Surging Pan African forced to secure mine from illegals at a cost of $3.4m
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JOHANNESBURG - Pan African Resources, while reporting that its interim revenue surged to $132.8 million (R1.98billion) on the strong gold price, said yesterday that it had beefed-up security at its Barberton mine in Mpumalanga or risked being “overrun” by illegal miners.
Pan African chief executive Cobus Loots told analysts during a financial results presentation for the six months to December 2019 that the group's priority had been to safeguard its assets.
“We are exposed to a lot of illegal miners. We are seeing an influx of illegal miners from countries like Mozambique. If we had not improved security, we would have been overrun today. We have made the business sustainable from a security point of view,” said Loots.
Pan African, the junior JSE-listed gold producer, said security costs represented 3.9percent of production costs and had increased by 3percent to $3.4m in 2019 from $3.3m in 2018.
The group said security had jumped 6.6percent in rand terms due to an increased focus on addressing illegal mining activities and once-off costs incurred during instances of community unrest.
The group said production from the Barberton Mines complex had fallen 6.3percent to 47356 ounces, from 50556 ounces in 2018, as production from underground and surface mining decreased by 4.7percent to 36737 ounces, from 38550 ounces, due to community unrest experienced during July 2019.
To add insult to injury, the challenging geological conditions at Barberton Fairview operation had also impacted production.
Despite problems at Barberton, group production increased by 14.7percent to 92941 ounces from 81014 ounces in 2018.
Last month the industry called for government intervention in the sector, following the spate of brazen killings by heavily armed gangs at different mines.
“South Africa's operating environment remains challenging, with key issues being electricity availability, illegal mining, community protests and disruptions, escalating costs and regulatory uncertainty.
"These challenges are successfully mitigated by employing pre-emptive risk management initiatives and by Pan African Resources’ pro-active management approach,” said Loots.
In terms of earnings, group profit after taxation increased by 125.8percent to $21.9m from $9.7m due to the improved production performance at Evander Mines and the prevailing robust dollar and rand gold price.
The group adjusted earnings before interest, taxation, depreciation and amortisation (Ebitda), impairment reversals and fair value adjustments on derivative financial assets and liabilities (adjusted Ebitda) increased considerably by 83.4percent to $44.2m from $24.1m in 2018.
Earnings a share increased by 128percent to $1.14 per share from 50c per share with an increase of 126 percent in headline earnings a share to $1.13 a share.
Pan African Resources shares closed 1.25percent higher at R2.43 on the JSE yesterday.