With the gold price reaching an all-time high, mid-tier gold producer Pan African Resources has seen a spike in the theft of gold ore, and falling productivity at its Sheba mine.
Speaking at the presentation of the results for the six months to December, Pan African Resources CEO Cobus Loots said they were “relooking” Sheba, an operation at the Barberton Mine complex where productivity “was unacceptable” during the period under review.
“The fact is that so many of our employees are stealing from us. I mean, in the last six months we caught 60 people stealing from us, and we think there is way more. We are drawing a line in the sand. We have the flexibility now, as far as long-term low-cost and stable production is concerned. This gives us the opportunity of right-sizing and ensuring this is a sustainable business,” said Loots.
A company spokesperson said the theft mainly related to gold-bearing material as the ore at Barberton is quite high grade and can contain visible gold.
South African gold miners have recorded double-digit growth share price gains since the start of the year. With the gold price reaching $2,928 (R53,760) on Friday, the price of bullion has soared 44% over the past 12 months on the back of geopolitical tensions as investors and central banks sought refuge in what is considered a safe investment.
Production levels at Pan African Resources fell overall after Eskom transformer breakdowns and delays in the commissioning of a sub-vertical shaft at the company’s Evander Mines.
The gold producer reported net debt climbing to $228.5m compared with $64.3m a year earlier, mainly due to the construction of the Mogale Tailings Retreatment operation and the consolidation of debt acquired as part of the acquisition of Tennant Consolidated Mining Group in Australia.
Pan African Resources completed the R2.5bn Mogale Tailings Retreatment project and acquired Tennant Consolidated Mining Group for $54.2m in December. It expects to pay back debt related to the acquisition in three years as it seeks to balance underground and surface mines as opposed to mainly conducting underground operations.
Loots said the Australian operation ticked all the boxes when it comes to deploying capital for growth in a tier-one jurisdiction. “We secured a dominant position in a gold field with the largest ever processing facility to be operated there. (It’s a) very exciting exploration potential with an experienced management team taking ownership of project delivery.”
We have invested a lot of capital into Evander, it has to now perform; as does Barberton.
— Cobus Loots, Pan African Resources CEO
Peter Main, MD of the Australian operation, said the Tennant Creek region had a “remarkable history” as one of the last major gold fields to be discovered Down Under, and holds the title of the nation’s highest grade gold field with deposits exceeding 50g per ton.
He said Tennant Creek’s untapped potential underscored Pan African’s rationale for the acquisition. “The field complements Pan African’s portfolio, providing long life near-term and low-risk ounces with significant returns for shareholders,” Main said.
Loots acknowledged that underground mining in South Africa was increasingly difficult but the Barberton and Evander operations should generate decent returns and cashflows. “If you look at the group in 2018, those are the only assets that we had. Now 60% of production going forward is long life, stable, and high margin from surface,” Loots said.
“We have invested a lot of capital into Evander, it has to now perform; as does Barberton. These are the assets the group was initially based on, it was the genesis of Pan African. We think they have a lot more potential and we will give them the necessary care to make sure they deliver.”
However, the company still regards South Africa as a worthwhile investment destination. The spokesperson said the group had significant resources and organic growth potential for the long term (over 20 years) in its South African portfolio and also invested significantly at Evander underground and the R2.5bn at MTR in Mogale. “We are also looking to expand at the Soweto Cluster, so significant investment is still in the pipeline for South Africa. We see Australia as part of a diversification strategy, as do other global mining companies,” he said.
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