JOHANNESBURG (miningweekly.com) ? Aim- and JSE-listed Pan African Resources, which posted a strong performance for the financial year ended June 30, is looking to pursue further gold and platinum opportunities in South Africa, CEO Jan Nelson said on Monday.
Attributable profit jumped 20% to ?17.2-million and headline earnings a share increased to 1.20p from 1.07p in 2010.
While organic growth opportunities remained its strategic and key focus, Nelson said that it would consider potential acquisitions in gold and platinum projects, from a prefeasibility stage onwards.
?It is not about just about finding a resource, but about find the right grade and quality of resource that enhances growth,? he explained.
Other growth opportunities included the Phoenix Platinum Chrome Tailings Retreatment Plant (CTRP), which Nelson said could see further expansion phases in future.
Commissioning of the CTRP is expected at the end of September, and production is forecast to start in December. Upon completion, revenue would be generated from platinum-group metals and gold.
The project has a defined a total indicated resource of 147 500 oz, with 3.130-million tons at an in situ grade of 1.47 g/t.
The Bramber tailings project at Pan African?s Barberton operations also featured in its growth strategy.
A feasibility study covering plant design, final process flow design, volume throughput, chemical and reagent consumption, recoveries and capital and operating expenditure will be completed in the second quarter of the 2012 financial year. If feasible, a new plant will be constructed to treat about 1.2-million tons a year of tailings for three years.
An order of magnitude estimate study completed by Matomo estimated that the project would cost about R250-million and that plant construction would take about 12 months.
The company also completed initial auger drilling on another nine-million tons of tailings, which, if viable, could extend the project?s life to ten years and increase the yearly production profile by about 20 000 oz.
The company is also looking to sustain and increase its production profile at the Barberton mines through continued capital investment, with over ?6.8-million (about R80-million) spent in the period under review.
A further R80-million will be spent on this project in the next year, Nelson said.
However, production, during the financial year under review, was affected by a strike at the Fairview section in the first quarter, which impacted the operations by an estimated 3 000 oz.
Nelson said that management had made significant progress in making up the lost production and that it was on schedule to produce close to 100 000 oz by the end of December.
Production had to be stopped at a section at the Fairview mine in April, in order to address poor rock wall conditions.
Barberton sold 92 197 oz of gold during the year, a decrease of 6.01% from the previous year?s 98 091 oz.
This decrease is the result of the mining operation milling 296 200 t, a decrease of 5.42% from the previous year?s 313 167 t. Head grade and overall recoveries remained relatively constant at 10.55 g/t and 90.80% respectively.
The Barberton operating sections, comprising the Fairview, Sheba and New Consort mines, showed further improvement year-on-year in the lost time injury frequency rate (LTIFR). The LTIFR improved to 2.2 and the serious injury frequency rate decreased to 0.66. During the month of July, Barberton mines achieved one-million fatality free shifts.
Outside South Africa, Nelson said he could not disclose any further information regarding the possible separate listing of Manica Gold, in Mozambique.
It was envisaged that a separate listing will benefit stakeholders owing to the new entity having its own dedicated management team, separate access to capital to fund an aggressive project development plan, operational flexibility, and being able to attract strategic development partners.
FINANCIAL PERFORMANCE
Gross revenue from gold sales increased by 15.62% to ?79.2-million, which was mainly attributed to a 24.41% increase in the average US gold spot price received to $1.366/oz, and the depreciation of the pound against the rand during the reporting period.
The effective rand gold price was 14.51% higher at R306 757/kg.
Mining profit at Barberton mines grew by 24.70% to ?30.8-million.
Cost of production increased by 11.58% to ?45.3 million. In rand terms, cost of production increased by 4.09% to R503.6-million mainly owing to a 17.34% increase in electricity costs to R49.4 million, security costs increasing by 4.01% to R33.7-million and salary, wages and other staff expenses increasing by 7.84% to R232.4-million.
Barberton absorbed the first full year effect of the cost of the new South African mining royalty tax implemented in March 2010, which amounted to ?2.4-million.
Pan African said it would continue to drive profitable, sustainable, stakeholder growth. ?We have laid a solid foundation in terms of our mining and project development skills and we have grown the strength of our cash flows and statement of financial position.
?This will allow us to allocate significant resources in building an organic pipeline of projects at Barberton mines, which have cost structures of less than $450/oz, have profit margins in excess of 35% and should be producing within 12 to 24 months,? Nelson said.
The group proposed a final dividend of ?7.4-million, which is an increase of 37.93% to 0.5135p a share.
Edited by: Mariaan Webb
PLA Price at posting:
22.0¢ Sentiment: ST Buy Disclosure: Held
