JOHANNESBURG (miningweekly.com) – Increasing gold theft from South African mines was funding international terrorism and human trafficking and amounted to a global money-laundering operation of huge magnitude, Pan African Resources CEO Jan Nelson said on Tuesday.
"Dirty money is coming in and clean gold is going out," Nelson told Mining Weekly Online at question time during the company's annual results presentation, where Pan African reported a 15% increase in underground gold production and 30% earnings before interest, tax, depreciation and amortisation (ebitda).
"It's a money-laundering operation on a huge scale. We have to attack this problem at various levels and the role players are interacting and there is assistance from government," he said.
Pan African's security costs have risen to close to 3%, which represents a total of $15/oz of gold produced. Of that $15/oz, $7/oz goes directly towards fighting criminal miners.
At international level, UN resolutions were being evoked and special programmes implemented.
"Interpol is involved, because the money leaves South Africa and it's funding international terrorism and it's also funding human trafficking," Nelson divulged.
The London Aim- and JSE-listed Pan African, which is debt-free, unhedged with cash in hand, is a junior gold-mining company that produces close to 100 000 oz/y of low-cost, high-margin gold from its Fairview, Consort and Sheba mines in Mpumalanga.
The company's gold sales totalled R760-million in the year to June 30, 2009, from 97 500 oz.
Nelson said, during question time in response to Mining Weekly Online, that "criminal mining" was on the increase at the company's mines in Barberton and throughout South Africa.
"We have seen an increase in criminal mining. We are targeting the criminal syndicate leaders. We know who these people are, we know where they are, they are being tracked and they will taken out," he told Mining Weekly Online.
The criminal miners were illegally entering the company's operations, threatening Pan African's employees and endangering the viability of the business.
A Presidential South African oversight committee had visited the mine and a special police task team had been assigned to the task of eradicating criminal mining at South African operations.
"We need to understand that criminal mining is not only a Barberton problem, but a South African problem and an international problem.
"We are linked into the precious metals committee and we have got the cooperation of the special task team of the South African police.
"On the first level, we are contributing $7/oz to fighting these criminals," Nelson told Mining Weekly Online.
"We have to do it and we will do it because we will not lose our business, and so we've improved security measures and we've also improved our interrogation systems in terms of information.
"When a criminal miner is captured and he has a cellphone, we download all the information, which is supplied to the government and the special task teams that use that to look at the networks on a country basis.
"On the ground, we are fighting criminal mining with additional security, we're looking at better information systems.
"But then, on the next level, at the tier-two level, we need special task teams from the police to fight the syndicate bosses. We are all coordinating our activities to do that, because you have the criminal miners doing the dirty work on the mines, but they are not earning a lot of money," Nelson said.
"It has an impact on our bottom line of $7/oz, but we are prepared to pay that to win the fight and we are coordinating with government," Nelson said.
He said that the 2009 financial year's 30% ebitda growth was sustainable.
The company had growth projects at Barberton; its Phoenix project is a year away from going into production of between 10 000 oz and 15 000 oz of platinum-group metals a year from early 2011.
The company, which has exited from its exploration assets in the Central African Republic and Ghana, no longer has that exploration expenditure, which will have a positive impact on cash flow.