Gold production from the group’s continuing mining operations increased by 54.2% to 81,014 ounces (oz) in the six months to the end of 2018 from 52,548 oz in the same period of 2017.
The company said there were “robust operational performances” from Barberton Mines’ underground operations and from the group’s tailings retreatment plants.
Gold production from the Barberton complex increased by 24.5% to 50,556 oz from 40,611 oz a year earlier.
The new Elikhulu tailings retreatment plant, which reached nameplate throughput capacity in October, contributed 15,292 oz (2017: nil) of incremental low-cost ounces.
The company said the improvement in production performance, the curtailment of large scale underground mining operators at Evander mines and the coming on-stream of the Elikhulu plant had led to a marked reduction in the group’s all-in sustaining cost of production.
The group suffered no fatalities during the current and corresponding reporting periods while the reportable injury frequency rate improved to 0.53 from 0.62 in the same period of 2017.
“The operational and safety performance during the current reporting period demonstrates the progress in repositioning our group as a low-cost, long-life producer, with the safety of our employees and contractors always being of paramount importance,” said Cobus Loots, the chief executive officer of Pan African.
“We are very pleased with the commissioning of Elikhulu during the period under review, notwithstanding the challenges associated with delivering a project of this magnitude and complexity on time and within budget. We now look forward to Elikhulu’s growing contribution to the group’s results in forthcoming reporting periods.
“In the period ahead, management will continue to focus on further improving our mining operations. The group remains on track to produce 170,000 oz for the full financial year to 30 June 2019,” he added.
Broker Peel Hunt said the output figure of 81,000 oz was a little below its forecast of 83k oz, with slightly lower recovery levels at Elikhulu and lower output from the Barberton underground operations more than offsetting the faster-than-expected recover at the Barberton tailing retreatment plant.
"The materially lower lost time injury rate (1.77 vs 4.05 in 1H FY18) suggests that with the transition to a much higher % of ounces from surface facilities has come a more stable business," the broker observed.
“Looking to the second half of FY19 the integration of the ETRP plant into Elikhulu looks to be ramping up marginally faster than expected. Once volumes are stabilised (February) we would expect management to turn their focus to plant recoveries,” the broker said.
“With a full half of Elikhulu volumes, and stability at the Barberton operations, management looks well set to produce towards 170koz from the continuing operations and ~180koz including output from residual operations at Evander,” it added.
Peel Hunt rates the shares as a ‘buy’ and has increased its target price to 16p; the shares currently trade at 9.61p, up 5% on the day.
“We don’t think the market is really valuing the much lower cost (and lower operating risk) ounces from Elikhulu. With the plant ramped up a stronger production level for 2H, FY19E looks assured and that should confirm that the shares are undervalued,” Peel Hunt concluded.
--- adds broker comment and share price reaction ---