JOHANNESBURG (miningweekly.com) – State electricity utility Eskom is passing its power-interruption pressures on to midtier gold producers like Pan African Resources, which lost 11 days to both planned and unplanned Eskom power outages in the 12 months to June 30.
“Eskom is under pressure and it’s passing that pressure on to us as gold producers,” Pan African CEO Ron Holding outlined on Tuesday, after presenting 7.2% lower R452-million headline earnings for the period.
The head of the London Aim- and JSE-listed precious metals mining company said that all four of the days lost in the first two months of this year were the result of unplanned power outages, which impacted the company's power-critical Evander gold mine, in particular, as it operates 2 300 m below surface.
Elaborating in response to Cannon Asset Managers investment analyst Dylan Martin, Holding expressed concern about the potential risk of more power outages and told analysts and journalists at the presentation attended by Mining Weekly Online that the power failures were adversely impacting labour relations, as mine management was seen to be at fault when they occurred.
“We speak about safety of our people and the environment that we work in, but there’s really nothing much that we can do, and we’re really in the hands of Eskom.
“To have the power switched off all of a sudden and the refrigeration plant stopping, and people having to sit at levels on the stations, waiting to be hoisted to surface, it's not comfortable for the people and I don't think it's very good for relations as well. Management normally gets blamed for this type of problem, and not Eskom,” Holding commented.
Earlier, Holding pointed out that Eskom was already negotiating to increase the 8% power tariff increase to 12% and reported that the company’s electricity costs had increased by 12.5% to R3.6-million in the 12 months to June.
Moreover, the company would be needing additional power at its new Evander Tailings Retreatment Plant (ETRP), which was scheduled to be cold commissioned in the next few months.
ETRP is poised to benefit from an estimated resource base of 0.4-million ounces, which has the potential to add immediate production ounces to the Evander operation.
Should ETRP meet its targets, Pan African plans to commission the far larger Elikhulu plant, which will treat tailings from the Winkelhaak, Leslie, Bracken and Kinross Dam dumps, which contain 1.5-million resource ounces.
The company’s long-term project pipeline at Evander also includes the Evander South, Poplar and Rolspruit projects.
Evander South has estimated resources of 5.2-million ounces of gold, Poplar 5.4-million ounces and Rolspruit 8.9-million ounces.
The refurbishment of the Fairview 2 and 3 decline shafts at Pan African’s Barberton Mines is expected to continue for another 18 months, after which operations will revert to six shifts a week.
Collectively, this should allow the company to attain its production target of 250 000 oz/y of gold from its current mines and infrastructure.
Pan African sold 44.2% more gold in the 12 months to June 30 at 188 179 oz, compared with 130 493 oz for the same period in 2013.
Its lower headline earnings were a consequence of current mining at Evander going through a low-grade mining cycle, which is expected to end before February.
For the first time, Phoenix Platinum was both cash generative and profitable, the Barberton Tailings Retreatment Plant has been a star performer and a final dividend of R0.141 a share, totalling R258-million, is being proposed following the payout of a dividend of R0.1314 a share in the 2013 financial year.
The company’s net debt increased marginally to R101-million.
Holding said discussions with employees had revealed unhappiness with accommodation, medical and social inequalities, which had prompted the company to expand its medical aid offering, extend its employee share ownership scheme (Esop) from Barberton to Evander, adopt a new accommodation strategy and build a bakery at Evander, which will include vendor stores where employees can sell their wares.
Pan African FD Cobus Loots said the introduction of the Esops at both mines meant that employees would own 5% of the shares in underlying operations and would be vendor financed, with limited dilution to the shareholders.
“We believe it’s the right thing to do for our employees and it also increases our empowerment credentials,” Loots added.