Pan African Resources (PAF:AIM)
The company is planning to move forward with production for its Elikhulu Tailings project, as Definitive Feasibility results surpass expectations of previous technical and financial assessments. Construction will commence on finalisation of a project financing package. Rand Merchant Bank has provided a five-year R1bn debt facility for the funding of the project’s development to be repaid from the cash flows generated from the initial five years of production. To fund the balance of the initial Project capital, the group is evaluating a number of proposals.
The first gold pour is forecast for Q4 2018 and full commissioning December 2018. The Project is expected to add approximately 25% to the production profile and reduce all-in sustaining cost profile of the Group. The Project has an estimated AISC of US$523/oz over the life of mine.
The internal rate of return (post-tax) is 23.1%, with a payback period of less than four years, based on a gold price of US$1180/oz. The net present value (disc. 9%) of the project is US$75.9 million. Initial capital cost is forecast to be approximately US$119.9 million. Gold production is expected to be 56,000 oz for the first eight years and 45,000 oz for the remaining five years. Approvals for the Environmental Impact Assessment (EIA) and Water Usage Licence (WULA) are in process and expected to be approved by late 2017.
Cobus Loots, CEO commented: “Elikhulu is expected to firmly establish Pan African as a leader in long-life, low-cost tailings retreatment, and possibly unlock other opportunities in the sector. We expect the Project to reduce the Group and Evander cost profiles and generate robust cash flows and attractive returns for our shareholders.”
Gold mining operations update:
The favourable coal price environment could result in a payback of less than the four years previously forecast for the Uitkomst Colliery mine. The processing capacity of the Phoenix platinum mine has increased from 25k tons per month to 30k tons per month following the installation of a scrubber in July 2016.
Gold production guidance for fiscal year 2017 has been revised downward by 5000 oz to 195,000 oz due to following: The Evander Mines’ 7 shaft which is undergoing maintenance after a dislodgement of a steel shaft guide. Hoisting speed is curtailed and is expected to return to normal holding speed in early January 2017. At the Baberton Mines, three separate community protests resulted in 6 days of lost production. Productivity was also affected by Union related demands which resulted in workers embarking on a slow down. The Fairview mine experienced flexibility issues, mainly at its high grade 11-block. Work is underway for a new production platform and a new decline. In addition, a new refrigeration plant will improve working conditions in this area.
Cobus Loots, CEO commented: “The Group will use all means at our disposal to ensure we protect and increase value for our stakeholders“.