Wrap Text
Operational update for the six months ended 31 December 2022
Pan African Resources PLC Pan African Resources Funding Company
(Incorporated and registered in England and Wales Limited
under the Companies Act 1985 with registered Incorporated in the Republic of South Africa
number 3937466 on 25 February 2000) with limited liability
Share code on AIM: PAF Registration number: 2012/021237/06
Share code on JSE: PAN Alpha code: PARI
ISIN: GB0004300496
ADR ticker code: PAFRY
(“Pan African” or the “Company” or the “Group”)
OPERATIONAL UPDATE FOR THE SIX MONTHS ENDED 31 DECEMBER 2022
Pan African is pleased to provide shareholders and noteholders with an operational update for the six
months ended 31 December 2022 (“current reporting period”).
Key features for the current reporting period
Operational
• Gold production of 92,307oz (2021: 108,085oz), with operational results as follows:
o Barberton Mines 32,022oz (2021: 39,991oz)
o BTRP 10,012oz (2021: 9,126oz)
o Elikhulu 25,830oz (2021: 25,900oz)
o Evander Mines 24,443oz (2021: 33,068oz)
• Proactive journey to ‘zero harm’ through a number of health and safety initiatives to address
regression in underground mining safety rates
• Agreements with representative unions to restructure Barberton Mines underground
operations as follows:
o Consort Mine loss-making operations are to be converted to a contractor mining
model, focussing on higher grade areas with reduced overheads, whilst development
and exploration will continue to increase future mining flexibility and production; and
o Fairview Mine and Sheba Mines’ operations are to be reconfigured to a continuous
operations (24 hour) shift cycle with productivity expected to increase
commensurately
• The Group maintains its full year production guidance of 195,000oz to 205,000oz, a level
similar to that achieved in 2022
Financial
• Issue of an inaugural sustainability-linked bond of US$47.3 million to assist in the funding of
Pan African’s pipeline of growth projects, with Mintails being the preeminent project for
development
• Payment of a net dividend of US$20.0 million (2021: US$21.6 million) in December 2022
• An increase in net senior debt by 108.8% to US$49.9 million (2021: US$23.9 million), primarily
as a result of capital expenditure incurred on Pan African’s organic growth projects
Environmental, Social and Governance
• Average monthly cost savings of US$145,000 achieved from Evander Mines’ 10MW renewable
energy solar photovoltaic (PV) plant
• Site clearance completed for Barberton Mines’ 8MW solar PV plant, with construction
scheduled to commence by June 2023
• Scheduling of further large renewable energy initiatives underway
Growth projects
• Mintails’ project construction expected to commence by June 2023
• Royal Sheba’s development plan to be finalised in the next months
Pan African CEO Cobus Loots commented:
“Reduced gold production over the past half year can primarily be attributed to the performance of
the Barberton Mines underground operations. We believe that the concrete measures being
implemented at this operation will result in a significant improvement during the second half of the
financial year and in the years ahead. The balance of our portfolio delivered in line with expectations,
despite disruptions to our electricity supply and inclement weather conditions impacting operations.
At our Evander operation alone, electricity issues impacted production by approximately 5%,
reinforcing our imperative to expand our renewable energy portfolio in the years ahead. Given the
improved production performance expected in the second half of the 2023 financial year, we are
maintaining production guidance of 195,000oz to 205,000oz for the full year, subject to consistency
in Eskom’s electricity supply.
Safety of our people and contractors remains our number one priority and we have implemented a
number of programmes to address the regression in the safety performance at our underground
operations.
We are encouraged by the progress made with the Group’s growth projects. The Mintails acquisition
was concluded during October 2022 and the senior debt funding for the construction of the project is
expected to be finalised in April 2023. This project’s definitive feasibility study (DFS) demonstrated
compelling economics at a much lower gold price than the prevailing spot price, and this asset is
expected to significantly increase Group gold production in the years ahead.
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 interim results on 15 February 2023, which will
include further details on our operational and financial performance, progress with the Barberton
restructuring initiatives and our growth projects.”
Safety
The Group has regrettably seen a regression in the safety performance during the current reporting
period at its underground operations, following an excellent record in the previous years. Pan African
continues to focus on industry leading safety initiatives in its pursuit of a ‘zero-harm’ working
environment.
• The Group’s lost-time injury frequency rate (‘LTIFR’) regressed to 2.54 (2021: 0.98) per million
man hours
• The Group’s reportable injury frequency rate (‘RIFR’) regressed to 1.34 (2021: 0.28) per million
man hours
• Barberton Mines achieved an LTIFR of 1.88 (2021:1.02) and RIFR of 0.63 (2021: 0.20) per
million man hours
• Elikhulu achieved excellent results with an improvement in both the LTIFR and RIFR to 1.28
(2021:1.50) and RIFR 0.00 (2021: 1.01) per million man hours
• Evander Mines underground operations achieved an LTIFR of 4.72 (2021: 0.65) and RIFR of
3.76 (2021: 0.00) per million man hours, with the majority of safety incidents attributable to
new short term contractors
The Group is implementing the following initiatives to improve its safety performance in the second
half of the 2023 financial year:
• Additional systems implemented to monitor contractor safety compliance
• Pre-emptive production stoppages, where safety protocols are re-enforced
• Strengthening of the on-site safety staff complement
• Third-party safety systems audit for both Barberton and Evander Mines in order to identify
further areas for improvement
Group Production
Group production for the current reporting period decreased by 14.6% to 92,307oz (2021: 108,085oz),
following the record gold production achieved in 2021. The gold production split per operation is as
follows:
Six months ended Six months ended Guidance for six
Operation 31 December 2021 31 December 2022 months to June 2023
Barberton Mines –
39,991 32,022 40,000 - 43,000
Underground
Barberton Tailings
Retreatment Plant 9,126 10,012 10,000 – 12,000
(BTRP)
Elikhulu 25,900 25,830 26,000 – 28,000
Evander Mines –
Underground and 33,068 24 443* 27,000 – 29,000
surface sources
Total ounces
produced 108,085 92,307 103,000 – 112,000
* Includes gold equivalent PGM ounces produced by Evander Gold Mines’ Osmiridium circuit
Barberton Mines
Barberton Mines has been in operation for over 130 years with a remaining life of mine in excess of
20 years, positioning this asset as a long-life operation within Pan African’s portfolio.
Over the last years Barberton Mines has made good progress in increasing mining flexibility, with key
initiatives including the following:
• Increased development rates at Fairview Mine, with up to five high grade mining platforms
established on the MRC orebody and three platforms available on the Rossiter orebody
• Increased exploration drilling targeting further down-dip extensions to these platforms to
improve reserve delineation
• Improving the production profile through decongesting existing infrastructure, including
plans for optimising hoisting from a sub-vertical shaft, development and equipping the 4
Decline from 42 to 64 Level and investment in refrigeration to allow mining at deeper levels
• Optimising the mining method at Sheba Mine from long-hole stoping to up-dip mining for
reduced dilution
• Focus on equipping the PC Shaft remnant blocks at Consort Mine to extract the high-grade
ore between 41 and 44 Levels
Despite the improvements detailed above, the underground operations have experienced a number
of headwinds in maintaining and increasing gold production, with challenges including the following:
• Above inflationary increases in labour and energy costs
• Increasing depth and underground travel times at Fairview Mine, reducing available face-time
• Depletion of the high-grade 42 Level block at Consort Mine
To mitigate these challenges, a detailed review of operations at Barberton was completed and
following intensive engagement with stakeholders, including the representative employee unions,
agreement has been reached to restructure the underground operations. Consort Mine is to be
converted to a contractor mining operation, and both Fairview and Sheba Mines will implement a
continuous operating cycle, whilst still allowing for ongoing maintenance and other support activities.
This conversion of Consort Mine will result in a more optimal operating model with a focus on the
mining of high-grade areas and reduced overheads.
The shift cycle at Fairview and Sheba Mines will be changed to a continuous operations cycle during
February 2023, with the following rationale:
• Work flow studies on the current shift cycle at Fairview Mine indicated actual face time of less
than 3 hours, affecting the completion of a full mining cycle as a result of the extended
travelling time to current production platforms
• Excess staff from Consort will be transferred to Fairview and Sheba to bolster the existing staff
complement in order to meet the requirements of the new shift cycle, resulting in no large
staff retrenchments
• The new continuous shift cycle is expected to result in an increase of approximately 20% in
available face time, with a progressive commensurate increase in productivity
• The amended shift cycle will reduce overtime requirements, which in turn is expected to result
in cost savings
• Increased development rates will improve mining flexibility in the future.
Negotiations with the unions to enable the conversion to a continuous operations cycle were
concluded on 27 January 2023.
Future cost-saving and production improvement initiatives to be implemented in the near-term
include:
• Commissioning of the 8MW solar PV renewable energy plant to reduce energy costs
• Optimised infrastructure plans to decongest ore flow and increase hoisting capacity to
improve the production profile, including completion of Project Dibanisa development that
will connect the underground infrastructure of Fairview and Sheba Mines
• Increase in exploration drilling to identify down-dip extensions to mining platforms and prove-
up new exploration targets.
Processing of the 10,000t bulk sample from the Royal Sheba project at the Sheba and Consort
metallurgical plants was completed. The bulk sample’s actual grade was 1.22g/t relative to a planned
grade of 0.5g/t, with recoveries of 84% relative to a planned recovery of 85%. A development plan for
mining the Royal Sheba orebody will be provided together with the Group’s interim results
presentation on 15 February 2023.
Elikhulu tailings retreatment plant (Elikhulu)
Gold production from Elikhulu remained steady at 25,830oz (2021: 25,900oz) during the current
reporting period, despite disruptions to electricity supply and inclement weather conditions during
the November and December rainy season.
Gold production from Elikhulu is expected to increase in the second half of the 2023 financial year, as
material from the Leslie/Bracken tailings facility is retreated, following the installation of the 6km
pipeline and successful commissioning of the pump station in September 2022.
Evander Mines’ 8 Shaft Pillar project (8 Shaft Pillar) and surface sources
Production from Evander Mines’ decreased by 26.1% to 24,443oz (2021: 33,068oz).
Underground production decreased by 29.8% to 19,173oz (2021: 27,312oz), despite an increase in
processed tonnes of 6% to 73,946t (2021: 69,790t). The decrease in the 8 Shaft Pillar’s production
during the current reporting period was a result of:
• Normalisation of mining face grades to 8g/t (2021: 13g/t), in line with planned grades of 7g/t
• Reduced mining rates and face availability, which impacted ore tonnes delivered for
processing, following depletion of the Mineral Reserves in accordance with geotechnical
parameters for the safe extraction of the pillar.
Expected production from surface sources in the second half of the 2023 financial year is underpinned
by the treatment of the Leslie TSF buttressing material, following the commencement of re-mining on
the Leslie TSF facility.
Group net senior debt
The Group’s net senior debt (comprising secured, interest-bearing debt, net of available cash)
increased by 108.8% to US$49.9 million (2021: US$23.9 million). Relative to the 30 June 2022 financial
year-end, Group net senior debt increased from US$9.3 million, primarily as a result of capital
expenditure in the first half of the financial year, and the cash outflow of US$20.0 million (2021:
US$21.6 million), associated with the net rand dividend paid to shareholders in December 2022.
Mintails project progress
Following the positive DFS results for the re-mining of Mogale Gold’s TSFs, the Group is in the process
of completing optimisation and value engineering activities in preparation for construction, which is
expected to commence by June 2023, subject to finalisation of funding and permitting. Funding for
the construction of the project is expected to be finalised in April 2023. Concept engineering works on
the Soweto cluster is also underway.
Further details on the Company’s organic growth projects will be provided together with the Group’s
interim financial results for the current reporting period.
Sudan Exploration Project
The Group has successfully commissioned the first fire assay multi-element analytical laboratory
within the Republic of Sudan. This laboratory will be used for the analyses of all of the Company’s
exploration samples being extracted from the Block 12 exploration concessions granted to Pan African
by the Sudan Ministry of Mines.
An exploration team is currently active within Block 12A South and Block 12A North, conducting 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 Au. These structures will be further defined over the next 6
weeks as part of a confirmatory sampling programme. No Mineral Resources or Mineral Reserves are
currently reported for any of the targets.
Interim results for the six months ended 31 December 2022
Pan African will announce its interim results on 15 February 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
30 January 2023
For further information on Pan African, please visit the Company's website at
www.panafricanresources.com
Corporate information
Corporate Office Registered Office
The Firs Office Building 2nd floor
2nd Floor, Office 204 107 Cheapside
Cnr. Cradock and Biermann Avenues London
Rosebank, Johannesburg EC2V 6DN
South Africa United Kingdom
Office: + 27 (0)11 243 2900 Office: + 44 (0)20 7796 8644
info@paf.co.za info@paf.co.za
Chief Executive Officer Financial Director
Cobus Loots Deon Louw
Office: + 27 (0)11 243 2900 Office: + 27 (0)11 243 2900
Head: Investor Relations Website: www.panafricanresources.com
Hethen Hira
Tel: + 27 (0)11 243 2900
E-mail: hhira@paf.co.za
Company Secretary Nominated Adviser and Joint Broker
Jane Kirton Ross Allister/David McKeown
St James's Corporate Services Limited Peel Hunt LLP
Office: + 44 (0)20 7796 8644 Office: +44 (0)20 7418 8900
JSE Sponsor and JSE debt sponsor Joint Broker
Ciska Kloppers Thomas Rider/Nick Macann
Questco Corporate Advisory Proprietary Limited BMO Capital Markets Limited
Office: + 27 (0)11 011 9200 Office: +44 (0)20 7236 1010
Joint Broker
Matthew Armitt/Jennifer Lee
Joh. Berenberg, Gossler & Co KG (Berenberg)
Office: +44 (0)20 3207 7800
Date: 30-01-2023 09:00:00
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