Pan African Resources PLC (AIM:PAF, OTCQX:PAFRY, JSE:PAN, OTCQX:PAFRF) said it has completed a 400mln rand (US$21.6mln) transaction with Rand Merchant Bank (RMB), a division of FirstRand Bank Limited, as the final component to the funding package for construction of the Mintails Project.
Following the successful issue of the group’s inaugural Domestic Medium Term Note programme of 800mln rand (US$43.2mln) in December 2022, and receipt of a 1.3bn rand (US$70.3mln) credit approved and underwritten term sheet from RMB for the senior debt tranche of Mintails Project funding, the full upfront capital of 2.5bn rand (US$135.1mln) has been secured with the transaction.
In a statement, Cobus Loots, chief executive officer of Pan African Resources, commented: “We are pleased that Pan African has managed to capitalise on the current attractive Rand gold price to secure the full funding package for Mintails, without any dilution to our shareholders. The group’s track record of bringing tailings retreatment projects of this nature to fruition is impressive.
"Mintails’ payback period, post-commissioning, is approximately three and a half years, at prevailing rand gold prices, and the operation will significantly contribute towards Pan African’s future gold production over its 20-year life-of-mine. We are excited to commence with the project’s construction in the next months.”
Under the terms of the RMB transaction, the company will sell 4,846 ounces (oz) of gold per month, for 24 months commencing March 2023, at a fixed price of 1,025,000 rand per kilogram (kg) - US$1,723/oz - and receive an upfront premium of US$21.6mln (400mln rand). The effective price at which the group sold the 3,617 kg of gold, representing approximately 30% of annual group production, over the 24 months, is 1,135,604 rand per kg (US$1,909/oz).
The Mintails Project senior debt facility, which is subject to the fulfilment of conditions typical for transactions of this nature, is at the drafting stage and the intent is for it to become effective by April 2023.
Pan African said it is in the process of finalising detailed engineering optimisation studies for the Mintails Project, with environmental authorisation and related permitting expected within the next four months. Commencement of construction is expected by June 2023, with steady state production forecast by December 2024.
The Mintails Project is being constructed by substantially the same internal teams that successfully completed Pan African’s previous three tailings retreatment projects.