"We are fortunate to have the flexibility provided by our surface operations, with much lower costs and therefore higher profit margins than underground mining."
Can you give an overview of Pan African Resources and the company’s history in South Africa?
Our production capacity currently stands at approximately 200,000 oz/y of gold from two asset complexes in South Africa, namely Barberton Mines and Evander Gold mines. What makes our business unique is that about 50% of our production comes from tailings retreatment of surface resources, which is much cheaper than mining underground ore.
Barberton Mines comprise some of the oldest mines in the world, as it started production in the 1870s, and still currently has a life of mine of 20 years from areas that have been drilled. It is a unique asset that still hosts incredibly high grades and significant exploration potential over the remainder of the mining lease area. Annual production at Barberton and Evander stands at 100,000 and 85,000 oz/y, respectively. In Barberton, approximately 80% of production is from underground mining, and 20% is from surface tailings retreatment. Meanwhile, at Evander Gold mines, approximately 55,000 ounces come from tailings retreatment, and the remainder underground from the 8 Shaft pillar mining operation. The tailings retreatment project at Evander is called “Elikhulu”, which means “the big one” in Zulu, one of the indigenous SA languages. Elikhulu is a US$120 million capital project, where we retreat 1.2 million tons of tailings per month, and which has had a payback of capital within three years and a 12-year life of mine remaining.
Can you elaborate on Pan African Resources’ growth pipeline?
Over the last two years, we increased our underground exploration efforts at the New Consort gold mine, where we discovered one particularly rich zone within the existing orebody containing mineral reserves of 5,000 tonnes, at an average grade of 25 g/t Au, demonstrating the high potential that still exists when systematic and new exploration techniques are implemented.
We also have a very attractive external growth pipeline. We are in the process of completing a pre-feasibility study on the last remaining Witwatersrand gold tailings retreatment resources in South Africa, being the Mintails assets. We expect to complete the pre-feasibility study by July 2021, with a final feasibility study to be concluded by the first quarter of 2022. This project has the potential to give us another 50,000 ounces of high margin gold production per annum for a minimum of 10 years.
What did the feasibility study indicate for the Egoli project and Evander, and what channels are you relying on to raise financing for this project?
The Egoli project will capitalize on the Evander mine’s existing established infrastructure at 8 Shaft 24 level during its development and exploitation. This synergy has materially reduced Egoli’s upfront capital investment. We managed to extend the current life of our 8 Shaft operations to a minimum of five years, so that we can timeously develop Egoli through existing cash flows and thereby significantly reduce our reliance on debt funding, as would have been required in the original model where Egoli would be developed separately. With the current gold prices, the project will therefore be self-funded from the existing 8 Shaft operations.
What are some of Pan African Resources’ sustainability initiatives?
One of the initiatives we are implementing at our Elikhulu operations at Evander is a 10 MW solar plant which was commissioned in the 4th Quarter 2021. This will decrease the power cost for the “Elikhulu” operation by approximately 30%, allowing for an ROI of fewer than five years for an US$8 million investment. We will eventually look to expand the solar plant at Evander to 30 MW and currently establish a 10 MW plant at Barberton. We also have various other community development projects at Evander Mines and Barberton Gold Mines, including retreatment of underground water for use as processing water.
Can you elaborate on Pan African Resources’ overall balance sheet structure?
We are different from many African producers whose costs are primarily based on US dollars, since approximately 95% of our costs are Rand-based.
We are fortunate to have the flexibility provided by our surface operations, with much lower costs and therefore higher profit margins than underground mining.
Our excellent financial performance in FY21 has improved HEPS by 69% and enabled a 45.6% reduction in Group net senior debt. We remain on track with our forecast degearing, while continuing to invest in our assets and increasing dividends to shareholders.