Pan African looks to turn the tide

Pan African Resources, a gold miner with underground and tailings operations, flagged a recovery of production from its Barberton mines, while its large R1.7bn tailings project at Evander is on track.

Pan African Resources, a gold miner with underground and tailings operations, flagged a recovery of production from its Barberton mines, while its large R1.7bn tailings project at Evander is on track to start low-cost production from August.

Pan African is in talks with labour at its Evander underground mine because costs are too high to sustain production and the process is to be completed by June. There has been speculation that the mine could be mothballed until rand gold prices recover from levels just above R500,000 a kilogram. Some 1,400 jobs are at stake in the Section 189 process in terms of the Labour Relations Act.

“The company has underperformed as multiple issues have affected production while a weak rand gold price forced a review of higher cost operations,” BMO Capital Markets analyst Andrew Breichmanas said. “However, with a Section 189 process initiated at Evander and the Elikhulu project expected to achieve a first gold pour in August, the group appears to be positioning for delivery of improved cash flow going forward,” he said in a note.

To offset the mine’s high-cost production, Pan African has moved into a high-grade area at its Barberton mines on the Swaziland border and will return output to 50,000oz of gold for the second half of its financial year, a 23% increase on the 40,611oz in the first half. By the end of April, Pan African will commission its new mill at the tailings retreatment operation at Barberton and production will be lifted to 21,000oz a year.

The main project in Pan African is the R1.7bn Elikhulu tailings project, which will treat 1-million tonnes of old dumps a month, delivering gold at less than $650/oz. Elikhulu will start production in August and ramp up to steady state output two months later. The project will deliver 55,000oz of gold a year.

A study into incorporating the Evander tailings retreatment project, which together with Elikhulu will deliver 70,000oz of gold a year, into the new project has been finalised.

The Evander project processes 200,000 tonnes a month and for “limited additional capital” this could be fed into the Elikhulu plant, which has higher recovery rates and lower costs. The two projects are slightly less than the 90,000oz-100,000oz the underground mine was intended to deliver.

Another project at Evander, the Egoli project to tap into gold at its 7 Shaft, will be investigated to see if it could stand alone or if it had to be part of the production coming from 8 Shaft.