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 Resources withstands cost pressures to post a 70pct rise in first-half earnings
Pan African Resources (LON:PAF) posted a strong rise in first half earnings despite a sharp hike in its cost base.
The company, which owns the Barberton Mines in South Africa, unveiled attributable profit of £7.58 million, a rise of 70 per cent on the year earlier, as sales advanced by almost a third to £38.33 million.
The company’s financial progress was underpinned by the soar-away value of gold with the spot price received rising to US$1,286 an ounce from US$1,032. Production of the precious metal, meanwhile, advanced 1.5 per cent to 46,655 ounces.
In common with most miners, Pan African has been hit by inflationary pressures with the rising costs of electricity, wages and other expenses up quite sharply in the period, meaning the cash costs of extracting the gold have jumped almost US$100 an ounce to US$767.
It has also seen a near doubling in security costs as it has been forced to guard against illegal gold diggers on its patch.
Unlike some of its larger and more illustrious rivals, Pan African is unhedged, so it hasn’t spent the past six months trying to unwind these costly insurance policies.
It also means the group has generated a significant amount of cash – around £10.6 million in the six months to December 31. However the group will decide whether it pays a dividend at the year-end.
Chief executive Jan Nelson said: "We are pleased to announce a strong set of financial and operational results.
“Despite the inflationary cost pressure and abnormal security expenditure, Pan African has increased attributable earnings 70 per cent.
“We have benefited from a sustained high gold price but we continue to stress test with a long term forecast of.
"Barberton remains our core asset, producing increased gold sales whilst our platinum project at Phoenix is well underway, on schedule and within budget for production later this year.
"We continue to remain focused on further productivity and cost improvements.
“Organic growth will continue to improve margins whilst we leverage our balance sheet and strategic partnership with Shanduka to realise further growth opportunities."
PAF is a rare commodity in the world of gold mining, having been one of the few to make the transformation from promising explorer to cash generating producer.
It is the culmination of several years of drilling at the company’s Barberton Mines in South Africa.
Pan African completed the acquisition of the operation in mid 2007, transforming the group from a largely exploration focused company to a gold producer.
Since then it has worked hard to upgrade both the size and increase confidence in the resources by extending the mine life and visibility of production.
Evidence of that effort was provided last June when the group upgraded the total resource by 18 per cent, and more importantly, raised the measured and indicated resource by 30 per cent to 1.8 million ounces (9.43 million tonnes at 5.99 grams per tonne in situ).
The mining reserve also climbed by nearly 7 per cent to 661,000 ounces (2.31 million tonnes at 6.29 grams per tonne gold). The boost in the measured and indicated resource pushed out the mine life up by 50 per cent to 15 years based on a depletion rate of 100,000 ounces per annum.
