Record production has helped increase group profits for mid-tier gold miner Pan African Resources, which reported a 13.3% increase in earnings for the six months to end-December.
This comes despite average gold prices weakening by about 10% in rand terms.
A solid performance by the miner’s Evander underground mine in Mpumalanga helped increase gold production by 9.9% to a half-year record of 108,085oz, exceeding the company’s own earlier expectation of 105,000oz. Headline earnings increased by 13% to $46.1m.
Production at the Evander mine had increased by 72% for the first six months to 33,068oz. The company attributed the increase in production to elevated grades, an indication of the amount of gold obtained from every tonne mined and improved mining rates, as a result of improved face availability.
Gold production from Pan African’s underground and tailings retreatment operation in Barberton for the period was 49,117oz and the company said it was on track to achieve full-year production of about 100,000oz.
The company was also expecting improved performance from its tailings retreatment plant, Elikhulu, during the second half of the financial year, where production was adversely affected by heavy rain in November and December.
The JSE- and London-listed miner was also able to keep a lid on costs, increase net cash generated by operating activities by 54.4% and decrease its debt by 56.7%.
All-in sustaining costs for the period, which reflect the full cost of gold production from current operations, improved by 6.3%, dropping from $1,252/oz to $1,173/oz.
Pan African CEO Cobus Loots said the company’s unique combination of underground mining and surface remining enabled it to benefit from an overall reduction in unit costs given that the surface mining operations, which have generated “fantastic” returns for the group, were highly automated and therefore less labour intensive.
The company’s investment in renewable energy would also play a role in managing costs in the future, Loots told Business Day.
“We continually look for ways of making the business less susceptible to adverse external impacts in SA. This includes reducing our reliance on Eskom,” he said.
The first 10MW solar energy plant at Evander Mines was set to be completed by end-March and a feasibility study to expand the solar plant at the site by a further 12MW was under way, with the additional capacity designated for Evander Mines’ underground growth projects. The company has also completed a feasibility study for an 8MW plant at its Barberton operations.
Demonstrating the company’s commitment to social responsibility to creating “sustainable local communities beyond mining”, the group partnered with Primocane Capital to develop a large-scale blueberry farm in Barberton at a total investment of about $2.7m.
Loots said they chose this project because Barberton was situated in an area where climatic and other environmental conditions were conducive to farming, and blueberries were a high-value and labour-intensive crop.
The first crop will be harvested later this year and will generate 400 temporary jobs for a period of about five months. The group was already looking at a possible expansion of this project that would increase the number of seasonal jobs created to 1,000.
Pan African, valued at R9bn on the JSE, said it was on track to produce about 200,000oz of gold for the year, a slight increase from its previous guidance. According to Loots the company’s organic and other growth strategies could see gold production increase to 300,000oz by 2024.
In afternoon trade on Wednesday, Pan African’s shares were up 3.05% at R4.06.
Update: February 16 2022
This story has been updated with comment from CEO Cobus Loots and the share price.
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