Pan African Resources expects to be debt-free within the next 12 months
JOHANNESBURG - Pan African Resources expects to be debt-free within the next 12 months on the back of the record gold price as it reported on Friday cutting almost half of group net debt during the year ended June on better-than-expected output.
Chief executive Cobus Loots told investors that the group’s strategic focus for the year ahead remained on de-gearing the balance sheet, with the intent of increasing dividends in the years ahead.
“We are especially pleased to report that the rate of deg-earing has exceeded previous guidance and, at prevailing rand gold prices and guided production levels, we expect to be debt-free within the next twelve months,” Loots said.
Gold breached the $1 800 ($8200) an ounce level last week for the first time since 2011 on Covid-19 concerns helping gold producers realise better share prices.
Group net debt was slashed by 49 percent to $62.5 million during the year to June from $123.7m in December 2019, said Loots.
Net debt at the 2020 year-end was lower than the previously guided $70m as a result of better than anticipated production, the depreciation of the rand against the US dollar and
disciplined working capital management.
In terms of group production, annual gold output for the 2020 financial year had climbed by 4.1 percent despite the severe impact of lockdown restrictions, especially at Barberton Mines in March and April. The company recorded 179 575 ounces compared to 172 442 ounce a year earlier exceeding the revised production guidance of 176 000 ounces as announced to shareholders in May after undertaking a number of initiatives including achieving steady-state production at shaft pillar 8.
Production guidance for the 2021 financial year was increased to 190 000 ounces, the company said.
In a move to cut electricity costs, Pan African said it had approved the development of a 10MW solar photovoltaic project at Elikhulu’s operation in Evander which is estimated to cost about R140m. The plant is expected to initially provide up to 30 percent of Elikhulu’s annual power requirements and aimed to reduce the operation’s dependency on the national grid, whilst also reducing exposure to above-inflation annual power cost increases.
"The project, with an expected minimum life of at least 20 years, is expected to generate electricity at a cost lower than Eskom power, which also makes this investment economically compelling”, said the group adding that the investment in renewable energy would result in improved efficiencies, a further reduction in operating costs as electricity makes up 35 percent of production costs at the Elikhulu operations.
Engineering, procurement, and construction contract for the project had been awarded to an independent contractor and the was now in the process of finalising the necessary legal and contractual agreements, as well raising dedicated funding for the project, said the group. Elikhulu is the group’s third gold retreatment plant, and is one of the lowest-cost operations in Africa, producing some 65 000 ounces a year.