www.panafricanresources.com
Pan African is a South African based precious metals mining company producing approximately 95,000 ozs of gold and, when in full production in May 2012, 12,000 ozs pgm per annum.
In January, the company announced a joint venture with Wits Gold to acquire the Evander Gold Mines from Harmony for a consideration of up to R1.7 billion, providing an attributable 50,000 ozs of gold production and a project pipeline for future growth.
Additionally, the company has approved phase 1 of a gold tailings retreatment project which could further increase gold production by 25,000 ozs per annum from August 2013.
The company is unhedged, debt free and dividend paying.
Pan African and International Ferro Metals green-light Phoenix Platinum tailings project
Pan African Resources (LON:PAF, JSE:PAN) is ready to start building a tailings plant at International Ferro Metals’ (LON:IFL) Lesedi mine in South Africa.
The company told investors it has now concluded the formal agreement with IFM, and plant construction will begin immediately.
Pan African’s wholly-owned subsidiary Phoenix Platinum is developing a Chrome Tailings Retreatment Plant (CTRP) that will extract platinum group metals (PGMs) from chrome tailings - comprising 60.9 percent platinum, 21.9 percent palladium, 16.9 percent rhodium, as well as 0.2 percent gold.
The project’s first production is expected before the end of 2011.
“The completion of the CTRP will bolster our operating cash flows and enable our company to continue its policy of dividend payments without hampering further growth,” chief executive Jan Nelson said.
“At a conservative PGM 4E's basket price of US$1,250/oz, the project is anticipated to have a profit margin of over US$850/oz with a cash cost of less than US$400/oz.”
Nelson highlighted that the project is low cost, high margin and it has a long life.
Investors welcomed the news, and Pan African shares were up 2.5 by midday on London’s AIM market at 10.25 pence. The shares have performed particularly well in recent months, gaining from 6p in mid-August to reach the 52-week high of 10.5p earlier today - the third time since 13 October 2010.
The company has had something of a lift from record gold prices with its primary asset, the Barberton mine in South Africa, now producing gold at a rate of 100,000 ounces per year. With platinum production now looming on the horizon, investors will keep a keen eye on upcoming developments.
Pan African acquired Phoenix Platinum for around ZAR71.25 million (£5.45 million), in a deal with Metorex Ltd, back in May 2009.
Since then it had advanced talks, and ultimately closed the deal, with IFM. Crucially it also hired independent consultants Venmyn Rand to independently review its Definitive Feasibility Study (DFS).
The Phoenix project has a 469,000 ounce PGM resource - based on 4.6 million tons at 3.15 grams per tonne.
It is expected to produce 211,000 ounces at a plant recovery of 45 percent, over a 17 year operational life. The plant will have an annual retreatment capacity of 240,000 tons.
The project has an estimated capital cost of ZAR104 million (£9.4 million), which was considered to be ‘fair and reasonable’ by Venmyn Rand.
Pan African said that capital costs will be funded from existing cash resources.
The deal sees Pan African pay ZAR80 million (£7.2 million) to IFM, with the initial ZAR25 million (£2.26 million) being paid on signing.
This will be followed by further payments starting with ZAR25 million (£2.26 million) due in January when bulk earthworks begin.
Further payments are then due as the plant is developed and commissioned throughout the year.
Importantly the deal allows Pan African to terminate the 25 percent net profit interest that IFM holds over the PGMs, and it will also own the property the plant is being built on.
