Pan African Resources’ share price plunged 21% on Friday, the mid-tier gold producer’s biggest one-day decline, after revising down its full-year production guidance due to load-shedding and operational issues.
The update and subsequent sell-off, which wiped more than R2bn off the company’s market capitalisation, comes with the gold price at a historic high and the rand touching a record low against the dollar last week.
The group’s JSE share price was R3.19 at close of trade on Friday after the sell-off, which wiped out all this year’s gains. The stock reached R4.80 on May 4 when its market value was R10.6bn.
Pan African lowered its production guidance by about a tenth for the rest of its current financial year, due partly to power cuts.
It expects gold production for the year to end-June of about 175,000oz, down from the previous guidance of 195,000oz-205,000oz, as problems at state-owned power utility Eskom and load-shedding led to about 10,000oz in lost production.
The slower-than-expected ramp-up of continuous operations at Barberton Mines and lower-than-expected production from Evander Mines’ underground operations curtailed total production.
“In addition to load curtailment, power outages and surges, difficulties related to transformers and other Eskom infrastructure contributed to production disruptions,” the miner said on Friday.
During load-curtailment, heavy consumers of electricity, including mining companies, reduce their usage on request from Eskom at peak periods.
Many companies, including Pan African Resources, are looking for other power sources to become self-sufficient and less reliant on Eskom after 2022’s record high load-shedding. Power cuts are now a feature of daily life in SA.
On Thursday, Reserve Bank governor Lesetja Kganyago said load-shedding was devastating the economy. Rolling blackouts are expected to cut two percentage points off SA’s economic growth in 2023. Eskom recently announced stage 7 and 8 load-shedding this winter.
But the miner says higher gold prices will partly mitigate lower production as the rand gold price rose 12.4% year on year to R1,003,374/kg, and it continues to rise.
“Despite lower-than-expected production, the group is positioned to deliver a robust financial performance for the current financial year as a result of the excellent rand gold prices being received and also disciplined operational cost control,” said CEO Cobus Loots.
The company expects to release its annual results on September 13. Its production guidance for the 2024 financial year is 178,000oz-190,000oz of gold.
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