Gold’s Safe Haven Status Has Returned – Pan African

JOHANNESBURG – The safe haven status of gold appears to have returned for the time being.

“The world is increasingly an unstable place. Project one world, or globalisation, seems to have failed,” Pan African CEO Cobus Loots said on Wednesday when the London Aim- and JSE-listed gold mining company reported group after-tax profit of $38-million in the 12 months to June 30, a sharp turnaround from last year’s after-tax loss of $122.8-million.

“Governments are printing too much money. Currency devaluation is increasingly a theme,” he added to investors and analysts at a results presentation covered by Mining Weekly Online. (Also watch attached Creamer Media video.)

“We have a saying that, in general, gold mining is an industry with long cold winters and short but very beautiful summers,” said Loots, who described the gold price at $1 500/oz as attractive and the gold price at R700 000/kg even more so.

Gold’s role in a balanced portfolio was now a question of choosing to invest in quality producers or in physical gold but the reality was that physical gold was unable to multiply.

While one Krugerrand would remain one Krugerrand, producers like Pan African could bring resources to account as quality, profitable and incremental production ounces.

Also, a 20% increase in the gold price could result in much larger profits for the producer.

Some of South Africa’s positives were its 130-year gold mining history with local production of gold taking place since 1886.

Well-established infrastructure facilitated travel to Pan African’s mines in Evander and Barberton in a matter of hours and in the event of breakdown, technical support was available to set things right, which was not the case in the rest of Africa.

Despite many perceptions to the contrary, there are many good, skilled and committed people in government, which was reflected in the definite decrease in unnecessary Section 54 stoppages by the Department of Mineral Resources and Energy and commendable assistance from government officials during operational challenges.

Recently, after many frustrating years, there seems to be a real realisation from government that unnecessary bureaucratic impediments cost jobs and growth.

He emphasised the sophisticated nature of South Africa’s financial sector and disclosed that all Pan African financial dealings were currently with South African banks, which assisted the company with funding value accretive growth.

“I have to say our banks can sharpen pencils a bit in terms of the cost of our funding, specifically in this gold price environment, but otherwise they are supportive partners,” Loots said.

He described South Africa’s Constitution as world class and the legal system as well functioning.

Pan African was continuing to up its game when it came to community engagement and the company was having a massive positive impact in the areas in which it was operating.

The company had great engineering teams and would continue to invest in that asset.

The country needed to better resolve the issues around Mining Charter III and, unlike some other mining companies, Pan Africa did not have to rely solely on “once-empowered” and was currently 26% empowered at group level.

When it came to electricity, the company would soon be finalising a study for a 10 MVA solar plant at the new Elikhulu tailings retreatment plant.

Security had become a core specialised function for Pan African, which was having to contend with increased illegal mining.

If the company had not spent more on security during the year, its Barberton operation would have been overrun, in similar fashion to what happened in 2009.

“At the moment we’re arresting 250 illegal miners a month,” Loots said.

The illegal miners were not only from South Africa, but also from neighbouring countries.

“It’s a worrying trend and something that we’re certainly paying a lot of attention to,” Loots added. While the list of challenges appeared daunting, for the most part the company had equipped itself to manage the issues.