R1.74bn gold mining project approved
The board of gold and platinum miner Pan African Resources has approved construction of the R1.74-billion Elikhulu tailings retreatment project at its Evander mine to extract at least 100 000oz of gold from old dumps.
Pan African, which is listed in Johannesburg and London, said the board’s approval was conditional on finalising a financing scheme for the project, due to start production at the end of 2018 after construction started early next year.
“The project’s execution and operational risk is deemed to below, and the robust nature of the project’s cash-flow generation allows for a relatively high level of debt funding,” it said.
Rand Merchant Bank had granted it approval for a five-year R1-billion underwritten debt facility.
Repayment of debt would not affect the company’s dividend policy of returning 40% of free cash flows to shareholders.
Pan African has a further R800-million available in a revolving credit facility, and this can be extended to R1.1-billion.
Pan Africa said it was “evaluating a number of funding proposals to fund the balance of the initial project capital and, given its strong financial position and access to debt facilities, does not foresee difficulty in securing the balance of the funding oncompetitive terms”.
This would be the company’s third tailings treatment operation, adding to the highly profitable project at its Barberton mine near the Swaziland border and Evander.
“Operating low-cost tailings plants has become an important business for Pan African in recent years, and we now intend to proceed with construction of the Elikhulu tailings retreatment project,” Pan African chief executive Cobus Loots said.
“This project is expected to materially enhance our group’s production profile and support Pan African’s continued focus on low-cost, high-margin gold ounces,” he said.
Pan African generates about 200 000oz of gold a year from its Barberton and Evander mines.
The R1.74-billion is needed for the first phase of the project to build a plant and set up infrastructure at the first dump.
A further R313-million and R113-millionis needed for phases two and three to tackle the remaining two dumps and will be funded from the project’s internal cash flows.
The board’s decision to approve the project came after the completion of a definitive feasibility study (DFS) by mining engineer company DRA Projects, which found excellent recovered grades and gold production, attractive financial returns and a low execution risk, with the DFS results surpassing expectations of previous technical and financial assessments of the project.
The project would deliver 56 000oz of gold in the first eight years and then 45 000oz in the next five, but there was further potential from existing mining operations and inferred gold resources falling outside the project’s scope at this stage.
