Pan African's underground mines temper an otherwise strong interim result

Pan African Resources used its interim results in February 2025 to reaffirm ambitions to lift group gold production to between 270,000oz and 308,000oz in the 2026 financial year, up sharply from prior levels, helped by the commissioning of its Mintails tailings retreatment project in October. Chief executive Cobus Loots described conditions as "a strong bull market" for gold producers.

Yet the same results exposed a soft spot in the company's underground portfolio. Sheba, an underground mine within the Barberton Gold Mines complex in Mpumalanga, was hit by gold theft and productivity declines, pushing its all-in sustaining cost to $2,959/oz — above the spot gold price at the time. Analysts flagged this as a reminder that Pan African's growth is increasingly reliant on lower-risk surface tailings retreatment rather than underground mining, which remains harder to control.

A company in transition

Nedbank Securities analyst Arnold van Graan summed up the mood as "two steps forward, one step back", characterising Pan African as a company in transition between its legacy underground assets and a newer portfolio of tailings and, following the December 2024 acquisition of the brownfields Nobles mine, an offshore growth option in Australia. Loots pushed back gently on the doubts, telling analysts the balance sheet — which peaked at $228.5m of net debt at the end of December — should be worked down within 12 to 18 months.

Standout year on the JSE

The caution from analysts did little to dent investor enthusiasm. Pan African was the JSE's third-best-performing share of 2024, having doubled in value on the back of improving gold prices and the successful ramp-up of the Elikhulu and Mogale surface operations. The interim period captured the start of that re-rating, with the company's underground challenges viewed by the market as manageable given the scale of the tailings business.

What to watch

The trajectory set out in these results — rapid production growth from surface retreatment, a stretched underground segment, and an Australian toehold via Nobles — would shape the rest of Pan African's 2025 and 2026 financial years, including subsequent decisions on a share buyback, a full listing move to London, and the Soweto Cluster tailings expansion.

Sources

• Miningmx: Pan African's underground mines could check its ambitions, 26 Feb 2025

Photo: Gold mine tailings in South Africa, the kind of surface material Pan African retreats for gold. NJR ZA, Wikimedia Commons, CC BY-SA 3.0.