Pan African Resources has announced plans to suspend its underground operations at the Evander gold mine in South Africa as a result of continued operational losses and the prevailing weak rand gold price.
The initiative follows the conclusion of a consultation process with the stakeholders of the mine and is expected to result in around 1,700 redundancies by the end of this month.
The results of a review led the company to determine that it would not be possible to continue underground mining operations on a sustainable and profitable basis.
Pan African Resources CEO Cobus Loots said: “The decision to cease mining from Evander Mines’ underground operations was not taken lightly, particularly given the socio-economic conditions prevailing in the country and the impact on a large number of our employees.
“All South African gold producers have been adversely affected by the recent strengthening of the rand, and it is imperative that we act decisively to ensure the future of our group and stakeholders that rely on our operations.
“Post the cessation of Evander’s current underground mining operations, the balance of the group’s production ounces will be low-cost and cash-flow positive, which will ensure the sustainability and profitability of the group in the prevailing low rand gold price environment.”
The retrenchment will cost an estimated R160m ($12.64m), which is set to be funded via the group’s existing debt facilities.
Pan African is also finalising an additional standby facility of roughly R100m ($7.9m) in an effort to arrange funds for working capital, as well as funding requirements relating to operations and growth projects.
The company claims that affected workers will most likely be absorbed into new, lower-cost operations at Evander, in addition to post-closure environmental rehabilitation works following the provision of reskilling opportunities.
Pan African has also revised its production guidance for this year to between 156,000oz and 158,000oz of gold as a result of the cessation of underground operations.