Pan African Resources (LON: PAF, JSE: PAN) has unveiled its intention to acquire Tennant Consolidated Mining Group (TCMG), a transformative move that will grant the African-focused gold producer a significant presence in Australia’s Tennant Creek Gold Field. With a total transaction value of USD 54.2 million, Pan African’s acquisition promises to bring new energy and resources to one of Australia’s most historically productive gold regions. The transaction is expected to complete in December 2024, positioning TCMG as a wholly owned subsidiary of Pan African.
A Strong Strategic Fit
The acquisition represents a valuable diversification for Pan African, which has traditionally focused on high-margin, long-life surface re-mining operations across Africa. This move into the Northern Territory aligns with Pan African’s strategy to secure low-cost production from a Tier 1 jurisdiction. Pan African CEO Cobus Loots remarked on the synergy, highlighting that TCMG offers “near-term, low-risk production growth with significant exploration potential,” which is crucial for the company’s goal to expand its low-cost production base.
The Tennant Creek Gold Field, historically one of Australia’s richest, has produced over 5.5 million ounces of gold and 348,000 tonnes of copper. Through this acquisition, Pan African will take ownership of key assets in this prolific region, including Warrego, Nobles, and Juno—known for their high-grade deposits in an iron oxide copper-gold (IOCG) mineralisation style.
Tennant Creek’s Nobles Processing Facility: A Regional Game-Changer
The centrepiece of the acquisition is TCMG’s Nobles processing facility, currently under construction and slated to be the largest operating plant in the Tennant Creek region. Scheduled for commissioning in mid-2025, this carbon-in-leach (CIL) gold plant will have a processing capacity of 840,000 tonnes per annum, allowing for a production rate of approximately 50,000 ounces of gold annually at an all-in sustaining cost (AISC) of around USD 1,300 per ounce.
Nobles Nob Gold Mine Project (CreditL: DFC Outsourcing & Engineering Services)
The facility’s “hub and spoke” model is designed to streamline processing by feeding ore from multiple nearby deposits, creating operational efficiencies that will reduce capital outlay across smaller projects. Initial ore will come from surface stockpiles and tailings, providing a low-risk, near-term production base that will fuel the early years of operation. The facility is a critical asset for Pan African, providing a reliable platform for ramping up production and delivering consistent returns.
Exploration Upside and Growth Potential
Pan African’s acquisition includes 1,700 square kilometres of prospective tenements in the Tennant Creek region, including areas in partnership with Emmerson Resources. This landholding is highly underexplored, with many deposits untouched below a depth of 150 metres. The region’s IOCG mineralisation style offers broad potential for further resource delineation, with known deposits that include Warrego, Nobles, and Juno showing continuity in grade and mineralisation at depth.
TCMG has also completed a Feasibility Study that identified an initial life of mine (LOM) of eight years, with five years based on current Mineral Reserves and an additional three years projected from targets in the permitting stage. Additionally, the Warrego copper-gold project is in the process of a prefeasibility study, suggesting future opportunities to diversify production output further. Pan African sees the potential to extend the LOM beyond 15 years through its phased development approach, including new drilling targets such as Mauretania and Marathon.
Financial Rationale: A Well-Timed Entry
Pan African’s acquisition is timely, given the current strength in gold prices and inflationary pressures that are bolstering the appeal of gold as a safe haven. The deal structure—a combination of cash and scrip—enables Pan African to fund the acquisition without significant dilution to its existing shareholders. With initial capital fully funded and expected payback in under three years at an assumed gold price of USD 2,600 per ounce, Pan African anticipates generating a return in line with its target of 20% per annum.
The financial model for the Nobles Project projects total life-of-mine cash flow of USD 420 million, with a net present value (NPV) of USD 129.7 million. Pan African has also arranged for potential hedging on 75% of TCMG’s early production to secure these returns, ensuring stability amid any price fluctuations.
A New Chapter for Tennant Creek
For Pan African, this acquisition represents an opportunity to leverage TCMG’s assets as a stable, low-cost addition to its portfolio, reinforcing the Group’s resilience across multiple geographies. The Tennant Creek Gold Field is an established high-grade mining region with significant upside potential. With the Nobles facility at the heart of operations, Pan African’s acquisition places it in a strong position to expand its production by around 20% annually in the next year, contributing valuable scale to its gold production profile.
This acquisition not only brings Pan African into the Australian mining landscape but also signals a commitment to long-term growth through strategic diversification. As the company moves forward with integrating TCMG, shareholders can anticipate a strengthened resource base, optimised production costs, and increased exposure to rising gold demand.
