Following an “extremely challenging” 2015 financial year, precious metals miner Pan African Resources expects to deliver an improved performance in the 2016 financial year.

The company announced last week that it expects its earnings per share (EPS) and headline earnings per share (HEPS) for the financial year to June 30 to be between 40% and 60% lower than the 24.74c reported for the 2014 financial year.

EPS and HEPS, in rand terms, are expected to be between 9.93c and 14.87c.

Pan African attributes the lower earnings to a low-grade mining cycle at its Evander Gold Mines and mines effecting corrective actions, including improved maintenance protocols, strengthening on-site management teams and a renewed management focus on achieving operational and production targets.

The company’s Barberton Mines’ Biox plant issues have also contributed to the lower earnings. The plant, which was affected by oil contamination in May 2014, continued to face challenges in the first six months of the financial year under review.

Pan African is, however, confident that the recovery of the plant is nearly complete.

“We are disappointed that Evander Mines’ turnaround has not happened more rapidly, [but] the operation is now established in higher-grade mining areas. Having implemented corrective strategies, the group is well positioned to deliver an improved performance in 2016,” CEO Cobus Loots says.

Pan African forecasts Baberton Mines to produce in excess of 110 000 oz of gold, its Evander Mines in excess of 100 000 oz of gold and its Phoenix Platinum operation to produce about 10 000 oz of platinum-group metals in the 2016 financial year.

Loots adds that the extension of Fairview’s life-of-mine, in conjunction with Evander Mines’ development of the main decline from 25 level to 26 level and exploration projects, underpins the company’s confidence in the longevity of its gold production and resources.

Further, he notes that, through the refinancing of the company’s debt facilities, the group can continue growing and investing appropriately. “It secures long-term funding at a competitive rate and provides the group with a flexible financing package to manage its capital structure and liquidity.”

The JSE-listed company notes that its Evander tailings retreatment plant (ETRP) remains on target, in line with its 42% planned recoveries. It has now successfully ramped up processing capacity to 200 000 t/m at 0.31 g/t.

In light of the positive results of the ETRP, the company will undertake a preliminary economic assessment (PEA) to determine the viability of building Elikhulu, a tailings retreatment plant that could potentially treat slimes at a processing capacity of up to 12-million tonnes a year at a head grade of 0.28 g/t from the Winkelhaak, Leslie and Kinross tailings storage facilities.

The total mineral resource for Elikhulu is 165-million tons at 0.28 g/t.

Further, an internal technical team from Evander Mines has been assigned to assess the merits of progressing the Evander South brownfield project to the level of a PEA.

“The Evander South project is an attractive mining opportunity, whereby the Kimberley reef can potentially be exploited at shallow depths, commencing at 300 m below surface,” the company says.

Coal Acquisition
Meanwhile, Pan African has also entered into an agreement to acquire the Uitkomst high-grade thermal coal project, in KwaZulu-Natal, from Oakleaf Investments Holding 109 and Shanduka Resources for R200-million.

The acquisition of the colliery, which has a mineral resource of 25.7-million tonnes, is expected to be immediately earnings and cash flow accretive to Pan African.

The colliery produces about 400 000 t/y of coal and Pan African believes there are opportunities to increase output and improve the operational performance of the mine.

The acquisition will be funded from existing debt facilities and internally generated cash flows.

Pembani Shanduka Deal
Last week, Pembani and empowerment group Shanduka signed transaction agreements and submitted the requisite regulatory filings related to the merger of the two companies to form a black-controlled natural resources and industrial group called Mergeco.

Shanduka holds 23.86% of the issued share capital of Pan African, through its wholly owned subsidiary Shanduka Gold.

Following the completion of the transaction, Mergeco will not hold any interest in Shanduka Gold or in Pan African. The direct shareholding in Shanduka Gold, and indirect 23.86% shareholding in Pan African, will instead be held by the Mabindu Trust, Jadeite Limited – an investment vehicle of the China Investment Corporation – and Standard Bank.

The Mabindu Trust is a broad-based black economic-empowerment (BEE) trust, with historically disadvantaged South Africans as beneficiaries.

Pan African believes the transaction will not negatively affect the group’s existing BEE credentials.

The company’s share price on the JSE fell as much as 8% to R1.96 early on Tuesday morning, compared with Monday’s close of R2.13 a share.