Pan African Resources Plc Successful completion of Mintails' Mogale Gold DFS
June 30 2022 - 2:00AM
UK Regulatory
TIDMPAF
Pan African Resources PLC
(Incorporated and registered in England and Wales under the Companies Act 1985
with registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
ADR ticker code: PAFRY
("Pan African" or the "Company" or the "Group")
PAN AFRICAN SUCCESSFULLY CONCLUDES MINTAILS' MOGALE GOLD DEFINITIVE FEASIBILITY
STUDY ("DFS")
Pan African is pleased to announce that the Company has successfully completed
a DFS on the Mogale Gold Proprietary Limited ("Mogale Gold") Tailings Storage
Facilities ("TSFs") that forms part of the Mintails Mining SA (Proprietary)
Limited ("Mintails SA") assets, situated near Krugersdorp to the west of
Johannesburg, South Africa (the "Project"). The DFS was prepared by DRA
Projects SA (Pty) Ltd ("DRA"), with reliance on specialist input from third
parties for Mineral Resource and Mineral Reserve estimation, dump re-mining,
tailings pumping and disposal and metallurgical test work. The parties have
provided their consent for the release of the information contained in this
announcement as far as it pertains to the results of the DFS.
HIGHLIGHTS FROM DFS
* Significant production impact:
+ The Project has the potential to increase the Group's gold production
profile over the coming years, with re-mining of the Mogale Gold TSFs
expected to add approximately 50koz/yr of production over its 13-year
life of mine (LOM)
+ Equivalent to an increase >25% on Group's current production
* Compelling project economics:
+ Pre-tax NPV (at 9.5% real discount rate) of ZAR1,006 million (US$64,9
million), real ungeared IRR of 20.1% at US$1,750/oz and US$/ZAR:15.50.
+ Forecast AISC of US$914/oz and operating cost of ZAR78/t (US$5/t at
US$/ZAR:15.50) over the initial 13-year LOM
* Construction capex:
+ R2.5billion (US$161.3 million at US$/ZAR:15.50)
* Payback:
+ Construction capital payback estimated within 3.5 years, post
commissioning
+ Targeting production within 18-24 months from commencement of
construction
* Mineral reserve:
+ The Mogale Gold TSFs, which comprise various individual dams, contain a
Probable Mineral Reserve of 123.6Mt of re-mineable material at a head
grade of 0.29g/t for an estimated content of 1.14Moz gold
* Further production upside:
+ Addition of Mintails SA's Soweto Cluster resource has potential to
extend LOM from 13 years to 21 years and further increase annual gold
production
* Proven technology:
+ Low unit cost hydro mining with low project execution risk at 800ktpm
(thousand tons per month) carbon in leach ("CIL") plant, similar to Pan
African's Elikhulu operation (currently processing 1.2Mt per month)
* Project funding:
+ A number of funding options for the Project are being considered,
including offers of debt finance from financial institutions and other
third party financiers
* Strategic rationale:
+ Builds on the Group's track record of bringing value enhancing surface
re-mining operations into production
+ Enhanced ESG credentials
o Environmental rehabilitation and socio-economic initiatives for
local economic development to run concurrent with operations
o Job creation and skills development in host communities
o Potential to extend the Group's solar renewable energy PV footprint
in line with its decarbonisation strategy and strategic production
cost reduction initiatives
Cobus Loots, CEO of Pan African, commented: "Pan African has an excellent track
record of successfully commissioning and operating surface tailings retreatment
operations, as evidenced by our BTRP, ETRP and Elikhulu operations. As
originally anticipated, the Mogale Gold DFS has demonstrated a compelling
Project, both operationally and financially. Mintails has the potential to
further improve the Group's overall AISC, while increased annual production
will move Pan African further up the ranks of mid-tier gold producers.
Additionally, our re-mining activities will assist with environmental
remediation in this area. We look forward to working with all stakeholders to
further progress the Project in the months ahead."
Background to the Project
In November 2020, Pan African announced that the Company had entered into
conditional sale of shares agreements to acquire the share capital and
associated shareholder loans and other claims of Mogale Gold and Mintails' SA
Soweto Cluster Proprietary Limited ("MSC") (together the "Mintails
Transaction"). Both Mogale Gold and MSC are 100% owned by Mintails SA, which
was placed into provisional liquidation during 2018.
The deadline for fulfilment of the conditions to conclude the Mintails
Transaction was extended to August 2022 and included the completion of a fatal
flaw analysis, prefeasibility study ("PFS") and DFS. The PFS on the Mogale Gold
TSFs was completed during July 2021, followed by the DFS, announced today. Both
studies were led by DRA. Further technical work on the MSC TSFs is currently in
progress.
Mineral Reserves and Resources
Following the initial due diligence on Mogale Gold, the following work was
undertaken to improve the Mineral Resource confidence:
* a highly accurate Light Detection and Ranging ("LIDAR") survey of the
entire project area to ascertain available tonnages;
* twinning 25 of the historical holes in order to verify grades previously
reported; and
* drilled 82 new boreholes in areas with sparse or no data.
The combined drilling totaled 2,761m resulting in 1,877 samples and 187 control
samples; and resulted in the remodeling of all available resources as reported
in the Mineral Resource table below:
Indicated and Inferred
TSF Tonnage Gold
Mt
g/t kg oz
Indicated
Total Indicated 121.62 0.29 35,049 1,126,855
Inferred
Total Inferred 4.64 0.33 1,525 49,040
* Density of 1.44; Gold conversion: 1kg = 32.1508oz
* No cut-off applied; No geological losses or modifying factors applied
* Mineral Resources are stated inclusive of Mineral Reserves
* Mineral Resources are reported as total Mineral Resources and not
attributed
* Mineral Resources are SAMREC Code (2016 Edition) compliant
* The Mineral Resources are signed-off by Charles Muller (BSc (Hons),
Pr.Sci.Nat), an independent Competent Person
The updated three-dimensional Mineral Resource models were subjected to a
hydro-mining and load-and-haul mine design and schedule according to
engineering parameters as defined in the DFS. The same approach was previously
used by Pan African during the design process of the Group's Elikhulu operation
(Elikhulu).
Scheduling of the available resources was built around achieving a throughput
rate of 800ktpm, as detailed in the July 2021 PFS, as the optimal processing
throughput. The Mineral Resources subjected to the mine design and scheduling
was subsequently converted to Probable Mineral Reserves, as depicted in the
table below:
Mineral Reserves
Tonnage Gold
Probable Reserves
Mt g/t kg oz
Total Mineral Reserves 123.58 0.29 35,400 1,140,180
* Density of 1.44; Gold conversion: 1kg = 32.1508oz
* No cut-off applied; No geological losses or modifying factors applied
* Mineral Reserves includes 1.96Mt of Inferred Mineral Resources, scheduled
to access remaining Indicated Mineral Resources. The Inferred Mineral
Resource represents 3.75% of the total Mineral Reserve and is not deemed a
significant risk
* The Mineral Reserve is signed-off by PAR's Competent Person, Hendrik
Pretorius
Conceptual MSC resource/reserve and production upside
In the SENS announcement of 6 November 2020, the Company reported that the MSC
TSFs comprise nine separate facilities with resources of 119Mt with an in-situ
grade of 0.31g/t, containing an estimated gold content of 1.20Moz. Although Pan
African currently classifies the MSC Mineral Resources in the Inferred Mineral
Resource category until further technical studies and work is completed, a
conceptual production schedule for this project was applied, based on available
information.
This conceptual production scheduling, entailing the processing of combined
TSFs demonstrates a more robust recovered ounce profile and an extended LOM for
the project, in excess of 20 years. The conceptual MSC TSF model increased
production by an average of 11koz/yr from years 6 to 13 (once the Mogale Gold
TSF resources are depleted), giving rise to a production profile of an average
54koz/yr from year 14 to 20.
No Mineral Reserves or financial valuation for the conceptual MSC scheduling
can be reported on at this stage and the incremental production from this
cluster is included for illustrative purposes only.
Re-mining and processing
The study envisages hydro-mining to be utilised for the larger dumps, using
hydraulic guns of similar specification as used at Elikhulu, cutting mine
widths of 15m wide and 20m deep. The North Sands and South Sands dumps are
conducive to load-and-haul mining, to extract the resources from these dams.
The re-mined tailings will be processed in a CIL plant of similar design to the
Elikhulu operation, with the addition of a water treatment section to limit
corrosion and potentially improve recoveries. The DFS process plant is designed
for an average throughput of 800ktpm, with up to 900ktpm achievable without
negatively affecting performance.
All of the borehole samples were utilised to refine and test the expected gold
recoveries from the processed material, under the direct supervision and
management of Pan African. The modelled recoveries are presented in the table
below:
Resource material % Recovery
TSF modelled
1L23-25 54.70%
1L13-15 48.90%
1L28 34.40%
1L8 53.56%
1L10 50.85%
North Sand Dump 71.00%
South Sand Dump 75.71%
Key financial assumptions and outputs (as per DFS)
Description
Net Present Value (9.4) R1,006 million (US$64,9
million)
Real Ungeared Internal Rate of Return 20.1%
Total construction capex requirement R2,460 million (US$158,7
million)
Forecast payback period (post commissioning) 38 months
Average AISC US$ 914/oz
LOM operating cost ZAR 78/t (US$5/t)
Average annual gold production 50koz
LOM 13 years
* Long term gold price US$1,750/oz
* Long term US$/ZAR:15.50
Envisaged project financing
The Group has received a number of offers from financing institutions and third
party financiers for the Project funding and expects to finalise the funding
package later this year, if the Company was to proceed to project execution.
Way forward and possible project execution timeline
Following in-principle approval by Pan African's board to further progress the
Project, the Company will commence with the environmental authorisation process
and stakeholder engagements.
Activity Estimated
date
Completion and finalisation of DFS Completed
Engineering optimisation activities June - August 2022
Detailed engineering study September 2022 - March
2023
Likely project commencement date September 2022
Funding package finalised October/November 2022
Environmental approvals March 2023
Construction commences April 2023
Commissioning July 2024 -
December 2024
ESG/Social Impact
As part of the DFS, the Company has already conducted extensive engagements
with community representatives and other interested and affected organisations
based in the area, including regulatory authorities. This information and the
EMPR is being utilised to compile an action plan to remediate past
environmental damage and restore the surface for productive land use, while at
the same time investigating impactful socio-economic development projects
intended to stimulate the local economy.
The Company will also conduct feasibility studies into the merits of renewable
energy for the new tailings retreatment plant's energy requirements.
Competent Person
The competent person for Pan African Resources, Hendrik Pretorius, the manager
for Group mineral resource management, signs off the Mineral Resources and
Mineral Reserves for the Group. He is a member of the South African Council for
Natural Scientific Professions (SACNASP 400051/11 - Management Enterprise
Building, Mark Shuttleworth Street, Innovation Hub, Pretoria, Gauteng Province,
South Africa), as well as a member in good standing of the Geological Society
of South Africa (GSSA - CSIR Mining Precinct, Corner Rustenburg and Carlow
Roads, Melville, Gauteng Province, South Africa). Hendrik has 18 years'
experience in economic geology and mineral resource management (MRM). He is
based at The Firs Office Building, 2nd Floor, Office 204, Corner Cradock and
Biermann Avenues, Rosebank, Johannesburg, South Africa. He holds a BSc (Hons)
degree in Geology from the University of Johannesburg as well as a Graduate
Diploma in Mining Engineering from the University of the Witwatersrand. Hendrik
has reviewed, and approved, in writing the information contained in this
document as it pertains to Mineral Resources and Mineral Reserves.
The information contained in this announcement is the responsibility of the
Company's board of directors and has not been reviewed or reported on by the
Group's external auditors.
Rosebank
30 June 2022
Certain information communicated in this announcement was, prior to its
publication, inside information for the purposes of Article 7 of Regulation 596
/2014.
For further information on Pan African, please visit the Company's website at
www.panafricanresources.com
Corporate information
Corporate Office Registered Office
The Firs Office Building Suite 31
2nd Floor, Office 204 Second Floor
Cnr. Cradock and Biermann Avenues 107 Cheapside
Rosebank, Johannesburg London
South Africa EC2V 6DN
Office: + 27 (0)11 243 2900 United Kingdom
info@paf.co.za Office: + 44 (0)20 7796 8644
Chief Executive Officer Financial Director
Cobus Loots Deon Louw
Office: + 27 (0)11 243 Office: + 27 (0)11 243 2900
2900
Head: Investor Relations Website:
Hethen Hira www.panafricanresources.com
Tel: + 27 (0)11 243 2900
E-mail: hhira@paf.co.za
Company Secretary Nominated Adviser and Joint Broker
Phil Dexter/Jane Kirton Ross Allister/Alexander Allen
St James's Corporate Services Limited Peel Hunt LLP
Office: + 44 (0)20 7796 8644 Office: +44 (0)20 7418 8900
JSE Sponsor Joint Broker
Ciska Kloppers Thomas Rider/Nick Macann
Questco Corporate Advisory Proprietary BMO Capital Markets Limited
Limited Office: +44 (0)20 7236 1010
Office: + 27 (0)11 011 9200
Joint Broker
Matthew Armitt/Jennifer Lee
Joh. Berenberg, Gossler & Co KG
(Berenberg)
Office: +44 (0)20 3207 7800
END
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