PAN African Resources made a special plea to the South African government to assist it following closure of a deal to buy two large surface gold tailings deposits west of Johannesburg.
The R7.9bn company announced on Thursday the purchase of the Mogale and Mintails tailings deposit after spending extra time assessing their economic feasibility. It also raised R80m in debt from Rand Merchant Bank (RMB) to help finance the project. Pan African already has a R1bn revolving credit facility with the Johannesburg lender.
The Mogale and Mintails deposits have the potential to lift Pan African’s annual gold production about a fifth, and significantly extend total gold resources. Production in the firm’s 2022 financial crested 200,000 ounces of gold.
However, closed and stranded gold assets in that region are a hotbed of activity for illegal miners, known in South Africa as “zama-zamas”. So far, the country’s policing and intelligence authorities have spectacularly failed to rein-in their activities which the Minerals Council said resulted in billions in rands of lost gold a year.
“The area where Mintails is situated presents a number of environmental and social challenges,” said Pan African CEO, Cobus Loots in a statement. “We will require the assistance of the government and all the other legitimate stakeholders to successfully address those challenges, remediate the site and develop a world-class project.”
Roger Baxter, CEO of the Minerals Council was quoted in a Financial Mail article this week as saying its member companies had increased annual spending on security by at least R2.5bn “on top of the billions of rands they already spend to combat the scourge of crime and as illegal mining escalates”.
However, the policing services are helpless in the face of the threat.
Public opinion was strongly catalysed on the issue of illegal mining when on July 29 female models filming a music video at a mine near Krugersdorp, west of Johannesburg were attacked and raped by men thought to be illegal miners. Neal Froneman, CEO of Sibanye-Stillwater, called for military intervention in response, given the hapless response of the SA Police Services.
In the main, financed by syndicates, illegal miners target ownerless or derelict mines, estimated by the Minerals Council to number about 6,100 in South Africa.
The deal
Pan African will pay R50m for Mintails and Mogale, held by Mintails Mining SA Proprietary, a company put into provisional liquidation in 2018. This followed completion of a definitive feasibility study on the Mogale Gold tailings facilities. Mogale would cost an estimated $161m (R2.5bn) in capital expenditure to develop – by far the largest capital call the company has undertaken.
“Pan African is pleased to have finally closed the sale transaction,” said Loots. “Our studies have demonstrated robust operational and financial economics, with the project having the potential to further increase our high-margin, long-life production from tailings retreatment operations”.
The DFS, completed by DRA Global, estimates annual production of about 50,000 ounces a year for 13 years based on a probable mineral reserve of 123.6 million tons (Mt) of surface gold at a head grade of 0.29 grams per ton. That would take Pan African’s production to 250,000 oz/year based on this year.
