A tough second half awaits Pan African Resources in its 2017 financial year after the gold miner reported an interim dividend and higher profits that masked operational difficulties.
The overriding task facing management in the six months to end-June will be the R40m refurbishment of two shafts at its Evander mine that will entail the underground workings to be shut for up to two months.
The mine will produce 14,000oz less of gold in the year and drag the company’s annual output down to 181,000oz.
Pan African wants to get the all-in sustaining cost at Evander to $1,100/oz after they ballooned to $1,769/oz in the interim period due to lower output due to safety stoppages and difficulties with its ore hoisting shaft.
Pan African must secure R740m for its R1.74bn Elikhulu tailings retreatment project at Evander, which will add 56,000oz a year of low-cost gold to the company.
The firm has secured R1bn in funding for the project that it hopes will begin producing gold by the end of 2018.
Pan African has two other tailings operations at its Barberton gold mine and Evander and they "shot the lights out" in the half-year to end-December, CEO Cobus Loots said.
"South African mining companies have for many years traded at a discount to their international peers and until we resolve uncertainty around the regulatory regime, I believe this will continue to be the case.
"The only way Pan African can reduce this discount is to diversify outside the country," he said at a results presentation.
Pan African, which mines gold, coal and extracts platinum group metals from chrome tailings, reported a profit of R250m for the six months to end-December, a 10% increase compared with a year earlier. It reported a R300m dividend payment, its largest yet, equating to R0.1544 per share compared with R0.1147 before.
"Given the strength of operational cash generation and the available headroom in the facilities, we continue not to be overly concerned about the balance sheet for the moment," said Yuen Low from Shore Capital.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.