Pan African Resources’ gold production will likely top 250 000 ounces a year, starting in 2026, said analysts at Edison Investment Research on Friday, adding that normalised headline earnings per share in the company were set to surpass 7 cents per share.
For the year to June 2024, Pan African Resources raised bullion output by 6.2% to 186 039 ounces, while it has projected that production will rise to between 215 000 ounces and 225 000 ounces in its current year. This is premised on expected increases in production, largely attributable to a stronger contribution from the new MTR project, although analysts at Edison see a much higher production profile for the company in 2026.
“We forecast that group production at Pan African will reach 250 000 ounces per year in 2026, and push normalised HEPS to beyond 7.00c per share,” said Edison Investment Research analysts in a research note on Friday.
While the company has held its dividends at R0.18 per share in the past, in the year to June 2024, Pan African declared a dividend of R0.22 per share. Edison analysts believe that “the possibility exists for materially increased dividend payouts as production increases, operating costs flatten and capital expenditure falls” away.
“We believe that materially increased dividend payouts are possible in the coming years. We calculate that PAF would almost certainly have the second-highest dividend yield of the 62 precious metals mining companies expected to pay dividends to shareholders globally over the next 12–24 months,” said the analysts in a research note.
They also see Pan African’s current share price, which fell 1.95% on Friday to R7.56, as “discounting” its normalised HEPS. Nonetheless, Pan African Resources is also viewed as “cheaper than its principal London- and South African-listed gold mining” peers.
Negative impacts to the company’s production, earnings and dividend outlook, however, could emanate from the delay in the commissioning of Evander Mines’ sub-vertical shaft, which could impact guidance by approximately 5 000 ounces. Nonetheless, the shaft was scheduled for commissioning this month.
In the year to June 2024, the delay in commissioning of Evander Mines’ sub-vertical hoisting shaft negatively impacted unit costs, said the company.
All-in sustaining costs for Pan African Resources’ lower-cost operations, which account for more than 84% of its total annual production, amounted to $1 170 per ounce.
Pan African was also progressing with commissioning of the MTR project, with steady-state production expected by the end of this year.
“This $135.1m project is expected to be delivered under budget and ahead of schedule. The Barberton Tailings Retreatment Plant’s (BTRP) life of mine has been extended to seven years (previously two years), following a successful internal project to reassess feedstock sources, further enhancing the Group’s high-margin, long-life surface remining operations,” the company said earlier.
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