Wrap Text
Finalisation of Evander Mines restructure and 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 Resources” or the “Company” or the “Group”)
FINALISATION OF EVANDER MINES RESTRUCTURE AND OPERATIONAL UPDATE
Further to the operational update released on 28 March 2018, Pan African Resources advises
shareholders of the conclusion of the Evander Gold Mining Proprietary Limited (“Evander Mines” or
“Evander”) section 189 of the South African Labour Relations Act, 66 of 1995, process (“Section 189
Process”) and progress made on the Group’s operations and growth projects.
FINALISATION OF THE EVANDER MINES SECTION 189 PROCESS
Pan African Resources has concluded the consultation process with the relevant Evander Mines’
stakeholders as determined by the Section 189 Process, under the auspices of the South African
Committee for Conciliation, Mediation and Arbitration. The Section 189 Process was initiated following
continued operational losses, which have been exacerbated by the prevailing weak rand gold price. An
internal and external review of the existing Evander 8 Shaft underground operation concluded that there
is no realistic prospect of mining on a sustainable and profitable basis from this operation in the current
weak rand gold price environment. The outcome of this process is regrettably that the current
underground mining at Evander 8 Shaft will cease and the affected employees will be retrenched.
The cessation of the existing underground operations at Evander Mines will result in approximately
1,700 employees being retrenched by the end of May 2018, at a cost of approximately R160 million that
will be funded from the Group’s existing debt facilities.
To ensure that the Group has adequate working capital and continuation of funding for operations and
growth projects, Pan African Resources is also in the process of finalising an additional standby facility
of approximately R100 million.
Retrenched employees will be provided with opportunities for reskilling and the Group is in the process
of identifying employment opportunities for retrenched employees in new, lower-cost operations at
Evander, such as the new Elikhulu Tailings Retreatment Plant (“Elikhulu”), and also in post-closure
environmental rehabilitation works. The Evander rehabilitation provision is fully funded by means of a
R311 million rehabilitation trust and these funds will be used to fund Evander’s underground closure
costs and associated rehabilitation.
The impact of the cessation of underground mining at Evander’s 8 Shaft is the following:
- The Group is reviewing the merits of mining the Evander 8 Shaft pillar, which may extend the
final closure date of the shaft, generate positive cash flows and assist with further employment
opportunities for those affected by the Section 189 Process. Further information on this initiative
will be communicated in the near future;
- The Group will continue to assess the technical and economic merits of its Egoli underground
project at Evander’s 7 Shaft and is in the process of updating the feasibility study on a project
stand-alone basis, post cessation of the underground operations at Evander 8 Shaft;
- The Evander Mines’ Kinross metallurgical plant, which houses the run-of-mine and Evander
Tailing Retreatment Plant (“ETRP”) circuits, will continue to operate until material from surface
sources, tolling and underground mining operations tonnages have been exhausted or become
uneconomical; and
- In order for the current ETRP throughput to benefit from the Elikhulu economies of scale and
improved recoveries, Elikhulu’s capacity will be increased by 200,000 tonnes per month with
effect from December 2018 to incorporate the existing ETRP through-put. The additional
construction associated with this increased capacity of the Elikhulu plant will not delay the initial
gold production in August and the full commissioning in September 2018. The cost of the
increased processing capacity is R65 million and will be funded from existing debt facilities.
Pan African Resources CEO Cobus Loots commented:
“The decision to cease mining from Evander Mines’ underground operations was not taken lightly,
particularly given the socio-economic conditions prevailing in the country and the impact on a large
number of our employees. All South African gold producers have been adversely affected by the recent
strengthening of the rand, and it is imperative that we act decisively to ensure the future of our Group
and stakeholders that rely on our operations. During the past five years, Pan African Resources
invested capital of R1.76 billion in our current mining operations in South Africa plus a further
R1.74 billion which is being invested in our Elikhulu growth project. Pan African Resources remains
highly committed to investing in our assets in South Africa and building a long term, sustainable platform
for growth. The Elikhulu project has created approximately 250 new employment opportunities and we
are confident that the Group’s future growth projects will create further long term employment
opportunities. Post the cessation of Evander’s current underground mining operations, the balance of
the Group’s production ounces will be low cost and cash flow positive, which will ensure the
sustainability and profitability of the Group in the prevailing low rand gold price environment”.
OPERATIONAL UPDATE
As previously communicated, Pan African Resources’ strategy is to prioritise lower cost, high margin
ounces both in its current operations and also in its future growth projects. The cessation of the current
underground mining operations at Evander will cease production from all loss making ounces generated
by the Group, resulting in improved positive cash flow and profitability from the Group’s remaining
operations. These operations are summarised as follows:
- Barberton Mines is expected to produce 50,000oz of gold in the second half of the 2018
financial year, which is an increase of 23% relative to the first half year’s production. The
improved gold production is primarily as a result of improved production sequencing of the high
grade 272 and 358 platforms at Barberton’s Fairview mine;
- The construction of the regrind mill at the Barberton Tailings Retreatment Plant (“BTRP”)
remains on schedule and on budget, with expected annual production of 21,000oz per annum
from this operation. The mill is now in the process of commissioning;
- Construction of Elikhulu remains ahead of schedule, with first gold production expected in
August 2018 and full commissioning at the end of September 2018. In conjunction with the
ETRP through-put, these two surface operations are expected to produce more than 70,000oz
per annum at an all-in sustaining cost of production of below US$700/oz at the prevailing ZAR/$
exchange rate.
- As previously communicated, the Royal Sheba Project’s mineral resource increased to
0.72moz from 0.36moz following a reassessment of this orebody’s geology. Pan African
Resources has mandated DRA Global to complete a feasibility study during the 2018 calendar
year on the viability of this project and the market will be updated in due course on the study’s
findings.
IMPACT OF CESSATION OF EVANDER’S UNDERGROUND PRODUCTION ON GROUP CASH
FLOWS AND PRODUCTION GUIDANCE
The Group’s net cash flows before finance costs and taxation (defined as earnings before depreciation,
interest and taxation less capital expenditure) for the past 4.5 years has been summarised in a table
below to illustrate the various operation’s profitability and sustainability.
31 Dec ‘17 30 June ‘17 30 June ‘16 30 June ‘15 30 June ‘14
Group net cash per operation Total
6 months 12 months 12 months 12 months 12 months
Evander underground (70.7) (556.2) 50.5 (110.7) (3.0) (690.1)
ETRP 54.7 276.4 153.3 (80.1)* (79.2)* 325.1
Barberton underground 13.0 241.5 290.8 192.5 310.6 1,048.4
BTRP 38.3 241.2 299.3 200.4 152.4 931.6
Total 35.3 202.9 793.9 202.1 380.8 1,615.0
*Includes the ETRP construction capital expenditure incurred during 2015/2014 financial years.
The Evander Mines’ underground operational cash outflow of R690.1 million over the past 4.5 years
demonstrates the adverse impact that this high cost mining operation had on the Group’s cash flow
generation during this period.
The Group previously guided production of 177,000oz -181,000oz of gold for the 2018 financial year.
The cessation of underground mining at Evander Mines’ 8 Shaft will adversely impact gold production
for the year, however Barberton Mines and the surface operations at Evander, which are the Group’s
primary cash generative units, are performing consistent with prior guidance. The revised production
guidance for the 2018 financial year is expected to be between 156,000oz and 158,000oz broken down
as follows:
- Evander Mines’ annual gold production is expected to be approximately 46,000oz compared to
the initial target of 67,000oz to 69,000oz;
- ETRP remains on target to produce between 20,000oz - 21,000oz; and
- Barberton Mines (including the BTRP) remains on target to produce between 90,000oz -
91,000oz.
The information contained in this announcement has not been reviewed or reported on by Pan African
Resource’s auditors and is the responsibility of the Directors of Pan African Resources.
For further information on Pan African Resources, please visit the Company’s website at
www.panafricanresources.com
2 May 2018
Contact information
Corporate Office Registered Office
The Firs Office Building Suite 31
1st Floor, Office 101 Second Floor
Cnr. Cradock and Biermann Avenues 107 Cheapside
Rosebank, Johannesburg London
South Africa EC2V 6DN
Office: + 27 (0) 11 243 2900 United Kingdom
Facsimile: + 27 (0) 11 880 1240 Office: + 44 (0) 207 796 8644
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 Ross Allister/James Bavister/David McKeown
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
Buchanan
Public & Investor Relations UK
Office: +44 (0)20 7466 5000
Email: PAF@buchanan.uk.com
Website: www.panafricanresources.com
Date: 02/05/2018 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
