Junior gold and platinum producer Pan African Resources planned to boost production volumes and ore grades in the next six months, after grappling with increasing cost pressures last year, chief executive Jan Nelson said yesterday.

“Our focus in the next six months will be to deliver on volume and grade and driving costs down. The group intends to grow the profit margin and resume the dividend payment,” Nelson said in a statement on the company’s results for the six months to December.

The JSE-listed company reported interim revenue grew by 8.15 percent to R668.14 million from a year earlier.

It posted a 4.3 percent drop in attributable profit to R166.62m from R174.1m in 2011, mainly as a result of once-off transaction costs from the proposed R1.5 billion acquisition of Evander Gold Mines from Harmony Gold.

The Evander transaction, which is expected to double the group’s gold production and increase its revenue, remains subject to the consent of the minister of mineral resources, in line with the requirements of national mining legislation.

Nelson said yesterday: “The Evander transaction, a game changing project for the group, is expected to conclude in the coming weeks, on receipt of section 11 [approval].

“The integration of this project is already well under way, with a view to doubling the group’s gold production to 200 000 ounces in the next full financial year.”

According to the Webber Wentzel website, section 11 of the Mineral and Petroleum Resources Development Amendment Act states that the minister’ written consent is required to cease, transfer or sell a prospecting or mining right, or an interest in such a right, and the sale of a controlling interest in an unlisted company or close corporation.

Basic and headline earnings a share fell 4.64 percent to 11.5c from 12.06c in 2011.

Nelson said the group had delivered a solid performance in its first half in spite of severe cost pressures.

Like many local mining companies, Pan African has been under pressure from increasing input costs, including electricity and salaries.

The company reported that the cost of production increased by 15.95 percent year on year to R324.41m.

Costs soared primarily due to a 19.46 percent electricity cost hike to R38.3m from R32.06m in 2011. Labour costs rose 16.97 percent to R153.74m from R131.43m in 2011.

“The significant increase in labour costs at Barberton gold mining operations is a result of a once-off adjustment made by the group to bring the pay scales in line with Chamber of Mines rates,” the group said.

At the Barberton operations in Mpumalanga, which comprise three mines with a total output of 95 000 ounces a year, Pan African is constructing a 1.2 million ton a year gold tailings retreatment plant that will produce about 20 000 ounces of gold a year when it is commissioned in June.

Nelson said the company was encouraged by the progress made at Barberton, in particular with the development of the tailings retreatment project.

Shares remained unchanged at R2.65 yesterday. The gold index rose 1.27 percent.