Pan Af, Pan African Resources (JSE: PAN) has been one of the best performing JSE-stocks so far in 2024 – up over 100%. It’s also been a stellar performer in the Red Hot Penny Shares portfolio. Of course, there’s a perfectly reasonable explanation for the company’s rally.
Gold!
Investor’s rush to safety has driven the yellow metal to new all-time highs in 2024. As a result, gold mining stocks have benefited too.
There are reasons to believe the gold price will remain high in the foreseeable future. After all, demand from central banks is soaring amongst other catalysts.
Pan Af’s management thinks so too!
In fact, the company recently announced an acquisition in Australia – one that will boost its gold production and generate huge money in the future.
Here are all the details…
Pan Af acquires one of the highest-grade gold-producing fields…
Back in March 2024, Pan Af secretly forked out $3.4 million cash for an 8% stake in mid-tier gold miner, Tennant Consolidated Mining Group.
Fast-forward to 5 November, and Pan Af acquired the remaining 92%. This time in a share-swap deal worth $50.8 million. The shares being issued constitute less than 6% of Pan Afs existing shares, so this is a meaningful deal.
All in all, the total transaction cost for Tennant is $54.2 million.
So, what exactly does the acquisition entail?
Well, Tennant is a low cost and low risk gold producer operating at The Tennant Creek Gold Field (TCGF) in Australia – a tier 1 mining region.
TCGF was discovered in the 1930s and gold production kicked off. By the 2000s, mining activity terminated as the gold price reached lows of $500/oz. However, in its heyday, TCGF was one of the highest-grade gold-producing fields in Australia.
Today, TCGF includes several assets with high mineral potential. The project includes the 100%-owned Warrego, Nobles, and Juno assets, as well as a joint venture with ASX-listed Emmerson Resources.
Currently, mineral resources stand at 8 million ounces of gold. There is also around 1.2 million tonnes of copper.
A BIG money-making deal for Pan Af…
Pan Af’s management expects payback on the initial capital investment in less than three years at a gold price of $2,600/oz.
Meanwhile, production costs will be around $1,300/oz. Over the initial three years of production, TCGF aims to produce about 50,000/oz per year.
In short, if the gold price remains at these levels, Pan Af’s profits will skyrocket!
In fact, Pan Af anticipates returns above the required 20% per annum. However, as you read further, the mineral reserves suggest a real ungeared Internal Rate of Return (IRR) of a whopping 144%.
The first gold production is expected by July 2025, with the processing plant construction more than 50% complete. Once complete, it will be the only functioning gold processing plant in the region at present and will be the largest facility ever operated in the TCGF.
Simply put – this deal could be a ‘gold mine” for Pan Af. No pun intended.
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