Wrap Text
Operational update
Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985 with registered number
3937466 on 25 February 2000)
AIM Code: PAF
JSE Code: PAN
ISIN: GB0004300496
(‘Pan African’ or ‘the Group’)
OPERATIONAL UPDATE
Pan African, the African-focused precious metals producer, is pleased to provide an operational update for the
year ended 30 June 2017 (‘current reporting period’).
KEY FEATURES AND HIGHLIGHTS
- Gold produced for the current reporting period was approximately 173koz, 4.4% below the production
guidance provided. This was due to the slower than anticipated restart of the underground mine at
Evander Gold Mining Proprietary Limited (‘Evander Mines’) and operational challenges experienced at
Barberton Mines Proprietary Limited (‘Barberton Mines’), which have now been remedied.
- Evander Mines 7 shaft refurbishment has been successfully completed, and the restructuring
programme is materially complete.
- Elikhulu Tailings Retreatment Plant (‘Elikhulu’) is fully funded and construction on-track.
- Feasibility study completed for a sub-vertical shaft at the high-grade Fairview mining operation at
Barberton Mines, with an estimated capital expenditure of R105 million, to be spent over a two year
period. This project should yield an additional 7-10koz of gold per annum.
- Encouraging high grade drill result at Evander Mines’ 2010 Pay Channel orebody, which has prompted
a feasibility study to assess the economic viability of expanding the underground mining operations.
- Completion of disposal of Uitkomst Colliery Proprietary Limited (‘Uitkomst Colliery’) on 30 June 2017.
- Strong statement of financial position with net debt of R66.7 million at 30 June 2017 (30 June 2016:
R339.7 million) and available debt facilities of R880.2 million.
- Production guidance for the 2018 financial year in excess of 190koz.
CEO STATEMENT
Cobus Loots, the CEO of Pan African, commented: “The 2017 financial year was operationally challenging in
many respects, however the Group is now seeing the benefits of the remedial actions implemented by
management. We look forward to a much improved performance in 2018, with a substantial increase in gold
production. The Elikhulu project is on track for delivering first gold as originally planned, and is expected to
contribute low-cost ounces and profits in the next 18 months. We are excited about the prospects for the Evander
Mines’ 2010 Pay Channel project; the Evander Mines team now has to bring the project to account in the near
term, in a profitable and value-accretive manner. During the past year, Pan African has reaffirmed our gold focus
and again delivered transactions that crystallise shareholder value.”
PRODUCTION PERFORMANCE AND 2018 GUIDANCE
Pan African’s gold production for the current reporting period was 4.4% below its revised gold production
guidance (announced on 20 February 2017) at approximately 173Koz. As per the announcements of
10 March 2017 and 10 April 2017, the Group is pleased to report that the initial Evander Mines shaft
refurbishment has been successfully completed, and the restructuring programme is materially complete. This
will result in substantial cost savings going forward.
In the next financial year, the following initiatives will continue at Evander Mines to ensure a sustainable and
consistent performance from the operation:
- Continuation of the engineering work plan to improve the reliability of the shaft and related
infrastructure, including:
- 8 Shaft pump column;
- 7 Shaft steelwork i.e. buntons and guides; and
- 7a and 8 Shaft, shaft bottom arrangements.
- Improving the total meters squared blasted per panel and per crew.
- Clean mining programme:
- Stoping width reduction, with the introduction of improved hanging wall support;
- Improved fragmentation resulting from optimisation of the blast design; and
- Improve quality of sweepings with the introduction of user-friendly blasting barricades and
additional sweeping tools.
- Old gold vamping, which is the cleaning of mud accumulations in redundant declines and spillage in and
around the belt declines.
- Pillar mining and vamping at 7 Shaft.
Mining in the high-grade areas in Fairview’s 11-block is also now established and expected to continue for the
remainder of the 2018 financial year. Productivity improvements are expected at Fairview following the
commissioning of a new bulk air cooler, which will reduce the ambient temperature at the work face by
approximately 3 to 4 degrees Celsius. To address the flexibility constraints currently experienced at Fairview,
and increase gold production from this very high-grade and long life ore-body, a feasibility study into a new sub-
vertical shaft has been finalised. The findings of the feasibility study are detailed in the growth projects section
below.
The Group’s gold production guidance for the financial year ending 30 June 2018 is in excess of 190Koz, an
increase of approximately 10% on 2017 gold production.
GROWTH PROJECTS
ELIKHULU PROJECT UPDATE
The Elikhulu project is progressing according to plan with project completion and first gold expected in the last
quarter of the 2018 calendar year. Following the successful US$50 million equity raise on 12 April 2017, Pan
African has commenced funding the initial capital expenditure on the Elikhulu project’s civil engineering works
and the procurement of long-lead-time items, such as the tower crane and the carbon-in-leach tanks, which are
critical to ensuring construction deadlines are met.
Capital expenditure of approximately R175 million has been incurred on the Elikhulu project during the current
reporting period, and capital spend remains on track relative to the total initial forecast capital expenditure of
R1.74 billion.
Pan African is also pleased to announce that the facility agreement for the R1 billion Elikhulu term debt facility
has been signed. The facility was underwritten by Rand Merchant Bank, a division of FirstRand Bank Limited, and
the syndication has closed successfully, with an over-subscription of more than 50%. The appetite shown by the
banking market highlights the quality of the project, which prevailed despite the negative sentiment at the time
of the release of the new Mining Charter. Utilisation of the facility is subject to the fulfilment of customary
conditions precedent, and the first drawings under the seven-year facility are scheduled for the final quarter of
the 2017 calendar year.
Together with the Group’s existing R1 billion revolving credit facility, these facilities comprise the core debt
instruments for funding the Group’s capital expenditure programmes. The low-cost, long-life Elikhulu project is
expected to increase the Group’s annual gold production by more than 50koz per annum and reduce the Group’s
average all-in cost of production.
BARBERTON MINES SUB-VERTICAL SHAFT PROJECT AT FAIRVIEW
The Fairview mining operation is currently restricted by the hoisting capacity of its No.3 Decline, which is used
to access workings below 42 Level. This decline is currently used to transport employees, material, and for rock
hoisting. The 11-block, or MRC, orebody has an average grade of 31.3 g/t and current life-of-mine of 22 years.
With no intervention, future mining at depth will result in increased travelling distance, reduce employee face
time and cause a lack of capacity to ensure both ore replacement and exploration development.
Pan African, with the assistance of DRA Projects SA Proprietary Limited (‘DRA’), has completed a feasibility study
on the construction of a raise-bored, sub-vertical shaft from Fairview’s’ 42 Level to 64 Level, with the potential
of continuing the vertical shaft in future to 68 Level. This sub-vertical shaft will be used to transport employees
and material to the working areas, which will allow the No.3 Decline to be used exclusively for rock hoisting,
increasing overall capacity and production from this mining area.
DRA has reviewed the technical and commercial aspects of the project and the supporting feasibility study has
yielded very positive results. The estimated capital expenditure for the project, including contingencies, is
approximately R105 million, to be incurred over a two-year period. The productivity improvements for Fairview
are estimated to yield an additional 7,000oz of gold per annum, which can be optimised further to more than
10,000oz per annum.
EVANDER MINES 7 SHAFT NO. 3 DECLINE AND 2010 PAY CHANNEL
The 2010 Pay Channel resource is adjacent to the 7 Shaft infrastructure and extends from the boundary of Taung
Gold International Limited’s 6 Shaft project and mining rights. As previously reported, Evander Mines embarked
on an exploration programme to drill a further exploration borehole from surface, to increase geological
confidence in the 2010 Pay Channel orebody, for which resources are summarised in the table below:
7 Shaft: No.3 Decline and 2010 Pay Channel resources
Tonnes Grade Contained gold
Category
million g/t tonnes Moz
Measured 0.52 11.02 5.80 0.19
Indicated 0.34 10.02 3.50 0.11
Inferred 5.41 10.85 58.70 1.89
Total 6.27 10.82 68.00 2.19
On 6 July 2017, the exploration borehole successfully intersected the Kimberley reef at a depth of approximately
two kilometres, highlighting a reef intersection with a 6cm width at 36.8g/t. Additional drilling deflections will
be performed to further delineate the ore body. The previous borehole into the 2010 Pay Channel yielded a
reef intersection with a 49 cm width at 36.04g/t.
Harmony Gold Mining Company Limited previously developed the 7 Shaft mine workings towards the 2010 Pay
Channel, however due to financial constraints and a reassessment of capital priorities, all development on the
Evander Mines’ shafts (other than 8 Shaft) was halted in 2009. This resulted in the controlled flooding of the
development ends and 7 Shaft’s No.3 Decline, from 22 level up to 18 Level. Following the dewatering, only
standard footwall and on-reef development would need to be completed, with the associated engineering
infrastructure, before mining can commence.
The 2010 Pay Channel is approximately three kilometres in tramming distance from 7 Shaft, which is currently
used by Evander Mines for hoisting to the Kinross metallurgical plant. This compares favourably with the 8 Shaft
mining areas, which are approximately 10 kilometres in tramming distances from 7 Shaft.
The Pan African project team has commenced a feasibility study related to the 7 Shaft No.3 Decline and 2010
Pay Channel resource, which will address the following critical issues:
- Collation of geological data from the drill hole intersection and deflections;
- The cost and timing of dewatering and re-equipping the 7 Shaft No.3 Decline from 18 Level to 22 Level;
- The development cost and timing to access the 2010 Pay Channel; and
- The economic viability of the project.
The 2010 Pay Channel can potentially increase Evander Mines’ underground gold production significantly at a
relatively low capital cost, using Evander Mines’ established shaft and metallurgical facilities. The feasibility
study for the project is expected to be completed during Q1 2018.
DISPOSAL OF UITKOMST COLLIERY
The Uitkomst Colliery disposal to Coal of Africa Limited (‘CoAL’) became effective on 30 June 2017 (“effective
date”). On the effective date CoAL took ownership, control and management of Pan African Resources Coal
Holdings Proprietary Limited, the holding company of Uitkomst Colliery. Pan African received its consideration
on conclusion of the disposal on the effective date as follows:
- R125 million in cash
- R125 million through the issue of 261,287,625 new ordinary shares in CoAL
- R25 million in interest bearing deferred consideration which may be paid by CoAL at any time prior to
the second anniversary of the effective date.
GROUP NET DEBT POSITION AND INVESTMENTS
The Group’s statement of financial position is robust with net debt at 30 June 2017 of R66.7 million
(30 June 2016: R339.7 million). Available debt facilities at 30 June 2017 were R880.2 million (30 June 2016:
R624.6 million).
The Group net debt is comprised of R161.2 million in cash and cash equivalents, and R227.9 million of drawn
debt facilities.
The groups holding in CoAL shares, which is classified as an investment, was valued at approximately R127.5
million at 30 June 2017.
FINAL RESULTS
The final audited results for the year ended 30 June 2017 are expected to be published on or about
20 September 2017.
Shareholders are advised that the financial information contained in this announcement has not been reviewed
or reported on by Pan African’s external auditors.
By order of the Board
Johannesburg
20 July 2017
Contact information
Corporate Office Registered Office
The Firs Office Building Suite 31, Second Floor
1st Floor, Office 101 107 Cheapside
Cnr. Cradock and Biermann Avenues London
Rosebank, Johannesburg EC2V 6DN
South Africa United Kingdom
Office: + 27 (0) 11 243 2900 Office: + 44 (0) 207 796 8644
Facsimile: + 27 (0) 11 880 1240 Facsimile: + 44 (0) 207 796 8645
Cobus Loots Deon Louw
Pan African Resources PLC Pan African Resources PLC
Chief Executive Officer Financial Director
Office: + 27 (0) 11 243 2900 Office: + 27 (0) 11 243 2900
Phil Dexter John Prior / Paul Gillam
St James's Corporate Services Limited Numis Securities Limited
Company Secretary Nominated Adviser and Joint Broker
Office: + 44 (0) 207 796 8644 Office: +44 (0) 20 7260 1000
Sholto Simpson Matthew Armitt / Ross Allister
One Capital Peel Hunt LLP
JSE Sponsor Joint Broker
Office: + 27 (0) 11 550 5009 Office: +44 (0) 207 418 8900
Julian Gwillim Jeffrey Couch/Neil Haycock/Thomas Rider
Aprio Strategic Communications BMO Capital Markets Limited
Public & Investor Relations SA Joint Broker
Office: +27 (0)11 880 0037 Office: +44 (0) 207 236 1010
Bobby Morse/Chris Judd
Buchanan Communications
Public & Investor Relations UK
Office: +44 (0) 207 466 5000
www.panafricanresources.com
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