Shares of Pan African Resources dipped 21% on Friday when the gold producer said it would lower its production guidance for gold in the current financial year, primarily as a result of challenges related to Eskom-generated electricity supply.
The shares closed 21.23% lower at R3.19 on Friday and have decreased by 11.88% in the past six months.
In its results for the year ending June 30, 2023, the group said it reduced production guidance to about 175 000 ounces, previously 195 000 ounces to 205 000 ounces, resulting in a production loss of approximately 10 000 ounces of gold.
Pan African Resources said issues related to Eskom-generated electricity supply impacted all of the group’s operations.
"In addition to loading curtailment, power outages, and surges, difficulties related to transformers and other Eskom infrastructure contributed to production disruptions," the group said.
Pan African Resources said it had been aggressively rolling out its renewable energy plans in order to mitigate the impact of this challenge.
It flagged that slower than anticipated ramp-up of continuous operations at Barberton Mines and lower-than-expected production from Evander Mines’ underground operations hampered total production.
Tailings operations at Barberton and Elikhulu were performing in line with expectations.
Despite lower-than-expected production, the group said it was positioned to deliver a robust financial performance for the current financial year as a result of the excellent rand gold prices being received, and also disciplined operational cost control.
"The impact of the lower than-expected gold production for the current financial year has been partially mitigated by the increased year-to-date rand gold price received of R1 003 374 per kg, in 2022 it was R892 431/kg, relative to the prevailing gold price of approximately R1 220 000/kg.
Pan African Resources CEO Cobus Loots said: "Whilst we are disappointed with the production performance of our underground operations for the current financial year, the turnaround at Barberton Mines is now evident, especially in the past two months, following a longer than anticipated ramp-up after the implementation of continuous operations at Fairview Mine and Sheba Mine and implementation of the contractor mining model at Consort Mine.
"Barberton Mines’ underground production tonnes have demonstrated a notable increase during the past two months, with further increases expected during the remainder of the current financial year. Implementation of the contractor mining model at Consort Mine is also bearing fruit, and the operation is expected to return to profitability in the short term," he said.
The group said a marked improvement in Fairview Mine’s production tonnes had been noted.
"The average tonnes produced for the preceding three months to April 2023 have increased by more than 10% to approximately 9,100t per month, compared to an average of 8,100t per month in the first seven months of the current financial year," it said.
A projected tonnage was expected to further increase in excess of 5% in the remaining two months of the current financial year.
Meanwhile, Pan African Resources said it had been informed by the South African Department of Mineral Resources and Energy (DMRE) of the imminent issuing of the Mintails project’s integrated environmental authorisation.
Last year, Pan African Resources announced that it had closed its R50 million cash deal to acquire Mogale Gold and Mintails SA Soweto Cluster, both of which are 100% owned by Mintails Mining SA, a company that was placed under provisional liquidation in 2018.
"Commencement of plant construction is, therefore, expected in the next month, and ground clearing activities have commenced, with steady state production from the commissioned project expected by December 2024," it said.
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