Pan
African Resources PLC
(Incorporated
and registered in England and Wales under the Companies Act 1985
with registered number 3937466 on 25 February 2000)
Share code
on AIM: PAF
Share code
on JSE: PAN
ISIN:
GB0004300496
ADR ticker
code: PAFRY
(“Pan
African” or the “Company” or the “Group”)
|
Pan
African Resources Funding Company Limited
Incorporated
in the Republic of South Africa with limited liability
Registration
number: 2012/021237/06
Alpha
code: PARI
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REVISED
PRODUCTION GUIDANCE FOR THE YEAR ENDING 30
JUNE 2023, OPERATIONAL UPDATE AND COMMENCEMENT OF MINTAILS
PROJECT CONSTRUCTION
Pan
African wishes to provide shareholders and noteholders with revised
production guidance and an operational update for the financial
year ending 30 June 2023 (current
financial year). It is also pleased to announce the imminent
commencement of the Mintails project’s construction, with site
clearance activities having commenced.
Group production guidance
-
Production
guidance for the current financial year reduced to approximately
175,000oz (previously 195,000oz to 205,000oz), primarily as a
result of:
-
Challenges
related to Eskom generated electricity supply, resulting in a
production loss of approximately 10,000oz of gold
-
Slower
than anticipated ramp-up of continuous operations at Barberton
Mines, largely addressed as highlighted below
-
Lower than
expected production from Evander Mines’ underground
operations.
-
Tailings
operations at Barberton and Elikhulu are performing in line with
expectations
-
Group
production guidance for the financial year ending 30 June 2024 of 178,000oz to 190,000oz, with a
further production increase in the 2025 financial year, following
the Mintails project’s commissioning during the first half of this
financial year.
Safety performance
-
The Group
regrets to report a fatal accident that occurred as a result of a
fall of ground at Evander Mines in March
2023, following one million fatality free shifts achieved at
the operation prior to the accident
-
Despite
this tragic setback, the Group expects an improvement in overall
group safety rates for the full year compared to the first half of
the current financial year as a result of the implementation of
various initiatives to further improve its safety
performance
Electricity supply
-
The Group
estimates a production loss of approximately 10,000oz for the
current financial year as a result of issues related to Eskom
generated electricity supply impacting all of the Group’s
operations
-
In
addition to load curtailment, power outages and surges,
difficulties related to transformers and other Eskom infrastructure
contributed to production disruptions.
-
As per the
announcement released on 15 May 2023,
Pan African is aggressively rolling out its renewable energy plans
in order to mitigate the impact of this challenge.
Barberton Mines
-
After a
slower than anticipated ramp-up of continuous operations at
Barberton Mines’ Fairview Mine and Sheba operations, the Group is
pleased to report the following improvements in recent
months:
-
A marked
improvement in Fairview Mine’s production tonnes has been noted.
The average tonnes produced for the preceding three months to
April 2023 have increased by more
than 10% to approximately 9,100t per month, compared to an average
of 8,100t per month in the first seven months of the current
financial year. Projected tonnage is expected to further increase
in excess of 5% in the remaining two months of the current
financial year
-
Optimisation
of mining methods at Sheba Mines’ MRC and ZK stopes, to reduce
dilution and the increased availability of trackless mining
machinery (TMM), has improved underground grade and production,
with an increase in monthly production to approximately 8,700t per
month during February to April 2023,
compared to an average of 6,600t per month for the prior seven
months. Projected tonnage is expected to further increase in excess
of 10% in the remaining two months of the current financial
year.
-
Implementation
of the Consort Mine contractor model has progressed slower than
expected, with challenges encountered with the recruitment of
skilled employees adversely affecting production. A full production
ramp-up is expected during June 2023,
with the operation returning to profitability
thereafter.
Evander Mines’ underground
operations
-
Evander
Mines’ underground operations have underperformed as a result of
geological challenges due to faulting of the Kimberley Reef at the
tail end of the 8 Shaft Pillar mining area, and a slower than
anticipated transition to full production from 24 Level
-
Infrastructure
development for 24 Level mining is progressing well, with the
equipping of the ventilation shaft for hoisting to relieve the
constraints currently being experienced with the conveyor belt
system. This development is expected to be completed by the end of
March 2024.
Mintails project
-
The Group
has been informed by the South African Department of Mineral
Resources and Energy (DMRE) of the imminent issuing of the Mintails
project’s integrated environmental authorisation
-
Commencement
of plant construction is therefore expected in the next month, and
ground clearing activities have commenced, with steady state
production from the commissioned project expected by December 2024.
Financial
-
The impact
of the lower than expected gold production for the current
financial year has been partially mitigated by the increased year
to date rand gold price received of ZAR1,003,374/kg (2022: ZAR892,431/kg), relative to the prevailing gold
price of approximately ZAR1,220,000/kg
-
As a
result of the reduced production guidance, the Group’s all-in
sustaining costs (AISC) for the current financial year is now
expected to be between US$1,325/oz
and US$1,350/oz, at an average
exchange rate of ZAR:US$
17.70
-
Net senior
debt (comprising secured, interest bearing debt, net of available
cash) is expected to decrease to between US$25 to US$35
million at the end of the current financial year, relative
to US$49.9 million at the end of the
six month period, ended 31 December
2022. This decrease is despite project expenditure of
US$10.4 million already being
incurred during the current financial year on the Mintails
project
-
With
manageable group debt levels and the Mintails project’s funding
secured, the group is well positioned to continue making cash
distributions to shareholders in the future.
Pan
African CEO Cobus Loots
commented:
“The
safety of our people and contractors remains our number one
priority and we continue to implement a number of programmes to
further improve the safety performance at our operations. We are
deeply saddened by the fatal accident that occurred at Evander
Mines as a result of a fall of ground incident.
Whilst we
are disappointed with the production performance of our underground
operations for the current financial year, the turnaround at
Barberton Mines is now evident, especially in the past two months,
following a longer than anticipated ramp-up after the
implementation of continuous operations at Fairview Mine and Sheba
Mine and implementation of the contractor mining model at Consort
Mine. Barberton Mines’ underground production tonnes have
demonstrated a notable increase during the past two months, with
further increases expected during the remainder of the current
financial year. Implementation of the contractor mining model at
Consort Mine is also bearing fruit and the operation is expected to
return to profitability in the short term.
Pan
African is leading the way in terms of rolling out renewable energy
projects and reducing our dependency on Eskom. In the coming years,
we believe this strategy will greatly benefit all of our
stakeholders.
The
development of the 24 Level project at Evander Mines is progressing
well, with crews redeployed to the 24 Level area as the 8 Shaft
pillar mining nears completion. Improved mining flexibility,
together with the other initiatives being implemented to ensure
that infrastructure availability is optimised, will ensure
sustainable production from this long life underground
operation.
Ground
clearing at the Mintails project has commenced in anticipation of
the senior debt component of the funding package being closed by
June 2023. Commissioning of the plant
is expected in the fourth quarter of the 2024 calendar year, which
will result in a significant increase in the Group’s production
profile from the 2025 financial year onwards.
Despite
lower than expected production, the Group is positioned to deliver
a robust financial performance for the current financial year as a
result of the excellent rand gold prices being received and also
disciplined operational cost control.
Pan
African is committed in its resolve to continued value creation for
its stakeholders by positioning the Group as a sustainable, safe,
high-margin and long-life gold producer with an attractive pipeline
of growth projects. We look forward to presenting our final results
in September 2023, which will include
further details on our operational and financial performance, as
well as information on progress being made with our growth
projects.”
Safety
As
previously communicated, the Group has implemented initiatives
during the second half of the 2023 financial year to further
improve its safety performance.
Barberton
Mines has seen a progressive improvement in safety performance for
both lost-time injury frequency rate (LTIFR) and reportable injury
frequency rate (RIFR), compared to the first half of the current
financial year.
Despite
the regrettable fatal accident, we remain confident that the safety
performance at Evander Mines will improve as it continues to
implement safety initiatives to reinforce a zero-tolerance approach
towards safety incidents. Elikhulu operations have seen a slight
regression in safety performance during the current financial year,
resulting from two recorded contractor lost-time
injuries.
The
Group’s forecasted LTIFR and RIFR for the current financial year
are expected to improve from the rates reported for the first half
of the year.
Group
production
Group
production for the current financial year is expected to be
approximately 175,000oz, split per operation as follows:
Operation
|
Year
ended 30 June 2021
|
Year
ended 30 June 2022
|
Guidance
for current financial year
|
Guidance
for 2024 financial year
|
Barberton
Mines – Underground total
|
84,826
|
75,738
|
64,000
|
71,000 -
74,000
|
BTRP
|
18,239
|
19,560
|
19,000
|
17,000 -
20,000
|
Elikhulu
|
51,459
|
52,220
|
50,000
|
49,000 -
51,000
|
Evander
Mines – Underground and surface sources
|
47,253
|
58,170
|
42,000*
|
41,000 -
45,000*
|
Total
ounces produced
|
201,777
|
205,688
|
175,000
|
178,000
- 190,000
|
* Includes
gold equivalent PGM ounces produced by Evander Gold Mines’
Osmiridium circuit
Royal
Sheba Project
Mine
layout optimisation and scheduling was finalised and requests for
quotations were issued for the initial development and production
activities. Preliminary optimisation work for the life-of-mine
(LOM) planning has been completed at a cut-off grade of 1.7g/t,
which translates into an average mining grade of approximately
3.0g/t and circa 235,000oz of gold recovered over the life of the
project, with the orebody open at depth.
DRA Global
has finalised the feasibility study for placing a crushing and
milling circuit at the Royal Sheba Mine site, together with the
design to enable slurry pumping from the milling plant at Royal
Sheba to the BTRP. The processing plant’s feasibility study and the
project’s financial model is being updated and reviewed. A phased
approach to capital spending, based on the availability of material
to feed the BTRP plant, is also being considered. This will entail
the phased development of the decline, production levels, as well
as the ventilation infrastructure required for initial stoping
operations.
First
stoped ore is planned in 2025 at 5,000t per month, ramping up to
10,000t, 30,000t and 45,000t per month, every twelve months
thereafter in line with a set lateral and vertical development
schedule. A trucking cost trade-off analysis indicates that the
onsite crushing and milling circuit and pipeline will only be
required to be completed once production rates reach 45,000t per
month. The internal feasibility study for the complete project is
expected to be completed in the next months.
Evander Mines’ 8 Shaft pillar and 24, 25 and 26 Level
and Egoli projects
The
opening up of mining areas on 24 Level continues, which will enable
the phased transfer of crews from the pillar area as mining of the
pillar resource is completed. Two crews are currently mining the 24
Level F-line, with an additional two crews mining the 24 Level
D-line. Construction of phase 2 of the refrigeration plant for
cooling 24 Level is ongoing. The development of the 24_N1B drive
towards 25 Level progressed slower than expected due to challenging
ground conditions. As ground conditions progressively improved,
development rates have now increased and multi-blasting is being
considered to further accelerate development.
The
equipping of the ventilation shaft to enable hoisting of waste and
ore produced on 24 Level will reduce reliance on the ageing
conveyor belt system and simplify the ore handling process.
Installation of pipes for equipping the ventilation shaft at 17
Level has commenced, with the development of the winder chamber and
shaft station ongoing. Completion of the ventilation shaft’s
equipping is expected by the end of the first quarter of the 2024
calendar year and will provide a hoisting capacity of up to 40,000t
per month. Additional crews have been deployed to the conveyor
belts in order to improve maintenance and breakdown reaction times,
which is expected to increase conveyor belt availability until such
time that ore hoisting will commence through the ventilation
shaft.
Construction
of an additional grout plant (for pseudo-pack support) is expected
to be completed in June 2023. This
plant will supply 24 Level and future mining on 25 and 26 Levels
with the required output for mining support. The use of
pseudo-packs in the 8 Shaft pillar area has proven to be effective
in controlling mining subsidence and enabling clean mining
practices, and these benefits will also be replicated through the
utilisation of pseudo-packs as mining support on the 24, 25 and 26
Level projects.
Dewatering
of the 3 Decline infrastructure to 19 Level at the 7 Shaft Egoli
project is progressing well. The completion of the dewatering is
projected to take place in the next months, which will enable a
more accurate assessment of potential mining of remnant areas
within the Egoli complex.
Mintails
project progress and funding
Progress
on the Mintails project and expected milestones include:
-
Mineral
Resource estimation on the Soweto Cluster 2L16 and 2L24 TSFs was
completed at the end of March 2023,
resulting in these TSFs being upgraded to the indicated Mineral
Resource category. The remainder of the Soweto Cluster TSFs remain
classified in the Inferred Mineral Resource category
-
Concept
engineering work on the Soweto Cluster TSFs is underway, following
completion of the mineral resource estimation
-
Completion
of optimisation and value engineering activities in preparation for
construction
-
Integrated
environmental authorisation from the DMRE expected in the next
weeks, with commencement of construction imminent
-
Steady
state production forecast by December
2024.
A
derivative funding structure was implemented during March 2023, to complete the funding package for
the Mintails project. The structure provided a US$22.6 million (ZAR400
million) upfront premium which, together with the proceeds
of US$47.3 million from the
sustainability bond raised during December
2022 and the debt funding package of US$73.4 million in the form of a credit approved
term loan facility underwritten by FirstRand Bank Limited, acting
through its Rand Merchant Bank
division, ensure that the project is fully funded at commencement
of construction. Independent technical reviews of the project
together with legal drafting are currently underway in anticipation
of the debt funding package being closed by June 2023.
Blyvoor
conditional acquisition - update
The due
diligence and fulfilment of other conditions precedent for the
acquisition of the Blyvoor Gold Operations Proprietary Limited
historical TSFs was not completed within the required timeframe,
and this transaction has therefore lapsed. Although the Group is
currently focused on the construction of the Mintails Project, it
continues to engage with the current owners of Blyvoor Gold
Operations to evaluate options to further develop this
project.
Sudan exploration project
Following
the outbreak of violence in the Republic of Sudan, all expatriate employees working on the
exploration project were safely repatriated. All
of the Group’s assets situated in the Republic of Sudan, including the fire assay multi-element
analytical laboratory, are currently guarded and have been placed
under care and maintenance until such time as the situation
stabilises and the Group can resume its exploration programme. The
carrying value of the Group’s investment in the Sudan exploration project to date, including
the acquisition of the exploration concessions and other assets,
amounts to approximately US$5.0
million. Limited expenditure is currently being incurred on
securing the Group’s assets and their care and maintenance, until
such time as exploration activities can recommence.
The Group
successfully commissioned the first commercial fire assay
multi-element analytical laboratory within the Republic of
Sudan during 2022. This laboratory
is used to analyse all exploration samples extracted from the Block
12 exploration concessions granted to Pan African by the Sudan
Ministry of Mines and any regional exploration work by other
explorers.
Prior to
the conflict, the exploration team active within Block 12A South
and Block 12A North conducted soil geochemistry and hard rock chip
sampling programmes to further define the identified exploration
anomalies. Initial assaying received from the exploration targets
identified in the south-eastern corner of Block 12A South averaged
1.7g/t from 12 samples taken from quartz veins, rock debris and
soil. However, some of the structures sampled indicated
significantly higher gold mineralisation, with values ranging from
2.9g/t up to 9.4g/t. These structures will be further defined as
part of a confirmatory sampling programme. No Mineral Resources or
Mineral Reserves are currently reported for any of the
targets.
Remote
sensing imagery in Block 12A North detected a notable additional
NE-SW anomaly approximately 11km long. Initial field investigations
identified a siliceous unit hosting significant iron oxide
alteration, with reported grades of 7.3, 0.19, and 0.58 g/t.
Further sampling along the strike and down-dip of the unit, as well
as subsequent mapping, revealed a potential extension of several
kilometres towards the southwest.
Pan
African remains positive that the in-country situation will
stabilise to the extent that it can resume exploration activities
in the near future.
Final
results for the twelve months ended 30 June
2023
Pan
African anticipates announcing its final results for the current
financial year on or about 13 September
2023.
The
information contained in this update is the responsibility of the
Pan African board of directors and has not been reviewed or
reported on by the Group’s external auditors.
Certain
information communicated in this announcement was, prior to its
publication, inside information for the purposes of Article 7 of
Regulation 596/2014.
Rosebank
26 May 2023
For
further information on Pan African, please visit the Company's
website at
www.panafricanresources.com
Corporate
information
|
Corporate
office
The Firs
Office Building
2nd Floor,
Office 204
Cnr.
Cradock and Biermann Avenues
Rosebank,
Johannesburg
South
Africa
Office: +
27 (0)11 243 2900
info@paf.co.za
|
Registered
office
2nd
Floor
107
Cheapside
London
EC2V
6DN
United
Kingdom
Office: +
44 (0)20 7796 8644
info@paf.co.za
|
Chief
executive officer
Cobus
Loots
Office: +
27 (0)11 243 2900
|
Financial
director
Deon
Louw
Office: +
27 (0)11 243 2900
|
Head:
Investor relations
Hethen
Hira
Tel: + 27
(0)11 243 2900
E-mail:
hhira@paf.co.za
|
Website:
www.panafricanresources.com
|
Company
secretary
Jane
Kirton
St
James's Corporate Services Limited
Office: +
44 (0)20 7796 8644
|
Nominated
adviser and joint broker
Ross
Allister/David McKeown
Peel
Hunt LLP
Office:
+44 (0)20 7418 8900
|
JSE
Sponsor and JSE debt sponsor
Ciska
Kloppers
Questco
Corporate Advisory Proprietary Limited
Office: +
27 (0)11
011 9200
|
Joint
broker
Thomas
Rider/Nick Macann
BMO
Capital Markets Limited
Office:
+44 (0)20 7236 1010
|
|
Joint
broker
Matthew
Armitt/Jennifer Lee
Joh.
Berenberg, Gossler & Co KG
Office:
+44 (0)20 3207 7800
|