Modern Mining January 2017

MINING News

Pan African approves Elikhulu tailings project

Pan African Resources, listed on the JSE and AIM, announced in December positive results from the independent Definitive Feasibility Study (DFS) for its Elikhulu tailings project. As a consequence, the company’s board of directors has approved the construction of the project, subject to finalisation of the project financ- ing package. Pan African says the DFS results indicate excellent recovered grades and gold pro- duction, attractive financial returns and a low execution risk, with the DFS results sur- passing expectations of previous technical and financial assessments of the project. The DFS was undertaken by DRA Projects. The planned commencement date of the project is January 2017, with first gold forecast for the final quarter of the 2018 calendar year and full commissioning in December 2018. Annual recoverable gold production of approximately 56 000 ounces is projected for Elikhulu’s initial eight years of opera- tions and 45 000 ounces of gold for the remaining five years thereafter. Optimal plant capacity for the project allows 12 Mt/a throughput. Current arisings and inferred gold resources could extend proj- ect life beyond the DFS estimated life of 13 years. The projected AISC over the life of Elikhulu is US$523/oz. Initial capital cost is forecast at approxi- mately R1,74 billion (US$119,9 million). The internal rate of return (IRR) (real, post-tax) is 23,1 %with a payback period of less than four years, based on an assumed gold price of US$1 180/oz. Pan African believes the experience gained in the construction and operation of the Barberton Tailings Retreatment Plant (BTRP) and the Evander Tailings Retreatment Plant (ETRP) positions it to successfully execute the construction and operation of Elikhulu. The project entails establishing facilities and infrastructure at Evander Gold Mining, owned and operated by Pan African, to re- treat gold plant tailings at a rate of 1 Mt/ month. This is in addition to the existing production from the ETRP which will con- tinue to operate independently for the next 13 years. Three existing tailings storage facilities will be reclaimed, in the following order: Kinross, Leslie and Winkelhaak. Post pro-

any capital allocation decision is our abil- ity to successfully execute the designated project and to generate the required returns over the investment horizon. The attractive returns already being earned on the capital invested in the BTRP and ETRP bear testimony to our previous success and will serve as invaluable experience in completing the project. “Elikhulu is expected to firmly establish Pan African as a leader in long-life, low- cost tailings retreatment, and possibly unlock other opportunities in the sector. We expect the project to reduce the Group and Evander cost profiles and generate robust cash flows and attractive returns for our shareholders.” 

cessing, these will be consolidated into a single enlarged Kinross tailings facil- ity, contributing to reducing Evander’s environmental footprint and associated environmental impact. Comments Cobus Loots, Pan African’s CEO: “We are pleased to announce the positive findings of the independent Definitive Feasibility Study. Operating low-cost tailings plants has become an important business for Pan African in recent years, and we now intend to pro- ceed with construction of the Elikhulu tailings retreatment project. This project is expected to materially enhance our Group’s production profile and support Pan African’s continued focus on low-cost, high-margin gold ounces. The sub- stantial capital investment required demonstrates our commitment to the South Africanmineral sector and our shared responsibility of creating employment and alleviating pov- erty in the Evander community. “Our primary consideration in

Mineral Reserve Estimation – All Probable TSF Name Tonnes (Mt) Au (g/t) Au (Moz) Kinross 47,0 0,31 0,47 Bracken/Leslie 70,1 0,32 0,71 Winkelhaak 70,0 0,24 0,55 Total 187,1 0,29 1,73

Scoping study completed on Lindi Jumbo Emerging African graphite producer Walkabout Resources, listed on the ASX, has announced the results of a scoping study for a proposed open-pit mine and graphite processing plant at the 70 % held Lindi Jumbo graphite project in south- eastern Tanzania. Project economics are highly robust as a result of the high grade nature of the project and the expected pre- mium natural flake graphite product, says the company.

feasibility studies conducted by other ASX companies developing graphite projects in Africa. The upside case model considered the increase of the initial production rate to 40 000 tonnes of graphite in concentrate per annum. The difference in processing capacity has already been built into the plant design and equipment sizing as a redundancy so minimal additional capital would be employed. This model has also been estimated in capex, working cost and life of mine production to an accuracy level of cost of ±25 %. Mining production rates are increased to 260 000 tonnes per annum or a very modest 21 500 tonnes per month. Key study outcomes include an oper- ating cost per tonne in concentrate estimated at US$290 to US$350 and a pre- production capex of approximately US$35 million to US$40 million with a payback period of less than two years. The base case pre-tax NPV 10 is estimated to be US$169 million for the 25 kt/a pro- duction option and US$304 million for the 40 kt/a production option. The pre-tax IRR estimate is 63 % for the base case and 97 % for the upside case. 

The base case employed during the scoping study was for the development of a mining and processing operation at Lindi Jumbo to produce an annual output of 25 000 tonnes per annum of four discrete products of graphite concentrate for sale FOB from the Port of Mtwara. Such a level of production would entail the milling of only 3 Mt over the 20-year life of mine, an average of only 150 000 tonnes per annum (12 500 tonnes per month). Although the project will potentially deliver a sought-after premium product with up to 85 % of the flake graphite in concentrate above 180 µm, the basket price used in the scoping study is up to 33 % less than prices used in bankable

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