Pan African Resources lost an estimated 10,000oz in gold output in the year to end-June due to unreliable electricity supply, contributing to a fall in overall production levels for the reporting period when rand gold prices were at elevated levels.
Higher stages of load-shedding have become a bugbear in recent months for miners, adding to cost inflation in an environment where commodity prices are volatile. The effects are not only lost production but also on the amount of metal being processed.
But Pan African and other industry players are plugging the electricity supply gap through renewable energy projects that are at various stages of development.
The mid-tier gold producer said on Wednesday that some of its underground mines also suffered production bottlenecks, leading to overall production of 175,209oz versus the record 205,688oz delivered in the matching period a year ago.
Earlier in the year Pan African reconfigured Fairview and Sheba Mines’ shift cycles to 24-hour operations and converted Consort Mine to a contract mining model. But this transition was slower than anticipated, with the company experiencing delays in the recruitment of scarce skills.
The changes are part of the strategy overseen by CEO Cobus Loots to sustain and improve productivity at its ageing Barberton underground operations.
Loots said in a statement that the higher gold price compensated for lower production at its underground mines. “We are confident that the measures we are implementing, specifically at Barberton Mines’ underground operations, will result in higher production in the future.”
Pan African upgraded its production guidance slightly for the year ahead as affected underground mines begin to ramp up production. The average rand gold price was up 17% year on year but flat in dollar terms. The all-in-sustaining costs, the industry metric measuring total cost of production, was up 3% to $1,327oz.
Higher production cost remains an area of concerns for the industry and is compounded by the weaker rand, which increases the cost of imported equipment.
The group’s headline earnings fell 20% to $60.5m during the reporting period while net cash from operating activities fell 9% to $100m. Shareholders have been rewarded with R400m in final dividends, equivalent to 18c per share.
Pan African’s share price ended 1.50% lower at R3.28 on the JSE on Tuesday.
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