Publications
Partners
- Pan African's production and profits dropped in the six months to end December
- Interventions at underground operations are expected to result in a significant improvement
- Full year production guidance remains unchanged but is subject to power supply.
- For more financial news, go to the News24 Business front page.
Pan African Resources, a mid-tier gold producer, reported a plunge in interim profits as production slid and costs climbed. And while the full-year production outlook remains steady, the miner said it is subject to the consistency of Eskom's power supply.
For the six months ended in December, the group's profit after tax of $28.9 million (R520.3 million) plunged 37% from $46.1 million in the comparative period in 2021.
Following record production in the previous reporting period, interim gold production dropped 15% to 92 300 ounces, down from 108 085 ounces - primarily due to the performance of Barberton Mines' underground operations. Meanwhile, all-in sustaining costs of $1 291 (R23 245) per ounce climbed 10% from $1 173 per ounce.
The average gold price received was 4.4% lower at $1725 an ounce.
The Barberton underground operations have experienced a number of headwinds in maintaining and increasing gold production, which include above-inflationary increases in labour and energy costs; increasing depth and underground travel times at Fairview Mine, reducing available face time; and the depletion of a high-grade block at the Consort Mine.
To mitigate these challenges, a detailed review of the operations was completed, and following intensive engagement with stakeholders, including the representative employee unions, an agreement was reached to restructure the underground operations. Consort Mine is to be converted to a contractor mining operation, and both Fairview and Sheba Mines will implement a continuous operating cycle, while still allowing for ongoing maintenance and other support activities.
Pan Africa CEO Cobus Loots said these interventions would result in a significant improvement in production during the second half of the financial year and in the years ahead.
As such, the group has maintained production guidance of between 195 000 ounces and 205 000 ounces for the full year.
This is, however, subject to consistency in Eskom's electricity supply as the utility continues to implement load shedding amid an operational crisis.
At the Evander Mines operation, electricity issues impacted production by approximately 5% in the period under review.
This challenge has reinforced Pan African's strategic objective to expand its renewable energy portfolio in the years ahead, with construction on a solar project in Barberton to commence in June.
"Savings at Evander Mines' solar PV renewable energy plant currently average approximately $145 000 a month following its full commissioning in May 2022," Loots said. "We have now convincingly demonstrated the business case for renewable energy in the South African mining industry and will maintain our strategic objective to expand this footprint significantly in the coming years."
Safety performance regressed at Pan African's underground operations and has prompted the group to implement a raft of measures such as increased contractor safety monitoring systems, pre-emptive safety stoppages, and a third-party audit of safety systems.
Among Pan African's growth projects is the re-mining of Mogale Gold's tailings – known as the Mintails project. Following the positive definitive feasibility study results, the group is completing optimisation and value engineering activities in preparation for the construction of a tailings re-treatment plant, expected to commence by June 2023.
This operation is expected to increase current group gold production by up to 25%, or 50 000 ounces per year.
"We are positioned for further growth as we progress the development of our organic projects and seek to commence with the full-scale construction of the Mintails project," Loots said.
