Pan African on track to deliver full-year guidance following strong interim period

14th February 2024 By: Tasneem Bulbulia - Senior Contributing Editor Online

Pan African on track to deliver full-year guidance following strong interim period

Pan African's Mogale project

Gold miner Pan African Resources delivered an “excellent” safety, production and financial performance for the six months ended December 31, 2023, which positions the group well to deliver on its production and cost guidance for the full financial year, CEO Cobus Loots says.

Its full-year 2024 production guidance is between 180 000 oz and 190 000 oz of gold, and increased guidance may be considered in due course.

Gold production for the interim period was 98 458 oz, compared with 92 307 oz in the previous year’s corresponding period, an increase of 6.7%.

Production costs are said to have been well managed, despite inflationary pressures, resulting in a reduction in all-in sustaining costs (AISC) for the reporting period to $1 287/oz from $1 291/oz in the prior comparable period.

The group’s own operations, which account for more than 85% of its gold production, produced at an AISC of $1 149/oz compared to $1 139/oz.

The group’s tailings retreatment operations – Elikhulu tailings retreatment plant and Barberton tailings retreatment plant (BTRP) – produced at an AISC of $894/oz compared with $887/oz the previous year.

Renewable energy generation and water recycling, together with other initiatives to increase the group’s future gold production, are expected to contribute to a decline in future AISC.

The AISC guidance for the 2024 financial year has been reduced to between $1 325/oz and $1 350/oz.

Loots explains that the higher dollar gold price, improved production and cost and capital discipline contributed to the much improved cash generation of $27.2-million, an increase of more than 130% when compared with the previous reporting period.

He adds that this cash flow generation has resulted in the group’s robust financial position, even after considering capital expenditure from the Mogale tailings retreatment project (MTRP) at the Mintails site, on the West Rand of Gauteng, and the net dividend of $18.3-million paid to shareholders in December 2023.

Loots highlights that the group’s surface remining operations performed “exceptionally well”, with its sub-$900/oz AISC contributing significantly to group production, cash flows and profits.

The BTRP benefited from operational enhancements and the optimisation of the carbon-in-leach process, which reduced AISC by over 10% to $650/oz, making it one of the world’s lowest-cost gold producers, he acclaims.

The long-life MTRP, once commissioned later this calendar year, is expected to add meaningfully to the group’s surface production portfolio and its valuation.

Steady-state production is expected at the MTRP by December.

“With the MTRP’s incremental production of approximately 50 000 oz/y, almost 50% of the group’s annual gold production will be sourced from low-cost, long-life, surface remining operations.

“In addition to being a compelling investment proposition, large-scale tailings retreatment operations provide much-needed economic stimulus and employment in defunct mining regions with challenging socio-economic conditions,” Loots avers.

He posits that the introduction of continuous operations at Barberton mines’ Fairview and Sheba mines has made a positive impact on production and further improvements will become evident once optimisation of the underground infrastructure is fully implemented.

While the Consort mine has experienced geotechnical challenges, Pan African believes the contractor operating model is appropriate for the scale of this operation going forward.

“We are excited by the initial exploration results from drilling programmes being undertaken, using the latest geological software to unlock the seemingly unlimited potential of Barberton’s orebodies, which have been continuously mined for almost 140 years.

“The development of Evander mines’ 24, 25 and 26 Level project is progressing well, with ramped-up mining operations at 24 Level already contributing to the replacement of ounces as mining from the eight Shaft’s pillar nears completion.

“The significant capital expenditure already spent on this project to improve and optimise the infrastructure will enable consistent and sustainable production of an average of 65 000 oz annually from this operation in the long term, and allow it to maintain its status as one of the lowest-cost underground gold mines in Southern Africa,” Loots outlines.

Following the restart of Pan African’s gold exploration activities in Sudan, steady progress has been made by its in-country team, with the mapping and sampling activities of shallow orebodies for the prioritisation of initial drill targets, Loots says.

On-the-ground exploration activities in Sudan included geological mapping and sampling and target generation for planned drilling activities, with drilling expected to start during the last quarter of the 2024 financial year, and Pan African is closely monitoring the situation in the country.

Net cash from operating activities increased by 134.5% to $27.2-million from $11.6-million the previous year, and profit for the period increased by 46.7% to $42.4-million from $28.9-million the previous year.

Headline earnings increased by 46.4% to $42.6-million from $29.1-million, and earnings a share and headline earnings a share increased by 46.1% to $0.022 from $0.015.

As mentioned, there was payment of a net dividend of $18.3-million in December 2023, equating to a dividend yield of 5.9%.

Overall safety rates improved, with a total recordable injury frequency rate of 6.13 per million man hours for the year compared to 8.54 per million man hours in the previous year.

Group surface operations reported no recordable injuries for the period. Barberton Mines achieved four-million fatality-free shifts during November 2023.

However, post the reporting period, a fatality occurred at Elikhulu with the investigation into the death of the supervisor still under way.

Loots says that, in the short term, the priority is to deliver to the production guidance for the 2024 financial year and commission the MTRP on schedule and within budget, as well as focus on sustainability initiatives.

“We are well positioned to deliver on our operational and strategic objectives for the 2024 financial year, and if the current gold price tailwinds persist, shareholders can look forward to a continuation of the reporting period’s excellent financial performance for the full financial year,” he highlights.