Pan African profit soars, dividend increased

JOHANNESBURG (miningweekly.com) – A year of record gold production has resulted in the Pan African Resources group delivering an outstanding set of results.

In the 12 months to June 30, the gold mining operations of the London- and Johannesburg-listed company saw particularly outstanding performance from its Evander mines, which increased production by 30.8%.

These results also contain record profits and the largest dividend payment to date, with profits assisted by a higher rand gold price and a full year’s production from the Evander tailings retreatment plant (ETRP).

Total gold production was 204 928 oz, with Barberton mines contributing 113 281 oz and Evander 91 647 oz, and the group’s gold resources are now at 34.9-million ounces, up from the 31.9-million ounces of last year.

Pan African CEO Cobus Loots said the company’s robust financial position, well-established cash-generative operations, decentralised management structure and cost-conscious culture were opening the way for further organic growth and potential acquisitive growth.

After-tax profit soared 160.2% to R547-million and earnings a share 163.1% to 30.20c a share.

Revenue increased by 43.1% to R3 632.8-million on operational performance, the higher rand gold price and the incorporation of the Uitkomst colliery revenue.

The proposed higher final dividend of R300-million, equating to R0.15438 a share, is subject to approval at the annual general meeting on November 25.

While the rand gold price received was 21.6% higher, at R542 850/kg, than the R446 274/kg in the 12 months to June 30, 2015, the dollar gold price received fell to $1 164/oz.

The all-in sustaining cost (AISC) a kilogramme rose marginally in rands to R40 847/kg and the AISC an ounce in dollars fell to $870/oz.

Uitkomst, the coal asset bought for R148-million cash in March, contributed R11.4-million to after-tax profit.

The company again suffered one fatality during the year under review as was also the case last year and a regression in its safety accident rates at Evander mines. In particular, the lost-time injury frequency and reportable-injury frequency rates increased and steps are being taken to reduce injury frequency rates by stepping up management oversight, technological enhancements, training and control of safety across all operations.

A full-nameplate 18 151 oz were produced at ETRP and the 17.7% earnings accretive Shanduka gold transaction was completed in the period.

Underground head grades rose to 11 g/t from 10.9 g/t at Barberton and to 5.7 g/t from 4.6 g/t at Evander.

The Pan African Resources share price reflected the company’s forward momentum, with the year-end price of R3.75 a share 108.3% higher than the R1.80 a share at the 2015 year-end.

The group’s net debt increased marginally to R339.6-million following the dividend payment of R210-million, the Uitkomst acquisition of R148-million and the cash funded portion of the Shanduka Gold transaction of R182.5-million.

Shanduka Gold, renamed PAR Gold, is Pan African Resources’ primary black economic empowerment shareholder, with its sole assets being a 22.5% interest in Pan African Resources’ issued share capital following the conclusion of the Shanduka Gold transaction.

Barberton mines’ gold sold increased 7.1% to 113 281 oz with revenue increasing 30.8% to R1 921.8-million. 

Cash cost per kilogramme increased marginally to R279 226/kg, decreasing in dollars to $599/oz.

Higher R139.7-million capital expenditure (capex) went on sustaining development, maintenance and once-off expansion capital on Royal Sheba and the completion of the Barberton tailings retreatment plant power line extension and installation.

The underground head grade improvement at Evander was principally due to establishing mining on 8 Shaft’s new 25 level.

Decreased R153.8-million capex costs were associated with 26 level of the 8 Shaft as well as the completion of the retreatment plant.

A newly established employee trust acquired 5% of the issued share capital of Evander mines following last year’s implementation of the Evander Mines employee share ownership programme, similar to the scheme implemented at Barberton.

Following a positive, high-level economic and technical assessment of the Elikhulu tailings retreatment project at Evander, the company has mandated DRA Projects to complete a definitive feasibility study on the project.

The results of the study will be available in November. Elikhulu will potentially treat slimes at a processing capacity of up to 12-million tonnes a year, at a head grade of 0.29 g/t, from the Winkelhaak, Leslie and Kinross tailings storage facilities.