Pan African’s tailings retreatment acquisition strategy compelling, says S2 Research
Market researcher S2 Research supports JSE-listed Pan African Resources’ acquisition strategy in the tailings retreatment sector, saying it is value-enhancing and strategically beneficial to shareholders.
Pan African has two tailings retreatment asset acquisitions under option, Mintails Mining SA and Blyvoor Gold.
S2 Research says the Mintails and Blyvoor assets could increase Pan African’s total gold reserve ounces by 9% and 8%, respectively. Together, these assets could double the current tailings retreatment reserve ounces, it states.
Pan African’s total gold production could increase from S2 Research’s forecast base case of 350 000 oz to 450 000 oz by 2027, it says.
Gold production could, thereafter, be maintained at 400 000 oz until 2032 (base case 300 000 oz).
Also, the life-of-mine of Pan African’s tailings retreatment operations increases to 19 years (base case 12 years) following the acquisition of the assets.
Based on Pan African’s published operational appraisals of each option, S2 Research estimates values of 28c apiece for Mintails and 13c apiece for Blyvoor.
In Pan African’s hands, S2 Research posits, Blyvoor will be optimised to a similar-sized project as envisaged for the Mintails assets and, in this way, will contribute a similar quantum value enhancement to shareholders.
S2 Research estimates that both options could be funded internally while still maintaining dividends, given Pan African’s robust balance sheet and continued strong operational cash flow forecast.
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