Pan African Resources out with healthy year-end dividend

Miner achieved a ‘great’ multi-year wage deal, expects within 24 months to have most operations mostly off-grid during the day: CEO Cobus Loots.

SIMON BROWN: I’m chatting now with Cobus Loots, CEO of Pan African Resources. Cobus, as always I appreciate your early morning time. Results to year-end June 2021: production up 12.6%, operating profits up 36%, Heps up 69%, and that dividend up 28.5%. 

If I look at Pan African Resources, there are two, I suppose, key themes to the company. One is (being) a low-cost miner; you are achieving this, and you’ve got 75% of production coming in at just over $1 150/oz. One of the key drivers of Pan African is to keep mining low-cost.

COBUS LOOTS: Yes, Simon. Certainly in the second half of the financial year what greatly assisted us was the performance of the Evander 8 Shaft Pillar project. That project doubled production in the second half and produced at under a $1 000/oz. And then obviously also the two low-cost tailings retreatment operations that we own and operate also assist – both of those producing some way below $1 000/oz.

Read: Gold producer Pan African Resources revels in record profit

SIMON BROWN: And you keep that pressure on the cost. For example, Kumba. Iron ore is a completely different commodity to mine. It’s open-pit and the like. But in their results, you could see them sort of mining some of the higher-cost (product) because of the elevated price of the commodity. Is there a temptation with your team to say, “You know what, gold is at $1 800/oz. We could perhaps mine something at a $1 200, $1 250, $1 300/oz all-in sustained cost,” or is it ”Stick to your knitting and keep costs as low as possible and stay away from the higher-cost stuff”?

COBUS LOOTS: Well, the key is just to, I guess, focus on cost escalations and to ensure that those don’t run away with you. What will also assist us in the next three years is the fact that we’ve reached a multi-year wage deal with our representative unions at Barberton, so that’s great for us. I think it’s a reasonable increase for everybody. 

And then we also are focusing quite heavily on renewables; our first solar plants will be commissioned in November this year at Evander. We are led to believe that we’ll actually extend that to the rest of the group. Within 24 months I think we can have most of our operations pretty much off-grid during daylight hours. That’s where we’d like to be. That’s going to definitely assist the underground also, where the cost of electricity is some 25% of the overall cost mix.

SIMON BROWN: Certainly I get the wages, and you’ve spoken before about those renewables. You are bringing in 9.9MW of solar, as you say, in November; that’s in just two months’ time. When I think of Pan African Resources, the other key point that always comes to mind is that you go to old mines, and in some cases very old mines such as Barberton. But even Evander is part of your skillset where you go to mines from which other companies have moved on, and you’re able to extract (there) and do that profitably. And at Evander, as you said, that 8 Shaft is doing incredibly well. Are you looking to expand there as well?

COBUS LOOTS: Yes, we are looking to expand there also. That in our view is a very exciting future. As you say, we don’t have massive overheads and we have a flat structure to get things done. The other exciting opportunity clearly we are still busy with evaluating is … that can be another Elikhulu as a sort of R15 billion sitting on the surface in gold tailings on the West Rand, and that’s going to assist everybody if we manage to get the feasibility done and build that plant.

SIMON BROWN: Is that the one which was in business rescue, then liquidation, (and) you made an offer, and now, if I understand the process correctly, it’s kind of gone back into business rescue?

COBUS LOOTS: Well, there’s a legal application to put it back into business rescue, but our feasibility studies are continuing. We released the pre-feasibility yesterday as part of our results and it’s looking incredibly attractive. You can produce 50 000 ounces a year for more than 10 years at a cash cost of less than a $1 000/oz. There are not many of those opportunities around.

SIMON BROWN: Yeah. As you say, billions of ZAR essentially lying on the ground there.

A last question. You’ve kept your guidance for a minimum 195 000 ounces for the 2022 financial year through to June next year, you did just over 200 000 in this current year under review. Is that just sort of a sense of caution, because I look at it in the new stuff coming on and I think 200 000 ounces should be a fairly easy ask?

COBUS LOOTS: I wouldn’t say it’s an easy ask, but I think it’s doable. If you remember, we started last year with the guidance of 119 000 (ounces) and we revised it up to 195 000. It ended up over 200 000. It’d be nice to get there again. It’s much better to see guidance. 

SIMON BROWN: When I say ‘easy ask’ let’s be very clear – I’m the chap setting in a nice warm office in Johannesburg. I’m not out there in my mining boots, actually doing the mining.

Cobus Loots, CEO of Pan African Resources, I appreciate the time this morning.

Listen to Thursday’s full MoneywebNOW podcast here.



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