Pamodzi Gold (JSE:PZG) will focus on fixing its newly acquired President Steyn and Orkney gold mines in South Africa to boost its gold production to 373,000 ounces of gold in 2008. The aggressive JSE-listed junior gold company, envisaging a second foreign listing in future, plans to transform President Steyn to the star and Anglo flagship it had once been.
The company's chief operating officer Tony Murdoch Eaton said today that Pamodzi Gold would transform these under-utilised assets in the North West province over the next few months, similar to the work it has done on its East Rand assets over the past year.
Murdoch Eaton said the company had achieved excellent results on the East Rand over the last quarter ending 31 March, with only a 4.9% decrease in gold production, despite the impact of the Christmas break and power cuts during this period. Pamodzi achieved gold production of 491.27kg from its East Rand underground operations in the March 2008 quarter compared to a quarterly average of 489.83kg in 2007.
The COO said the Pamodzi culture which emphasised safety and a back-to-basics approach, has had a sterling impact on the company's East Rand operations where shaft call factors were improving and face length was increasing as a result of development work done here.
Pamodzi will now embark on implementing its turnaround strategy, including a shift from cost saving to profit making, at its new, stressed acquisitions. The company's strategy is to acquire non-core assets which did not receive required investment from previous owners and to turn them around.
Murdoch Eaton said the company was already giving attention to planning and budgetary control, environmental management and people and skills at the Orkney and President Steyn operations. Pamodzi recently acquired these assets from major Harmony Gold.
He said with a smile that everybody in the operation knew his seven P's philosophy of proper planning and preparation prevents p*** poor performance and gladly adhered to this line.
President Steyn was the new asset in the group that was in worst shape, but this mine had much potential as it had a large resource and good gold grades. In 2007, its underground grade averaged at 4.45g/t and grade at the surface was on average 1.11g/t.
Pamodzi had a large focus on infrastructure at this stressed asset and was investing to open a deeper area at the mine to produce an additional 3,000 ounces of gold every month.
President Steyn produced a monthly average of 9,300 ounces of gold from underground in 2007. This declined to a little over 4,000 ounces under Pamodzi's first period of ownership in March this year, but was the result of safety stoppages at two shafts.
Pamodzi plans to turn this operation around in three to six months.
There is no doubt that gold production is going to improve at President Steyn every quarter, said Murdoch Eaton.
He added that in terms of company growth, there was the potential to expand gold production at nine shaft by about 150,000 gold ounces. The company was currently conducting a feasibility study to this end.
Pamodzi Gold does face the challenge of raising $50m working capital to capitalise the company's new assets, but it is confident it will be able to raise the funds with its winning model and plans to make an announcement by the end of May this year.
The company plans to place Thistle's 11% shareholding in Pamodzi Gold at the end of the quarter, but has an understanding with Harmony and Kinross that want to retain their shareholding in the company for a period.
Kobus du Plooy, executive director of Pamodzi Gold, said President Steyn and Orkney mines will be in good shape in a few months and will solve the company's working capital issue. The share price will then automatically reflect higher value and that would provide the company with equity required for additional future acquisitions.
Murdoch Eaton said Pamodzi Gold was still pursuing its target of becoming a 1m ounce producer within 18 months and would look to its South African neighbours for growth after attaining internal growth.
*The company today re-opened the former North West shaft on the East Rand, which closed down in 1962 due to a harsh economic climate. Dubbed Ndlovu (elephant) by Pamodzi, the shaft will start production immediately and reach full production of 30,000t of ore per month by the end of 2009. The initial mine life extends to 2015.