PAN African Resources, a junior gold and platinum producer, has reported a dip in interim profit as it concludes a R1.5bn transaction to buy the Evander mine from Harmony Gold to double its gold output.
Pan African, listed on the JSE and London’s alternative AIM exchange, reported revenue of R668m for the six months to end-December, an 8% increase compared with the same period a year earlier.
Its attributable profit fell 4.3% to R166m due to one-off costs related to the Evander transaction, for which finalisation is awaiting ministerial consent.
Pan African operates the Barberton gold mines in Mpumalanga and the Phoenix platinum recovery operation in the North West, where it treats tailings from chrome company International Ferro Metals.
The Barberton gold operations sold 44,926 ounces of gold in the period, a 4% drop. Its total cash costs ballooned by 21% to R233,021/kg.
Phoenix delivered a below-target 3,136oz of platinum group metals in the period after the plant was commissioned last July.
The nature of the feed coming from International Ferro Metals is different from what had been expected as that company mines the oxidised part of its ore body rather than the deeper sulphide material. Phoenix’s total cash costs were $861/oz.
"The group has delivered a solid performance in the first half in spite of severe cost pressures," Pan African CEO Jan Nelson said.
Electricity costs increased by 19.5% to R38m, while labour costs grew 17% to R154m as the Barberton mines brought workers’ salaries into line with those stipulated by the Chamber of Mines.
Pan African will commission its Bramber tailings project in July, which will add 20,000oz of gold to the group’s output.
Evander, for which Pan African needs Section 11 approval from Mineral Resources Minister Susan Shabangu, will add 100,000oz, meaning the group will more than double its production. Barberton produces about 95,000oz a year.
"The Evander transaction, a game-changing project for the group, is expected to conclude in the coming weeks, on receipt of Section 11, and the integration of this project is already well under way," Mr Nelson said.
"Our focus in the next six months will be to deliver on volume and grade and drive costs down. The group intends to grow the profit margin and resume the dividend payment," he said.
At 9.45am on the JSE, the company’s share price was unchanged from its previous close of 265c.