Pan African puts tough year behind it, raises future production target
CEO Cobus Loots says the company is now a low-cost producer, after a painful year in which the closure of the loss-making Evander mine caused production to plunge
After a difficult year in which it closed its Evander mine, leading to a sharp fall in expected gold output, Pan African Resources lifted its future gold production target to about 170,000oz.
Pan African, which is traded on bourses in Johannesburg and London, fell well short of the 190,000oz target it set at the end of its 2017 financial year, in which gold sales dropped by 15% to 173,285oz because of difficulties at its Evander mine in Mpumalanga.
Pan African took the decision to stop the loss-making Evander mine, putting 1,700 people out of work after having already laid off 775 employees at contractors at the mine during the 2017 financial year to end-June.
In its production update for the 2018 financial year, Pan African, one of the worst-performing gold stocks on the JSE so far this year, said its full-year production of 160,421oz was ahead of a more recent forecast of between 157,000oz and 160,000oz.
For the 2019 financial year, Pan African set a target of 170,000oz, with the extra output coming from its R1.7bn Elikhulu tailings retreatment project at Evander, which will start pouring gold in August this year, adding low-cost, safe production to the group.
Elikhulu will deliver 55,000oz of gold a year at an all-in sustaining cost of up to $700/oz.
"With the previous high-cost ounces from the Evander underground now replaced by production from low-cost surface re-mining operations, production costs are also expected to demonstrate a significant improvement," CEO Cobus Loots said.
"We are now repositioned as a lower-cost, long-life gold miner, consistent with stakeholder expectations."
Pan African did not give any financial data on the costs of production for 2018.
The all-in costs of production during 2017 were R540,693/kg, including capital development expenditure, compared with R410,206/kg the year before.
The Barberton gold mines came in at the upper end of the 2018 production forecast, achieving 90,628oz, with the second half of the year showing a 23% improvement on the first six months of the year.
Evander topped its full-year forecast, generating 69,793oz, but this was Pan African’s most expensive mining operation. The small tailings retreatment operation making up part of the production number fell short of its production target. It hit 19,874oz, missing the 20,000oz-21,000oz range.
Evander spent R160m in laying off 1,700 people at Evander in May 2018, a number that will be reflected as a one-off cost in its full-year financial results.
Pan African will conclude a feasibility study on its Royal Sheba prospect at Barberton during September 2018. The project could deliver 303,000oz of gold a year.