Next Wednesday, 11th September, Pan African Resources (LON:PAR) will be declaring its 2024 Final Results for the year to end-June, they should be very good, showing at least a 50% increase in pre-tax profits.
It has helped that the price of gold has been on the rise over the last few years – the recent strong push will show through forcefully in the current year to end-June 2025.
A year ago, the £541m capitalised group’s shares were trading at around 12.50p, they are now 29p and looking capable of an even further rise in due course.
The Business
The group is a mid-tier African-focused gold producer, with a production capacity in excess of 200,000oz of gold per annum.
The company is a unique combination of underground and surface mining, owning and operating a portfolio of high-quality, low-cost operations and projects.
From new retreatment and infrastructure plants to underground expansions, the group boasts of a proven record of bringing new operations online on-time and in-budget.
It has four major producing precious metals assets in South Africa: Barberton (target output 95koz Au pa), the Barberton Tailings Retreatment Project, or BTRP (20koz), Elikhulu (55koz) and Evander underground, incorporating Egoli (currently 30koz, rising to >100koz).
With over 12m oz of Gold Reserves and 40m oz of Gold Resources, Pan African’s unique portfolio mix presents significant upside potential for many years to come.
Its Mining rights in Barberton are valid until May 2051 and at Evander until April 2038.
It also has interests North-West of Port Sudan, where it is assessing five exciting prospects that have yielded promising samples.
The group has succeeded in maintaining its gold production levels while simultaneously lowering all-in-sustaining costs for improved operating margins.
For investors, that means a capital-efficient, optimally run portfolio of African mines geared for exceptional investment returns.
Latest Operational Update (29th July)
For the year to end-June 2024, the group’s production of 186,039oz (175,209oz) was within guidance and increased by 6.2% year-on-year.
The average achieved gold price for the year was $2,021/oz, which will be noted as the highest on record for the group.
The group’s all-in sustaining costs for the year was around $1,350/oz.
CEO Cobus Loots stated that:
“We are pleased that the Group has again delivered into its production guidance, while further improving safety rates and maintaining its industry leading safety performance during the 2024 financial year.
The surface tailings retreatment operations at Elikhulu and the BTRP performed exceptionally well, with some of the lowest all-in sustaining production costs in Southern Africa.
The Group is poised to deliver another world class tailings retreatment operation ahead of schedule and below budget in the coming months with the MTR Project.
Barberton Mines has seen a steady improvement in gold production, with planned optimisation initiatives to increase ore tonnages expected to further bolster gold production in the next financial year.
Commissioning of the ventilation shaft hoisting system at Evander underground during the start of the 2025 financial year, will substantially improve efficiencies and reduce reliance on the cumbersome conveyor system currently in use, vastly improving this operation’s production profile and facilitate the 25-26 Level project’s development.
We look forward to presenting our 2024 year-end financial results in September, and to provide further details on developments at our operations and exciting pipeline of growth projects that will significantly increase the Group’s total annual gold production in FY2025.”
Analyst Views
After next week’s results announcement, it will be interesting to see the latest analyst opinions as to the group’s value and their Price Objectives.
Following the recent Update, Charles Gibson at Edison Investment Research, increased his estimates for the current year, reflecting the higher gold price.
He now has a 52.31p valuation out on the group’s shares.
His estimates for the year to end-June 2024 are for revenues of $390.7m ($321.6m), lifting pre-tax profits to $142.0m ($92.9m), earnings of 5.72c (3.54c) and a slightly higher dividend of 0.98c (0.95c) per share.
For the current year, he looks for $473.9m revenues, $211.4m profits, 8.02c earnings and a maintained 0.98c dividend per share.
In My View
With the Finals due on Wednesday next week, there should be some positive reaction to the figures.
Sentiment remains strong aligned with the price of gold – and look at those estimates of $2021 per ounce achieved, against a production cost of just $1,350 per ounce – the sums look extremely attractive.
Gold continues to edge higher, as does the group’s production.
At 29p the shares offer attractive upside prospects.