Pan African Resources: Six months’ gold production ‘nicely higher’

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SIMON BROWN: I’m chatting with Cobus Loots, Pan African Resources CEO. The results for the six months ending December. HEPs up 46.1%, production up 6.7%, cash generation 130% higher. Cobus, I appreciate the time. A strong period for yourself, most notably production nicely higher. What’s driving that? Is that efficiencies? Is that new online mining? What’s pushed that number up quite markedly?

COBUS LOOTS: Simon, most – actually all – of our operations performed as expected or better than expected. So most notably in Elikhulu, which is our flagship tailings business, production was up on the back of recoveries, generating some excellent Ebitda. It’s one of the lowest-cost producers of gold I’d say in southern Africa – under $1 000/oz. It still has 10 years of life. So that’s an exceptional asset.

And then certainly the continuous operations at Barberton that we implemented last year – we’re seeing the benefits of that strategy now. Principally the Fairview Mine at Barberton increased production.

And then also the team at Evander – underground performed well. Tonnes were up and production was up.

So overall a great performance in terms of certainly production. That obviously also then means a lower unit cost of production, plus we have the current tailwinds in terms of the rand gold price, which is close to an all-time high in rand terms.

SIMON BROWN: Yes, I take your point to that. Lots I want to pick up on. You mentioned the all-in sustained costs. Again, a really positive number there. You mentioned that is efficiencies more than anything, because inflation was down in those six months but inflation was still at a fairly chunky number – let’s call it a high 5%, 6%.

COBUS LOOTS: Yes, I think what certainly helps us in terms in dollar all-in sustained costs is the weakening of the rand. We can’t really see that turning around in the shorter term. You might have your own views.

And then yes, you produce more units and your unit cost comes down. So that’s quite a positive.

And we are definitely looking forward to also commissioning Mintails in the next while because that’s going to be of the same ilk as Elikhulu from a production perspective.

SIMON BROWN: And there I take the point around production, but also in terms of all-in sustained costs. The tailings operations are coming in at really, really good pricing.

COBUS LOOTS: Yes. It’s incredible to think that we can process 0.3 grams per tonne, and recover less than half, and you’re still able to produce under $1 000/oz. But that’s the beauty of these tailings operations. From a rehabilitation and green-mining perspective they tick the boxes. We’re doing a lot of good work on rehabilitation and land restoration.

But then, just because your overall cost of mining and processing is so low, about R40/tonne, that allows us to do what we have been doing and we’re very excited about Mintails coming on line. As you say, it’s going to reduce the group all-in sustaining costs quite a bit also. We forecast that Mintails should be producing at an all-in sustaining cost of just over $900/oz.

SIMON BROWN: Your Evander Mine – you mentioned it’s going well there. You’ve also still got a fair bit of development work happening at Evander Mines. That seems to be progressing fairly well, as well.

COBUS LOOTS: It’s going well, Simon. [There are] two principal developments. Number one, refrigeration underground, which will aid with long-term productivity. But then importantly we are equipping a sub-vertical shaft for hoisting, and that’ll be done before the end of this financial year, before the end of June. So we’ll have capacity to hoist 40 000 tonnes from underground and eliminate a very cumbersome conveyor system. So probably eliminate about eight kilometres of conveyors – which is not insignificant.

So yes, we’re quite excited about the future of that Evander underground. Traditionally, the last years’ deep-level underground gold mining in South Africa has been known as expensive. But we’re currently able to produce at just over $1 200/oz from Evander, and that number can come down.

SIMON BROWN: Okay. Deep level usually is a whole lot more.

Your Fairview Mine – you’ve got the solar plant which will be commissioned around midyear – that’s 8.75 megawatts. Does that help with costs? Eskom is expensive to households; I imagine it’s expensive to a mine as well.

COBUS LOOTS: Definitely. On the first solar plant to be commissioned at Evander we are seeing a unit saving for the group of over $10/oz, or actually $13/oz to be exact. So with our second 10 megawatts coming on stream, you can expect that number to double, and it starts becoming quite significant.

That’s obviously in addition to all the other initiatives – 40 megawatts of wheeled power we’ll bring on stream in 2025, plus a number of other developments.

SIMON BROWN: Sudan exploration? Still early days there, but you say expect drilling probably by the end of the year.

COBUS LOOTS: Yes, we’ve had some very good results – soil sampling and everything else. Obviously the political situation is something we need to watch, but we aren’t heavily exposed, Simon. Up to the end of June we might have invested $6 million in total. So we are taking it slowly and we are quite excited about the geological potential, but the political situation would have to stabilise in order for us to make a large development or a capital decision on somewhere like Sudan.

SIMON BROWN: I take your point on that. We’ll leave it there.

Cobus Loots, Pan African Resources CEO with results to end-December, I appreciate the time.

You can also listen to this podcast on iono.fm here.