Pan African Resources thrives amid rising costs and stronger rand

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SIMON BROWN: I’m chatting with Cobus Loots, CEO of Pan African Resources, on the results for the six months ending December 2025. Revenue up 157%, Heps 511.7% higher, and a maiden interim dividend of 12 SA cents. Cobus, appreciate the time. Staggering numbers there, and we’ll delve into some of those.

But let’s touch first on the all-in sustaining cost – that is under pressure. Almost $200 above the top end of the range. What’s driving the costs higher?

COBUS LOOTS: Simon, I wouldn’t say that the costs are under pressure. The reasons for the overshoot were explained in that the rand is stronger. You can’t do much about that. The share price has increased massively so the staff, sort of from an option perspective, there needs to be some accruals. And then we would buy in some third-party material at a higher cost – but still great margins plus royalties that were higher as a result of the gold price. And 90% of our production came in at $1 700/oz. So the only bit of the portfolio that came in above that really was Sheba Consort at Barberton.

But compare that to the international sector – $1700 or $1800/oz is very competitive. It’s very much on par with the international average.

SIMON BROWN: And you say the very vast majority coming in at $1700/oz.

Let’s move to the good news. I mean, gold has been on an absolute tear. What was the average price you received during the period?

COBUS LOOTS: Simon, about $3 800/oz. So it’s still quite a bit less than the current spot. That, coupled with obviously forecast increased production – further increased production in H2 – should position us very nicely for the second half and then obviously also for full-year results.

SIMON BROWN: Here’s the question, to which I probably know the answer to. I know you just closed your hedge book a year ago. Gold is at, let’s call it, at $5 000/oz. It’s there or thereabouts. Any thoughts of hedging at current levels, or are you happy to – I was going to say take the risk, but I don’t know how much risk there is at a $5 000 gold price.

COBUS LOOTS: Simon, it’s a good question. And if one looks at the numbers in terms of hedging and the cash flows that you lock in, it’s incredibly attractive. But the feedback from most of our shareholders who buy Pan African [want?] to be exposed to the gold price and to be exposed to the production growth that we’ve been delivering. And as you say, I mean, at the end of this month we have no more debt. We are unhedged.

So, all things being equal, we should end the financial year with a really healthy cash balance – and that’s despite obviously a lot of additional growth. So it’s not our job to call the gold price; it’s our job to safely mine as much gold as sustainably as we can and increase production, which we’ve been doing. And at $1 700 or $1 800/oz all-in sustaining, we’re very competitive. And even if the gold price was to go down, we still have excellent margins.

SIMON BROWN: Yes, 100%. And to be clear, the hedge that you closed last year wasn’t locking in the gold price. It was around borrowings and the like. So 100%, I take your point. Shareholders want that exposure.

You mentioned the balance sheet. Debt was down to $46 billion. As you say, it will now be gone. You’ve declared a maiden interim dividend. There is very, very strong cash generation. At these levels, even at the $3 800/oz level, never mind the $5 000/oz, there is massive cash generation and opportunity here.

You’re doing some feasibility studies here, you are looking to expand some operations, perhaps Australia, the Soweto cluster as well.

COBUS LOOTS: Simon, we’ve given a very clear growth path for Australia. We could not have bought this asset at a better time, even if we’d had a crystal ball. And we’re going to do about 50-odd thousand ounces – say 40/60/50 thousand ounces we expect for this full year.

But then we’ve mapped our growth to 100 000 ounces over the next three years, and that excludes any additional production from our Warrego copper-gold project. Obviously, copper is also flavour of the day, but our focus is very much gold. So yes, that’s one very exciting growth opportunity – or initiative, rather.

And then we’ve, as you say, mapped out a couple of others. We’re going to start slowly developing the Royal Sheba ore body here at Barberton. It is low grade for Barberton. Anywhere else in the world that would be very attractive, mechanised, quite big – 700 000oz sitting there. So we’ve started developing Royal Sheba.

And then also looking at the Soweto cluster, which is part of MTR [Mogale Tailings Retreatment], MTR has been one of the most successful projects in South African mining over the last years – so that’s quite exciting.

And then looking at longer-dated projects such as a Poplar at Evander, it’s six million ounces at seven grams a tonne. It’s a staggering deposit.

SIMON BROWN: Wow, that is huge. You mentioned copper there. You’re getting a fair bit of copper out of the Australian operations but, to be clear, the copper price is doing great as well. But for you it’s like a side hustle. It’s not a focus by any stretch. It’s a by-product from mining the gold.

COBUS LOOTS: No. At this point Pan African is a pure gold play, and that’s the way which we attempt to keep it, other than growing the likes of a Warrego. But even that project by itself has standalone, attractive gold grades.

SIMON BROWN: You mentioned Evander there. There has been strong production, as you say, across all the different divisions. Evander is the most notable turnaround. That really is working nicely.

COBUS LOOTS: It is starting to come together. It is really a quality ore body. The B-Line we are mining on 24 level; if you see the Kimberley Reef, it’s really impressive. It’s not the easiest of assets. We’ve invested a lot of time and capital, but it’s a long-life asset. The Evander basin out of all the Wits Basin is probably the least exploited, and it still presents a lot of opportunity.

SIMON BROWN: And much of this expansion – you have touched on the fact that your balance sheet is going to be completely ungeared – is happening from cash flows; so it’s not, in other words, sort of risking the business. You do expansion. If gold was to completely collapse, you could put it on care and maintenance and it wouldn’t sort of threaten the operations more broadly.

COBUS LOOTS: Well, I hope I never live to regret this statement, but I’d be very surprised if we ever saw gold collapsing anywhere close to our all-in sustaining costs. And because we’ve been spending such a lot of capital, investing so heavily in the business, we can also sustain a bit of a downturn if we have to. If you look at our low-cost production, the likes of Elikhulu, MTR  and Australia longer term, we’re sitting at $1 400 all-in sustaining. That’s world-class.

SIMON BROWN: And to be clear, gold is currently $1 200 above what you received for the period. So the full-year numbers are going to be staggering as we go forward.

We’ll leave it there. Cobus, Loots, CEO of Pan African resources, appreciate the time.

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