South African gold miner, Pan African Resources has increased its stake in Tennant Consolidated Mining Group in Australia by 92%, bringing its total acquisition consideration for the transaction to $54.2 million whilst it has suspended its exploration activities in Sudan.
Pan African Resources CEO Cobus Loots said recently that South Africa’s mining sector investment climate has improved, highlighting that the company was set to benefit from years of investment into alternative electricity, which would lower costs. Investing in the Australian company will help spread its portfolio and geographical risks as it looks forward to accrue returns for the latest acquisition in the next three years.
“Payback of initial capital investment is expected in less than three years at an average gold price of approximately $2,600/oz, with the base case financial model also demonstrating returns in line with group’s requirement of 20% per annum,” said the company in a statement.
The acquisition has been consummated as an all scrip acquisition of 92% of Tennant Consolidated Mining Group. Pan African had acquired an initial 8% in the Australian firm earlier this year, and now wholly controls it.
After an initial cash investment of $3.4m for the 8% stake in March this year, Pan African Resources will now issue shares valued at $50.8m in the SA gold producer to attain full control of the Australian company.
The current “consideration constitutes less than 6% of Pan African Resources’ current issued share capital,” it said.
Loots explained that Pan African has “been assessing the Tennant portfolio for almost a year,” adding that the company was “confident that this acquisition complements our strategy of focusing on safe, low-cost gold mining opportunities, with the potential to further grow our business by developing projects that meet our stringent investment criteria.”
“Tennant represents an opportunity to further expand and diversify our near-term low-cost production base and the next phase in the growth trajectory of the Group, in a Tier 1 mining jurisdiction,” he said.
Pan African has been forced to stop exploration activities in conflict-ridden Sudan. The company said “given the ongoing political unrest prevailing in Sudan, the decision has been taken to suspend exploration activities in Sudan’s Red Sea state.”
“All of the group’s assets will be safeguarded and a notice of force majeure has been issued to the Sudanese Mineral Resources Company in order to maintain the validity of the exploration concessions.”
For the year to June 2024, Pan African Resources raised gold production 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.
BUSINESS REPORT
