% increase in revenue to £51.23-million from £38.33-million in 2010.

Earnings and headline earnings a share grew to 1p, marking a 88.7% growth, while earnings before interest, taxes, depreciation and amortisation increased by 86.6% to £24.17-million.

Cash on hand decreased to £4.9-million from £10.6-million in the precious reporting period, mainly owing to capital expenditure of £4.57-million associated with the Phoenix platinum-group metals (PGMs) retreatment plant and the dividend payment of £7.42-million made during the period under review.

Pan African slightly increased its gold from BGMO, which comprises the Fairview, Sheba and New Consort sections, to 46 927 oz of gold. Total underground production remained consistent at 45 209 oz.

PROJECTS

Nelson said the Barberton gold tailings retreatment project (BTRP) was the next organic growth project to be developed and once commissioned should increase its BGMO’s yearly production by 25 000 oz from August 2013.

The company’s board approved Phase 1 of the BTRP, which would recover gold from the retreatment of the gold tailings situated close to the BGMO.

The BTRP would reclaim surface tailings that require no underground mining, therefore placing it on the lower end of the cost curve, Nelson pointed out.

During the reporting period, Matomo, which is a TWP company, commenced with a definitive feasibility study on the final design for the BTRP.

“This project will allow us to grow our profit margin once again,” Nelson stated.

The detailed design for the new tailings storage facility was also under way, while the environmental-impact assessment study was progressing according to schedule.

Nelson added that its BGMO remained one of the lowest cash cost producers in the South African mining industry. Despite significant inflationary pressures, the cash cost reported for the second quarter of the reporting period fell to about £13 000/kg.

Further, for total consideration of £830 000, the company acquired the Harper gold tailings dumps that were situated close to the Bramber tailings dump, and represented over three-million tons of material at a grade of 1.3 g/t.

During the period under review Pan African Resources established a separate management team to list its Manica gold project, in Mozambique, as a separate exploration company on an international exchange.

“Good progress has been made to achieve a separate listing in April 2012,” Nelson noted.

The company’s Phoenix chrome tailings retreatment plant at its platinum mine in the Northwest province was commissioned ahead of schedule and on budget at the end of last year. Through this the group completed its transition into a producer of both PGMs and gold.

At an expected operating cash cost of $466/oz, the project would be one of the lowest cash cost producers of PGMs in the South African industry.

Nelson pointed out that the acquisition of Evander Gold Mines from Harmony Gold in a 50:50 joint venture with JSE-listed Wits Gold, gave the group access to 50 000 oz of attributable production at a cash cost of about £17 750/kg, additional attributable profits, newly upgraded underground infrastructure following a £21.14-million investment in Evander 8 Shaft by Harmony over the last year.

“We believe that management’s proven track record for extracting value at BGMO can be duplicated at Evander…Our objective for the remainder of the financial year is to improve on the reported results for the period under review,” Nelson stated.
 

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