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The saying, ‘one man’s rags are another man’s riches’ couldn’t be more true for precious metals producer Pan African Resources. Its acquisition of Harmony Gold subsidiary Evander Gold Mines, now unconditional, is the perfect example, writes Laura Cornish.

On 28 February 2013, Pan African Resources (PAR) took control of the subsidiary – nine months after the R1.5 billion deal was first announced. The deal encompasses all the operational and non-operational Evander shafts, its process plant and all tailings material.

While the Free State-based, semi-deep level gold mines at comfortably in Harmony’s portfolio for years and was a significant cash contributor to the group, the company’s cash interests today lie with new (Wafi-Golpu) and priority projects. “Under the Harmony umbrella, Evander’s future was questionable, under ours it will prosper. The mine needs an owner that can invest heavily in its future and ensure its long-term (brownfield) potential will be realised,” says Jan Nelson, PAR CEO.

“We are delighted to finally take full control of the mine,” Nelson continues, “A world-class ore body with an exceptional team of people will ensure that Pan African continues to deliver profitable, sustainable stakeholder growth. In addition to its 100 000 oz of annual gold production, Evander provides Pan African with a healthy project pipeline that provides for significant growth possibilities and flexibility,” he continues.

All cash and profits generated by Evander from 1 April 2012 onwards go to PAR.“For a company of our size, averaging about 115 000 ozpa of gold, Evander immediately almost doubles our yearly output to 215 000 ozpa and removes the risks associated with being a single mine operator. It also increases our employee head count increase from 2 000 to 5 000.”

The mine also increases the PAR’s reserve base dramatically, from 1 to 9 Moz at a grade of 7.7 g/t, and increases its overall resource base from 3 to 35 Moz at a grade of 8.16 g/t. “But it is the mine’s brownfield potential that excites us the most.”

In the short to medium term

“The upfront focus is to increase the grade and reduce the operating costs at Evander’s single operating No 8 Shaft,” Nelson explains. This will be achieved if PAR successfully implements a mining model that sees a split between reef and waste. This should take about 24 months to achieve, Nelson notes. The entire 100 000 ozpa production from Evander is delivered via this single shaft, which alone has another 10 operational years left.

One of the most exciting prospects lies not in the mine itself, but in its tailings. There is approximately 203 Mt of tailings material on site, which PAR has started evaluating internally.“We are aiming to make a decision on how to maximise on the potential opportunities the tailings may offer within the next 12 months. We have already redefined its purpose by changing its name from Harmony’s Mini Libra to the Evander Tailings Reclamation Project (ETRP). We believe a plant capable of processing around 240 000 tpmat a grade of no more than 0.4 g/t is a definite possibility.”

Over the past two years, PAR’s tailings reprocessing expertise has risen substantially, following the successful delivery of its Phoenix platinum-recovery-from-chrome project and the imminent start-up of its Barberton Tailings Reclamation Plant project. Considering this project has a healthy and sustainable future on the back of just 12 Mt, the potential for Evander’s tailings is enormous.

In the medium to long term

No 7 Shaft has all the necessary infrastructure for mining, but the shaft is closed and has consequently flooded. “We will consider reopening some of the old mining sections and we need to determine where the reef lies, but this is something we will look at further down the line.

“No 9 Shaft is currently on care and maintenance. It is lower in grade, but we will evaluate the viability of reopening this shaft as well.”

Evander South and Poplar require a pre-feasibility study to determine how best to develop them. “The two projects comprise a 15 Moz resource and could deliver up to 200 000 ozpa, but require a strategic partner to help fund their development. PAR is already engaging with Chinese investors about possible partnerships for the projects.”

Rolspruit, an extension of No 8 Shaft, is a high-grade operation (14 g/t) starting at depths of about 2 800 m. The ore body has been drilled and contains 10 Moz.

Evander’s final contribution to Harmony

Evander’s generated production profit, as published by Harmony, for the full year ended 30 June 2012was£52 million (R711.88 million), before tax and other charges, up from £16.7 million for the previous year. This was mainly the result of Harmony investing approximately £21 million to upgrade and improvethe underground rock handling and ventilation infrastructure at the mine.

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