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Pan African proposes record final dividend as headline earnings surge

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Pan African proposes record final dividend as headline earnings surge

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Pan African CEO Cobus Loots

16th September 2020

By: Martin Creamer
Creamer Media Editor

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JOHANNESBURG (miningweekly.com) – Gold mining company Pan African on Wednesday proposed a record final dividend after headline earnings surged 93% and net cash generated by operating activities rose by 42%.

Mining Weekly can report that, in the 12 months to June 30, gold produced by the London-, Johannesburg- and New York-listed company rose 4.1% to 179 457 oz, exceeding the revised full-year production guidance figure of 176 000 oz.

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While in terms of lost-time injury and reportable injury frequency rates safety performance was described as industry-leading, Pan African CEO Cobus Loots stated that the company was deeply saddened by a fatality that occurred after the reporting period, when employee at Fairview Mine in Barberton, Senzo Mavimbela, lost his life in a fall-of-ground accident on July 22.

Revenue rose 25.9% to $273.7-million and after-tax profit 16.6% to $44.3-million. Headline earnings nearly doubled to $44.2-million and headline earnings a share leapt 92.4% to $0.0229 a share and operational net cash to $53.8-million.

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Net senior debt fell 51.9% to $62-million and the ratio of net debt to net adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) improved to 0.7 from 2.2 in financial year 2019.

Low-cost operations, including Elikhulu, Barberton Tailings Retreatment Plant (BTRP) and Barberton Mines’ Fairview, achieved an all-in sustaining cost level of $826/oz.

Payback on Evander Mines’ Egoli project under way is estimated at less than five years from inception of construction, with funding provided on a non-dilutive basis by a dedicated debt facility.

Production guidance has been pushed up to 190 000 oz for financial year 2021, ending on June 30.

The board has proposed a record final dividend of R312.9-million, or $18.7-million, subject to approval by shareholders at the annual general meeting.

Loots stated in a stock exchange news service (SENS) announcement that the group's operations had demonstrated their resilience, with gold production above revised guidance, despite the impact of Covid restrictions imposed.

Gold production from the low-cost Elikhulu and BTRP surface retreatment operations were singled out for contributing significantly to group profitability.

The group’s operational execution capability was leveraged to bring Evander Mines' 8 Shaft pillar project and the Prince Consort Shaft's Level 42 development at Barberton Mines’ New Consort mine into steady-state production, turning these operations into an integral part of further underground mines’ cost reductions and increased margins.

The group stated that it would continue to invest in compelling organic growth projects, most notably the recently announced long-life Egoli project, which capitalises on the substantial existing shaft and plant infrastructure, and is also fully licensed and "shovel-ready".

“We’re pleased to announce that following the successful completion of the feasibility study, the group has obtained credit approval from Rand Merchant Bank for the full debt funding of the project’s capital expenditure.

“We’ve prioritised our environmental, social and governance initiatives as evidenced by the level of rehabilitation spend for the reporting period, and board approval for the implementation of a number of significant and sustainable development projects.

“These include the 10 MW renewable energy solar photovoltaic plant at Elikhulu and a large-scale agriculture project at Barberton Mines. The merits of a similar solar photovoltaic plant are also being considered for Barberton Mines, as well as new agriculture projects on rehabilitated land at Evander Mines.

"We're acutely conscious of the ongoing impact of the Covid-19 pandemic and will continue to implement stringent preventative and precautionary measures to limit incidences of infection among our employees and in our host communities, and minimise the potential adverse impact of the pandemic on the group’s operations," Loots stated in the SENS release.

The Egoli project is expected to directly employ 1 200 people, mainly from host communities and will provide additional economic and supplier development opportunities for the Evander region of the Mpumalanga province.

The group has undertaken several initiatives to improve production and reduce unit costs at its higher cost operations, with the objective of reducing all-in susetaining costs to less than $1 000/oz for the 2021 reporting period.

The group’s mineral resources increased by 5% year-on-year, mainly due to cutoff grade changes at Evander Mines, an optimised mining method at Royal Sheba mine and additional mineral resource blocks at Fairview mine. The changes in the cutoff grade are affected by the higher gold price used in the cut-off grade estimations, relative to previous declarations. Mineral reserves decreased marginally, year-on-year, with a decrease of 0.5% recorded. This is inclusive of 169 000 oz depleted from the reserves due to mining and processing, and excludes surface sources not accounted for. The resources, reserves and production targets for the group are supported by long-life robust assets including Fairview's remaining life of 20 years, and the Sheba Mine and Royal Sheba project combined also represent a 20-year life.

The group’s flagship tailings retreatment operation, Elikhulu, has a remaining life of 12 years. New Consort Mine and BTRP have remaining lives of eight years and six years, and there is access to long-life organic growth projects such as Egoli, Rolspruit, Poplar and others form the basis of a strong foundation of more than 14 years.

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