Pan African earnings jump after low-cost half

Pan African Resources (PAF) is balancing declining operations and new build options, with its Evander and Barberton operations combining for a 7 per cent increase in production in the first half of its 2024 financial year. 

The company’s guidance of 180,000-190,000 ounces (oz) of gold for the full year to 30 June is down on the 200,000-plus oz seen in 2021 and 2022, although the company has flagged this could increase depending on output in the coming months. Pan African produces gold through mines and tailings treatment facilities, with the latter contributing to lower operating costs. Its all-in sustaining cost for the first half was $1,287 (£1,025.03) an oz, flat compared with the year before. 

Guidance for the full-year has been tightened to $1,325-$1,350 an oz from just $1,350. 

That lower cost and higher output combination served to send Pan African’s adjusted cash profits up 41 per cent in the first half, to $75mn. Broker Peel Hunt forecasts $130mn for the full year, up 13 per cent on last year but down 6 per cent on 2022. 

Further out, production is set to increase through the commissioning of a new tailings treatment site, Mogale, which eventually add up to 50,000oz a year of gold production. Peel Hunt sees production climbing 28 per cent by 2026 with this addition. Capital spending for Mogale was $21.6mn in the first half, which contributed to net debt climbing from $22mn as of 30 June to $64mn on 31 December. The company’s margin in this high-gold-price environment is enough for us to stay interested. Buy. 

Last IC View: Buy, 14p, 13 Sep 2023