Pan African Resources (PAR) has reported 32% growth in profit for the year ended June as increased output allowed the mid-tier gold producer to capitalise on high gold prices.
The SA mining house on Wednesday reported revenue up by 16.8% at $373.8m (R6.68bn) for the year under review, while headline earnings soared 32% to $79.5m.
This came as the group increased output by 6.2% to 186,039oz, in line with its guidance. PAR attributed the higher production to operational enhancements and optimisation initiatives at its Barberton mines’ underground operations and the Elikhulu tailings retreatment plant’s surface operations.
PAR said it expected its new Mogale Tailings Retreatment project, whose steady state production is set to start in December, to further bolster its operational performance. As a result, production guidance for the 2025 financial year was increased to 215,000oz to 225,000oz.
The group reported all-in sustaining costs (AISC) of $1,354/oz, reflecting a slight increase from the prior period — marginally above guidance. PAR attributed the higher costs partly to the delay in commissioning its Evander Mines’ subvertical hoisting shaft, which the group said negatively affected unit costs.
CEO Cobus Loots said that while the group benefited from high gold prices, its focus was on positioning the company for sustainable, long-term growth.
“We find ourselves in a very favourable gold price environment, with the metal appreciating by more than 20% in dollar terms in the past year, and generally positive sentiment on its near-term prospects,” Loots said.
“However, we also recognise that, though fortuitous, the commodity price tailwinds may not last indefinitely. We therefore have to use this opportunity to ensure our business model remains robust and continue to position our assets for long-term sustainability.”
The CEO warned that the continued underperformance of gold equities relative to the gold price in the past year reflected investors’ concerns about capital allocation and sustainable value creation in the sector.
“Certainly the recent escalations in AISC globally (now around $1,400/oz on average) suggest that producer margins and profits are being eroded by cost pressures and by a general underinvestment in capital expenditure and mining development over many years.”
Loots said management would continue to focus on disciplined capital allocation and cost control, noting that the past year’s favourable trading environment provided an opportunity for the company to hedge against a future downturn in the gold market.
“There was a big focus on reinvesting in our assets in the good times, so that we reduce the cost of production, which gives us more flexibility to see through a downturn,” he said.
Loots noted that the group’s “tailing operations, which are all long-life, can produce at an all-in-sustaining cost of $1,000 or lower”, making them resilient to price volatility.
The CEO said that despite occasional challenging operating conditions and the age of its underground operations — with the Barberton Mines having been producing for almost 140 years — PAR “can demonstrate a track record of sector-leading returns and dividends to shareholders”.
In line with this, PAR’s board proposed a final dividend of R489m for the 2024 financial year, or 22c per share.
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