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SIMON BROWN: I'm speaking with Kobus Loots, CEO of Pan African Resources. Year-end results in June. Production up 6.2%, revenue up 16.8%, EPS up 32.1% and a dividend of 22 cents. That's a dividend in ZAR.
Kobus, I appreciate your time. We are seeing a lot of cost pressure in the mining industry around the world. You have largely managed to contain that. Your overall sustained cost growth was a little bit higher than expected, but you highlight that this is really at the heart of Pan-African Resources in many ways – that you can mine 140-year-old mines in Barberton, but you need to do it with a tight eye on costs.
KOBUS CATCH: Yes, Simon, we are quite pleased with the results for the year and, as you said, the teams have certainly done a very good job of managing costs and will continue to do so.
In fact, what is a huge positive for Pan African is our surface re-mining business. Elihulu is our flagship and we will be producing $1,000/oz there, or a little bit more.
And of course, we are in the process of commissioning Mintails, our new project, and we are budgeting for less than $1,000 an ounce overall on sustaining. South African miners are generally known for being expensive. That is not the case with Pan-African. We can compete very well with international companies on cost. So that is great for us.
SIMON BROWN: Yes. Gold is $2,500/oz right now. That's great, but we don't know where gold will be in a year or a decade. That's really [about] Positioning the operation is almost independent of the gold price. If it's $2,500/oz, that's great, but if it's $1,500/oz, you still need to be profitable.
KOBUS CATCH: It looks like there are still tailwinds for gold. With interest rates said to be coming down and obviously all the uncertainty in the world, we are definitely not looking at $2,500/oz gold. We are running our models at $2,000/oz or lower and… with our business.
Another thing is that our assets have such a long service life that they will serve for many, many more years.
SIMON BROWN: I want to touch on this. I dug into your Samrad [South African Mineral Resources Administration] compliance, but I'll get to that in a second. Net debt is noticeably higher, but I have a feeling this is a Mogale, Mintails project that's about to get going.
KOBUS CATCH: Yes, we are not particularly interested in debt, but for someone like Mintails, debt certainly makes sense. The R2.5 billion we have invested in this project over 14 months, at the current gold price, will pay for itself in two to three years. Mogale has a lifespan of over 20 years, so it is an exceptional project for Pan African.
SIMON BROWN: How's the Evander mine going? You've got a couple of ongoing projects there.
KOBUS CATCH: Obviously, Elihulu is running at full capacity, which is great. And then we've invested quite a bit in the underground, and the sub-vertical shaft has been a bit delayed. It's due to come on stream in September, and that pretty much doubles our hoisting capacity at Evander, so we're very excited about the future of the underground at Evander. Obviously, we're mining [the] At the moment it is shaft No. 8, but there are also huge opportunities in shaft No. 7, namely the Egoli project, which we will talk about in due course.
SIMON BROWN: Evander is an old mine and you seem to keep finding more and more stuff that you can get out of it, as does Barberton. It's a 140 year old mine. Barberton is probably one of the oldest mines in the country. Is it explored? Do you have Samrec [SA Mineral Resources Reporting code] about 30 million ounces. Is there anything else you haven't gotten to yet?
KOBUS CATCH: There is huge potential in the medium to long term, and this week we are just looking at some of the other projects in Evander. Some of these projects, if they were in other countries, we could list them on their own and they could be quite attractive. For us, it is a balance. We obviously need to reinvest in the business. We need to grow the business, which I think we are doing quite well. And then we need to continue to pay shareholders a return in the form of a sector-leading dividend. So it is a balance for us.
SIMON BROWN: I see your point. You are increasing the forecast to 215,000-225,000 ounces. As I said, I went and looked at your Samrec compliance. The gold resources are 30 million ounces. It is about not pumping everything at once. As you mentioned, with your Mintails, there is a cost, there is a good return. It is a balance between getting it out of the ground, profitability and upfront costs.
KOBUS CATCH: Yeah, 100 percent. Right now the market is giving you little or no value for optionality. That's okay, and we accept that, and that's why I think we're obviously very focused on the here and now, and we're very excited about the year ahead.
SIMON BROWN: We've seen a couple of deals around the world in gold mining. Are you looking at things like that at the moment or are you just saying you have enough time at the moment that you can work with. You don't need to do new deals – or are you looking at some, just in case?
KOBUS CATCH: Well, we continue to look at other assets, and I think that's a good discipline because you learn a little bit about your own portfolio as well. But we're in a very fortunate position where we have so much growth potential in our own business and portfolio that we don't have to go out and buy assets. That shows the life of our assets. The teams continue to innovate and come up with new ideas.
On the BTRP [Barberton Tailings Retreatment Plant]which is our first tailings dam, we had two years left, and now we've revisited the situation and extended the life of the tailings dam to seven years. That's great for us – limited capital and great cash flows for another seven years.
SIMON BROWN: And, as you say, work with what you have.
Let's leave it here. Kobus Loots, CEO of Pan-African Resources, I appreciate the early morning.
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