Old mines and wasted gold energy rises 90% in pan-African stocks

(Bloomberg) — South Africa’s top-performing miner this year is challenging the country’s contemporary reputation for producing more expensive, lower-quality gold.

Most read from Bloomberg

Pan African Resources Plc extracts the precious metal from waste dumps, known as tailings, left over from decades of mining when South Africa was the world’s largest gold producer. It also operates century-old underground passages around Barberton, site of the country’s first gold rush in the 1880s.

The stock has risen 94% in Johannesburg this year, hitting a record high this month. This represents more than three times the return of the second-best miner, Harmony Gold Mining Co. Ltd. It rose by a similar amount in London, where it is listed on the Alternative Investment Market.

The price of gold, which has broken record after record — rising 27% since the beginning of the year and reaching an all-time high of $2,790.10 an ounce on October 31 — has helped. Larger players have not scaled the same heights, partly due to higher operating costs and weak production across large-scale global assets, offsetting the windfall of higher prices.

Pan African, which produced a relatively modest 186,000 ounces of the metal in 2023, has bolstered its portfolio of traditional deep mines with less expensive surface operations that address old tailings sites and will account for nearly half of production within a few years.

“We can do what would be difficult for big companies to do, which is to increase production – and low-cost production – significantly,” Kobus Lutz, Pan-Africa CEO, said in an interview. The company’s third tailings project, Mintails, which is being ramped up, will provide an additional 50,000 to 60,000 ounces annually, he said. “I think the market is very excited about it.”

The miner’s “higher production volumes and lower costs” make it attractive compared to peers and insulate it from a lower gold price, according to Allan Gray Ltd, a Cape Town-based fund manager that increased its stake in Pan African to more than 17% in the quarter ended. in September, making it the largest equity holder, according to data compiled by Bloomberg.

“I don’t think the market has fully captured the cash flow that Pan African will generate once Mintails is up and running,” said Sean Muncy, portfolio manager at Allan Gray.

New raw bodies

Pan African has owned the Barberton complex – three mines located 300 kilometers east of Johannesburg that have produced more than 8 million ounces of gold over nearly a century and a half – since 2007. The main operation, Fairview, remains Two decades in the mining field. The company hopes to prolong this by deploying modern technology to find new ore bodies, according to Lutz. The company also extended the life of Evander, the company’s other underground asset acquired from Harmony Gold Mining Co. Ltd. 12 years ago.

The story continues