Pan African Resources posts study results for Elikhulu

Pan African Resources announced positive results for the independent Definitive Feasibility Study for its Elikhulu Tailings Project on Monday.

The AIM-traded company’s board of directors approved the construction of the project at the same time, subject to finalisation of the project financing package.

It said the DFS results indicate excellent recovered grades and gold production, attractive financial returns and a low execution risk, with the DFS results surpassing expectations of previous technical and financial assessments of the project.

The planned commencement date of the project is January 2017, with first gold forecast for the final quarter of the 2018 calendar year and full commissioning in December 2018.

Annual recoverable gold production was identified at approximately 56,000 ounces for its initial eight years of operations and 45,000 ounces of gold for the remaining five years thereafter.

Current arisings and inferred gold resource could extend the project life beyond the DFS estimated life of 13 years.

Optimal plant capacity for the project would allow 12 million tonnes per annum throughput, and the project is expected to add approximately 25% to the group’s current production profile and reduce the group’s all-in sustaining cost profile.

Initial capital cost is forecast at approximately $119.9m.

The project internal rate of return was stated at 23.1% - or 30.6% nominal - with a payback period of less than four years, based on an assumed gold price of $1180/oz.

Return on equity was set at 34.3%, or 42.5% nominal, and the project’s net present value was $75.9,.

AISC of $523/oz were estimated over the life of the project, and cash outflow per ounce over the life of the operation was put at sub $650/oz, inclusive of debt servicing, and approximately $805/oz, inclusive of debt servicing, over the five year debt redemption term.

Average gold recovery rate over the life of the project was estimated at 47.77%.

Environmental Impact Assessment and Water Usage Licence processes are underway, with both approvals expected by late 2017, the board said.

“We are pleased to announce the positive findings of the independent Definitive Feasibility Study,” said CEO Cobus Loots.

“Operating low cost tailings plants has become an important business for Pan African in recent years, and we now intend to proceed with construction of the Elikhulu tailings retreatment project.

“This project is expected to materially enhance our group’s production profile and support Pan African’s continued focus on low-cost, high-margin gold ounces.”

Loots said the substantial capital investment required demonstrates our commitment to the South African mineral sector and our shared responsibility of creating employment and alleviating poverty in the Evander community.

“Our primary consideration in any capital allocation decision is our ability to successfully execute the designated project and to generate the required returns over the investment horizon.

“The attractive returns already being earned on the capital invested in the BTRP and ETRP bear testimony to our previous success and will serve as invaluable experience in completing the project.”