Pan African Resources is a JSE listed gold miner that owns underground and surface mining operations. This company’s share price is up 192% in the past five years – but its about to make another major jump.
You see – it is about to add a R2 billion a year surface gold project to its already sizeable R6 billion a year operation…
What’s more – the company got the bank to guarantee around 30% of its sales AS WELL AS finance the new mine! Let me explain…
Here’s what you need to know about Pan African Resources as an investor
Pan African Resources recently bought the Mintails project for R50 million. It is now in the development phase of this operation – which it expects will produce 50,000 ounces of gold a year (on average) for at least 13 years!
That means the company will increase gold production and revenue by at least 25%.
The project will initially mine the Mogale mine dumps, after they have been processed. It also has the rights to process the Soweto Cluster – which will extend the mine life to 21 years with a similar production profile!
The project will cost R2.5 billion – and will pay for itself in under 4 years.
But what makes the Mintails project special is how it’s been funded…
How Pan African Resources got the bank to ‘guarantee’ its sales – AND fund a new mine
To develop the Mintails project Pan African resources needed cash. And so it made an interesting deal with the bank…
It got R400 million in upfront financing from Rand Merchant Bank. With the full capital of over R2.5 billion secured with the bank.
It did this through the forward sale of gold. Between March 2023 and March 2025 the company will sell more than 3,617kg of gold to the bank at $1,909/oz. So, if the price drops below, its sales are guaranteed, but if the gold price goes above, it loses out.
But the real benefit is it can use future production to raise the cash immediately to complete this project.
How soon will this project be online?
Pan Af completed the feasibility study, engineering optimisation and secured funding. It also secured environmental approvals and started construction in July 2023.
The company expects production to commence by December 2024. It will start mining the 123 million tons of re-mineable material, containing around 0.29g/t of gold.
The company expects mining costs to come in at the $900/ounce level – compared to the gold price being above $2,000 at present so, there’s ample upside opportunity…
Pan Af is also working on other initiatives.
It commissioned a 9.9MW solar plant at its Evander mine in 2022 and is currently doing a feasibility study to expand this to 22MW. It also commenced construction of an 8.75MW solar plant at its Barberton mine. And by mid-2024 it plans to launch a study to look into the feasibility of a 10MW renewable energy solution for the Mintails project as well. By 2028 the company aims to produce 15% of its electricity demand from renewable sources.
It states with 30MW of installed solar it will generate cost savings of R100million per year!
That’s enough for around 4-5cps in additional profits!
And, on top of this, the company expects increased gold production from expansions at its Evander mine to add up to 40,000 ounces of extra gold production annually by 2027 – growing steadily from current levels.
This is a stock to keep your eye on.
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