Pan African Resources plc (LON:PAF) is to build a new tailings plant at Elikhulu after a definitive feasibility study confirmed it was viable.
Elikhulu will be built on the site of the existing Evander mine.
It can add 56,000 ounces per year or 25% to Pan African’s annual gold production over eight years with the potential for this to rise to thirteen years.
First gold may come as soon as the first quarter of 2018 if construction gets underway in January with the plant set to be up and running fully by the end of that year.
Upfront capital costs are estimated at R1.74 billion (US$120mln) with the project forecast to return 23.1% at a gold price of US$1180/oz.
That gives the project a net present value R1.1bn (US$75.9mln).
All-in-sustaining-costs are US$523/oz over the life of the project or $805/oz, inclusive of debt servicing over the five year debt redemption term.
Rand Merchant Bank has approved a R1bn underwritten five-year debt facility, with debt to equity set to rise at 115% at the outset.
Cobus Loots, Pan African’s chief executive, said low cost tailings plants have become an important business for Pan African.
Pan African is already making good money out of tailings from the Evander and Barberton mines, Coots added, and it will use experience gained here on the new plant.
Separately, Loots said production in the first of the current year had been disappointing and affected by operational problems and the difficult environment in South African mining at present.
Repairs are underway to one shaft at Evander, while a go-slow lost six days production at Barberton.
Safety notices were also an issue at the Fairview mine, though Uitkomst Colliery got a boost from higher coal prices and production at Phoenix Platinum is expected to rise by 9% in the latest quarter.
Overall, Pan African has trimmed its forecast output for the current year to 195,000 ounces from 200,000 ounces with the second half to be the stronger of the two.