Pan African warns on Manica gold
Allan Seccombe
Posted: Mon, 14 Apr 2008
miningmx.com
[miningmx.com] -- PAN African Resources will know within two months if it will go ahead with its Manica gold project in Mozambique as it moves ahead with exploring two large prospects in Central African Republic, said CEO Jan Nelson.
Pan African is most likely to make an acquisition or two to reach its stated production target of 500,000 oz in five years, he said, despite a pipeline of some eight potential projects within the JSE and AIM- and AltX-traded company.
Pan African, which is 55% held by South African diversified miner Metorex, will release a mine optimisation study as part of its pre-feasibility study into the Manica greenstone project within the next two months.
“We are upbeat about Manica, but if the mining optimisation comes back and it doesn’t look good we are not going to force it into production just for the sake of it,” Nelson told Miningmx in a telephonic interview.
Pan African would ideally like to see a 70,000 to 100,000 oz/year mine with a minimum life of five years for it to sink $100m into the Manica project. If the optimisation study shows less, the trigger on the project is unlikely to be pulled.
The ore body is narrow and vertical, but with a relatively good grade. Pan African has committed to bringing out a pre-feasibility study this quarter.
“I’m not being negative about it, but if the economic parameters for Manica don’t have a proper margin we are happy with and it doesn’t make a good profit for us, we won’t force it into production,” he said. “We’ll know in the next month or two.”
The planning for Manica is taking into account average longer-term gold prices of $550/oz and $600 against current prices close to $910.
“The next step Pan African takes -- whatever acquisition we make or project we put into production -- will determine the success of the company,” Nelson said.
“If do something foolish, by putting something into production or buying something that doesn’t make money, will in effect destroy the company. We are being very cautious about the next step we take.”
Pan African’s shares on the JSE were last traded at 110 cents, well below the year-high of 355 cents in October last year. This is despite gold prices pushing to record highs above $1,000/oz in March.
Included in the prospect pipeline are two exploration plays in Central African Republic, where Pan Africa is in a joint venture called CARGold with Mike Nunn’s Amari Holdings. Nunn is best remembered for founding and leading Tanzanite One and other diamond companies.
CARGold will spend $3m in 2008 drilling targets at the Bogoin prospect with two reverse circulation drills to build up an inferred resource over the next four months.
If the drilling proves up what the partners hope is a sound deposit, they will most likely bring in more drills for the Dekoa prospect some 150km away. If not, a drill will be moved to Dekoa, for which the partners have signed a mining convention with the CAR government.
At best, a mining project in CAR is three to four years away, pending a pre-feasibility and a bankable feasibility study. The objective is to define a three million oz target to make the political risk worthwhile.
Pan African has enough capital to take the Manica project to the end of a bankable study, but would need to return to the market to fund a mine there or make an acquisition, Nelson said.
The Barberton greenstone mine in South Africa produces around 100,000 oz of gold a year, Manica, if all goes well, could produce between 70,000 and 100,000 oz a year from early 2010.
“The 300,000 oz we’re short, we’d need to get the balance through acquisitions. We are looking at a lot of junior companies, which are explorers not miners and we are looking to form partnerships with them,” Nelson said.
There are also two advanced Ghana exploration plays within the group. Pan African is also busy with exploration projects at the Barberton mine and should know in a couple of weeks which targets it is going to look at more closely. |
