Pan African chief executive Kobus Loots told investors on Friday that the group would no longer pursue the Royal Sheba project on a stand-alone basis and instead the existing Barberton Mines’ processing plant infrastructure could be upgraded to process ore from this ore body.
“The benefits of this approach are the ability to expedite the environmental licensing process, shorten the timeline to production, enhance returns from mining this ore body and negate the requirement for external capital funding,” Loots said in the group's operational update for the nine months to March. Pan African last year completed a drilling programme on Barberton Mines’ Royal Sheba prospect, a near-surface resource of 370000 ounces, which the company hopes will deliver attractive returns to shareholders.
Loots said the feasibility study into the project had found that the mining method was not in line with the group's low-cost mining strategy.
“The group has completed the Royal Sheba project feasibility study and concluded that the merits of mining the near-surface resource, using an opencast mining method, did not meet the group’s disciplined capital allocation criteria. This was as a result of higher-than-anticipated capital expenditure, largely due to the challenging topography of the Sheba valley,” Loots said.
Loots also said the Pan African board had given the green light to the mining of Evander 8 Shaft Pillar, following a feasibility study into the merits of the project. “Development and equipping of this area has already commenced, with first gold expected during August 2019,” he said.
The Evander 8 Shaft Pillar is billed to replace the current remnant underground mining and is expected to contribute on average 30000 ounces a year over the next three financial years, with 20000 ounces of production forecast for the 2020 financial year. The company said gold production from its continuing mining operations increased by 51.4percent to 123771 ounces in the nine months to March from 81729 ounces in 2018 on the back of a strong performance from the Barberton Mines’ underground operations and the group’s tailings retreatment plants.
Production from the Barberton complex had jumped by 11.7percent to 72944 ounces from 65297 ounces last year. It also said underground and surface mining increased by 3.4percent to to 54857 ounces from 53034 ounces in 2018. “We are confident the group remains on track to meet its gold production guidance of 170000 ounces for the full financial year to June 30, 2019,” said Loots.
The share price declined by 0.57percent on the JSE on Friday to close at R1.75.
Seleho Tsatsi, an investment analyst at Anchor Capital, said the Pan African has historically been a low-cost gold producer. “The focus recently has been on its Elikhulu project. Pan has had operational challenges for the last couple of years, but expects to ramp production up from 170000 ounces in the 2019 financial year to 185000 ounces next year,” Tsatsi said.