Pan African hit with R320m opportunity cost on runaway gold
PAN African Resources is to report a decrease in interim headline share earnings owing to less gold sold in the six months, although production was set to be within its guided range in December of about 87,581 ounces.In a trading statement that negatively surprised the market, the South African gold miner also reported a $17.4m opportunity cost after the spot gold price far exceeded a gold hedge which it has in place for 25% of total gold production.The opportunity cost of the hedge in the previous reporting period was $1.7m – a different way of viewing the historic acceleration in the gold price.Shares in the gold miner fell just under 7% in Johannesburg reining in continued gains this year. The stock has gained 10% since January 1 after ending 2024 about 106% higher.BMO Capital Markets analyst Ray Ray described the update as “an earnings miss” although it said the impact would be “slight”.Interim share earnings would be between $1.09 to $1.31 compared to the bank’s $2.06 per share estimate. “The lower earnings relative to our estimate is driven by lower gold ounces sold of 79.900 oz” which compares to BMO’s estimate of 89,600 oz, he said.Commenting on the impact of the hedge, Pan African said the period under review would be the last where forward sales were a major factor because the contract would be fulfilled by end-February.After that, Pan African would “fully benefit” from the spot price calculated to be 21% higher at the current dollar spot price than the average price received in the reporting period. In rand terms, the spot price is 24% higher than the reported period.The current year is a big one for Pan African as it ramps up production from its Mintails operation, west of Johannesburg while it would also register first production from Tennant, a mine in Australia it bought last year.Inaugural production from the Nobles Gold Project was estimated to be 48,000 to 60,000 oz this year. Given the start-up of Nobles, formerly shuttered, as well as ramp-up from Mintails, full year gold production would be weighted towards the back half of the year.Pan African said previously it expected to grow output by 16% to about 215,000 oz of gold in its current financial year (ended June) at the lower end of previous guidance, but with a substantial uplift to between 235,000 and 250,000 oz in its 2026 financial year.Production from Nobles Gold Project, scoped to produce 50,000 ounces a year, follows the $54.2m acquisition in November of Tennant Consolidated Mining Group, a privately held company in Australia. Initial capital development of $35.7m has been estimated for the project taking Pan African’s total investment to $90.2m.The post Pan African hit with R320m opportunity cost on runaway gold appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com
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