Pan African Resources Interim Earnings Drops As Gold Production Falls
LONDON (Alliance News) - Pan African Resources PLC said Tuesday that its gold production fell in the first half, as did revenue and profit, as the mining company faced substantial challenges.
The group's earnings before interest, taxation, depreciation, and amortisation declined by 61% to ZAR185.6 million during the first half to December 31, from ZAR476.5 million in 2016, a GBP10.5 million fall in sterling terms.
Revenue from continuing operations fell by 9.2% to ZAR1.46 billion from ZAR1.61 billion in 2016, as a result of a decrease in the rand gold price received and gold ounces sold.
Cash cost per kilogram increased by 13% to ZAR473,187 per kg, from ZAR418,764 per kg in 2016, due to lower gold production.
Gold production fell by 6.9% to 85,282 ounces during the period from 91,613 ounces in 2016, primarily as a result of operational challenges encountered at the Barberton mines in South Africa. Pan African added that Barberton is positioned for an improved performance in the second half of the year.
Gold production at Baberton was disrupted by pressure groups, community unrest, and strike action, resulting in 11 lost production days, equivalent to about 3,000 ounces of gold. Pan African said the source of local frustration is driven by "issues unrelated to the mine and is symptomatic of the general dissatisfaction with service delivery, inter-union conflict, and unemployment issues that currently characterise the South African mining and other sectors."
Conversely, the Evander mines, also in South Africa, delivered an improved operational and financial performance, returning to profitability as a result of the company's addressing critical shaft infrastructure and the cost base of the operation. However, some potential production was lost due to a number of water bursts.
The Evander mines' gold production increased by 5.4%, as gold sold increased by 24% to 32,734 ounces from 26,477 ounces in 2016, due to tonnage milled from underground mining increasing by 7.6% to 174,233 tonnes, from 161,872 tonnes in 2016. Head grade also increased by 13% to 6.1 grams per tonnes, from 5.4 grams per tonne in 2016.
Pan African highlighted that it remained profitable despite currency volatility, lost production days from industrial disputes, and technical challenges at the Barberton tailings retreatment plant.
The miner noted that it is strongly positioned for the second half, with the results of its investment in the Barberton plant regrind mill and improved grades from Barberton mines set to deliver strong production growth and lower costs over the next 12 months.
Pan African's production guidance for the full financial year is about 177,000 to 181,000 ounces.
"Our group is positioned to deliver into our objective of mining relatively low-cost, high-margin and sustainable gold ounces. The past 12 months has been a watershed period during which we reassessed the sustainability of all our operations and dealt with issues causing operational disruptions. We expect improved production and cost savings in the next reporting period," Pan African Chief Executive Cobus Loots said.
Pan African shares were up 0.3% at 9.74 pence per share on Tuesday.
By Toby Woodall; [email protected]
Copyright 2018 Alliance News Limited. All Rights Reserved.
Register for daily news emails
We have a selection of newsletter options suited to the needs of every investor.To subscribe simply tap the button below: Subscribe now
That page has full facilities for managing your subscriptions. Or, should you choose, unsubscribe.
Any questions — simply contact our customer support team. They will be more than happy to answer your questions.