Pan African produces more gold at a higher price

Midtier gold producer Pan African Resources says an increase in production and a rally in the price of gold lifted its profit for the six months to end-December by about 46%.

The group said on Wednesday that production in the period increased nearly 7%, while the price of gold went up 14% in the period under review.

The mining house said gold production for the six months under review came in at 98,458oz, up 6.7% compared with the same period in the previous reporting cycle.

This put the group on track to deliver its 2024 financial year production guidance of 180,000oz to 190,000oz and it said it might consider increasing guidance during the second half of the year.

Gold production was expected to continue increasing, with estimated production for the 2025/26 year when the company will benefit from the full 50,000oz bump in production from its new Mogale tailings retreatment (MTR) plant at the Mintails project, set at 220,000oz to 250,000oz.

The MTR plant near Carletonville, west of Johannesburg, is set to reach steady-state production by December 2024.

The group, which has a dual listing on the JSE and the Alternative Investment Market (AIM) in the UK, achieved a slight 0.3% reduction in costs for the period despite increased inflationary pressures. This, said CEO Cobus Loots, did not include about $13/oz cost savings from renewable energy.

Presenting the interim results to investors on Wednesday, Loots said the miner did not expect the electricity supply situation in SA to get significantly worse than it now was, hence it did not expect this to have an effect on the production forecast for the rest of the year.

The group was targeting at least 30MW of installed solar capacity in the next 24 months, which would result in significant cost savings and mitigate future electricity supply disruptions and price increases, Loots said.

By 2027, Pan African Resources wants to have 80MW installed solar power — half of this from a 15-year third-party-supplied power purchase agreement, which will cover about 40% of the gold producer’s energy requirements and generate about R200m in cost savings per year.

The increase in gold production, coupled with steady production costs and a 14% jump in the gold price to $1,961/oz yielded a good set of interim results.

Headline earnings and headline earnings per share for the period were both up about 46% compared with the six months to end-December 2022. Its profit for the period was up about 47% and cash generated increased 134%.

“This cash flow generation has resulted in the group’s robust financial position, even after taking into account the MTR project’s capital expenditure and the net dividend of $18.3m paid to shareholders in December 2023,” said Loots.

He said the company had successfully resumed exploration activities in Sudan, after a detailed assessment of the security and operational environment, which it would continue to monitor closely. “We hope to start drilling prospective targets in the months ahead,” Loots said.

The group had to withdraw from the North African country in mid-2023 due to conflict in the region. Sudan is the third-largest gold producer in Africa after Ghana and SA.

In early afternoon trade on Wednesday, Pan African’s share price on the JSE was down about 2% for the day at about R4. Over the past 12 months, its share price has gained 25%.

erasmusd@businesslive.co.za