Pan African Resources plc (LON:PAF) has confirmed that it is to cease the existing underground operations at the Evander gold mine in South Africa.
The firm said the move will result in approximately 1,700 employees being retrenched by the end of May 2018, at a cost of approximately R160mln (around £9.26mln) that will be funded from the group’s existing debt facilities.
READ: Pan African Resources confirms considering cutting jobs at Evander Gold Mine in South Africa
The group said the move is being made after it concluded a consultation process with the relevant Evander Mines’ stakeholders. The consultation was initiated following continued operational losses, which the group said have been exacerbated by the prevailing weak rand gold price.
It added: “An internal and external review of the existing Evander 8 Shaft underground operation concluded that there is no realistic prospect of mining on a sustainable and profitable basis from this operation in the current weak rand gold price environment.
“The outcome of this process is regrettably that the current underground mining at Evander 8 Shaft will cease and the affected employees will be retrenched.”
Finalising additional standby facility
Pan African Resources said that to ensure that it has adequate working capital and the continuation of funding for operations and growth projects, the group is also in the process of finalising an additional standby facility of approximately R100mln (around £5.8mln).
The firm said the Evander rehabilitation provision is fully funded by means of a R311mln (around £180mln) rehabilitation trust and these funds will be used to fund Evander’s underground closure costs and associated rehabilitation.
The group added that retrenched employees will be provided with opportunities for reskilling and it is in the process of identifying employment opportunities for them in new, lower-cost operations at Evander, such as the new Elikhulu Tailings Retreatment Plant, and also in post-closure environmental rehabilitation works.
To ensure sustainability and profitability
Pan African Resources’ CEO Cobus Loots commented: “Post the cessation of Evander’s current underground mining operations, the balance of the Group’s production ounces will be low cost and cash flow positive, which will ensure the sustainability and profitability of the Group in the prevailing low rand gold price environment”.
The firm said the cessation of underground mining at Evander Mines’ will adversely impact its gold production for the year, however Barberton Mines and the surface operations at Evander, which are the group’s primary cash generative units, are performing consistent with prior guidance.
It added that the revised production guidance for the 2018 financial year is expected to be between 156,000 ounces and 158,000 ounces of gold.
In late afternoon trading, Pan African shares were 0.4% higher at 7.19p.