Pan African Resources ups H2 production guidance and reports significant progress at Phoenix Platinu

Pan African Resources (AIM: PAF, JSE: PAN) has raised its production forecast for the second half of the current financial year. The company’s Barberton mines in South Africa are now expected to produce 97,000 ounces of gold - 318,000 tons at a head grade of 10.40 grams per tonne - for the full financial year 2010, with cash costs below ZAR165,000 (approx US$22,500) per kg.

The increased forecast has resulted from the impact of new security measures (reported in February) which have reduced illegal mining activities, together with a renewed focus on mineral resources management and productivity initiatives.

Pan African Resources said that it continues to focus on reducing the cost of additional security measures, consumables and electricity usage.

Additionally, Pan African Resources reported significant progress in terms of the development of the Phoenix Platinum Chromite Tailings Retreatment Plant (CTRP) in association with International Ferro Metals (LSE: IFL) (IFM). In February, the companies announced the signing of an exclusivity agreement to allow the construction of the plant.

Pan African’s subsidiary Phoenix Platinum intends to build the plant at IFM’s Lesedi operations to extract platinum group metals (PGM) from historic chrome tailings.  IFM also holds a 25% Net Profit Interest (NPI) on the PGM contained in the tailings at Lesedi.

Under the terms of the deal, Pan African will have the right to build the CTRP on the IFM mine property, in north-west South Africa, and it will acquire the 25% Net Profit Interest (NPI) held by IFM in respect of the Platinum Group Metals contained in the IFM Lesedi operations tailings for ZAR80 million - payable in three tranches.

Pan African will pay ZAR25 million (approx £2.2m) on conclusion of the ‘formal agreement’, a further ZAR25 million on commencement of the construction phase and finally ZAR30 million (approx £2.7m) upon commissioning of the CTRP.

Today, the company stated that the site for the CTRP was agreed with IFM on 31 March 2010, and it is now finalising specific detail relating to the infrastructure and services requirements ahead of the construction phase of the CTRP project.

This is expected to be completed by the end of April 2010.  Subsequently, detailed engineering design work will be undertaken and the parties will conclude the formal agreement - at which point the first tranche of ZAR25 million (approx £2.2m) will become payable.

The CTRP construction is anticipated to commence during June 2010 and first production is expected in the second half of calendar year 2011.

Once operational, the CTRP will provide Pan African with approximately 15,000 ounces per annum of four platinum group elements - platinum 56.5%, palladium 27%, rhodium 16% and gold 0.5%. The CTRP project has an expected life of 17 years.

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