PAN African Resources on Tuesday announced the $54.2m acquisition of Tennant Consolidated Mining Group, a privately held company in Australia that owns the Nobles Gold Project, scoped to produce 50,000 ounces a year.
“TCMG 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,” said Cobus Loots, CEO of Pan African in an announcement to the JSE.
Initial capital development of $35.7m has been estimated for the project taking Pan African’s total investment to $90.2m or about R1.6bn.
“This takes us close to 300,000 oz a year in production in four operating complexes (Barberton and Evander in Mpumalanga and the recently commissioned Mintails, west of Johannesburg” said Loots in an interview.
“Nobles has a three year payback, which is our sweet spot, in a tier one district. We will also keep the existing management team in place,” he said
The deal will be paid for in about 120 million shares at a 30 day volume weighted average price, equal to about 6% of Pan African’s current market capitalisation. Shareholders will be asked to approve the issue of shares, said Loots.
Shares in Pan African have almost doubled in value this year as the company has brought production growth into play just as the metal’s price has kicked on, bursting through more than 30 new all time records this year. According to some banks, bullion could reach $3,000 to $3,100/oz during 2025.
The fact Pan African is using shares also keeps its powder dry for the possible doubling up of Mintails, the 50,000 oz/year gold tailings project, although no decision has been made.
The Nobles Gold Project, which is based on a resource mined as far back as the Eighties, consists of an open cast mine and tailings – in a one third to two thirds ratio – at an all in sustaining cost of $1,300/oz.
The deposit once hosted Australia’s largest open pit mine with among some of the country’s highest grades. The current average grade is estimated at three grams per ton increasing to 15g/t in parts of the resource.
There is potential for underground mining while a feasibility study into a copper/gold expansion would also be progressed. The upside in this respect is significant: TCMG thinks there is 10,000 to 15,000 tons of copper over a mine life of 10 years.
“These opportunities don’t come along very often. This is too small for the majors and too large for smaller companies,” said Loots. “We’ve been looking throughout Africa for a new opportunity without finding anything that suited us.
“The other thing about this is that it’s a privately held company owned by private equity that is looking for an exit. So we aren’t paying a massive premium on a listed company.”
Pan African has also decided to shelve its exploration foray into Sudan, some two-and-a-half years after announcing a $7m drilling programme there. “We are not going to put more money into that region at this stage,” said Loots. While “the book hasn’t been closed” on Sudan, the civil war in the country weakened its investment case.
