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Gold miner Harmony Gold has posted a 46% increase in production profit to just under R14-billion, or $774-million, for the financial year ended June 30.

The company swung from a net loss of R1-billion in the 2022 financial year to a net profit of R4.8-billion in the reporting year, enabling it to declare a final dividend of 75c, or $0.04, apiece, against a prior full-year dividend of 22c, or $0.01, apiece.

Earnings a share increased by more than 500% to R7.80, or $0.44, from a comparative loss a share of R1.72, or $0.08, in the prior year.

In turn, headline earnings per share (HEPS) increased by 60% year-on-year to R8, or $0.45, compared with HEPS of R4.99, or $0.33, in the prior year.

Harmony met its full-year production, grade and cost guidance, having recorded an 8% increase in underground recovered grades to 5.78 g/t from 5.37 g/t in the prior year.

Gold production of 1.46-million ounces in the year under review compares with the 1.48-million ounces produced in the prior year, despite the Bambanani operation having closed at the end of the 2022 financial year.

Production was mainly driven by a solid operating performance at the South African underground mines and an 18% year-on-year increase in production from the Hidden Valley mine, in Papua New Guinea.

Harmony reported a 108% year-on-year increase in group operating free cash flow to just over R6-billion, from R2.9-billion of free cash flow generated in the prior year.

The company's cash generation was supported by a 15% higher average gold price realised in the reporting year of $1 829/oz.

The group managed to reduce its net debt-to-earnings ratio to 0.2 times, compared with 0.6 times as at December 31, 2022.

"The past financial year was filled with many highlights as Harmony delivered on its strategic objectives of producing safe, profitable ounces through operational excellence and value-accretive acquisitions.

"We saw an improved safety performance, while meeting our production, cost and grade guidance as we continue navigating a challenging operating landscape," CEO Peter Steenkamp explains.

He adds that it is worth noting that the company's costs have remained under control despite the current high inflationary environment.

Steenkamp says continued embedded sustainability practices, improved asset quality and operational consistency resulted in a strong and sustainable group performance with solid operational free cash flows in the year under review.

The company plans to allocate growth capital towards high-margin, long-life operating assets in the copper space, including by progressing its two key projects Eva Copper, in Australia, and Wafi-Golpu, in Papua New Guinea.

At the Eva project, Harmony is progressing a feasibility study following its acquisition of the project in December last year, while Harmony is progressing towards permitting of the Wafi-Golpi project.

Copper now comprises about 20% of groupwide mineral resources.

Harmony will also allocate capital to projects aimed at achieving net-zero emissions by 2045, including by investing in more renewable energy and reducing energy consumption through various energy efficiency programmes.

Harmony saved about R394-million in electricity costs in the reporting year, owing to 41 energy optimisation programmes having been implemented to save 295 GWh.

Harmony has saved a cumulative R1.7-billion in electricity costs since 2016, on the back of more than 240 energy efficiency projects.

Phase 1 of Harmony's renewable energy programme was commissioned in the reporting year, delivering 30 MW of solar generation capacity to its Free State operations, in South Africa, which will reduce the operations' daytime grid demand by about 20%.

Phase 2 of the renewable energy programme is in progress, which will add a further 137 MW of renewable energy generation to the portfolio. Harmony expects completion of this phase in the 2025 financial year.

The first 100 MW will largely be funded using a R1.5-billion green loan that Harm...

Globally diversified Indian-headquartered mining company Vedanta Resources chairperson Anil Agarwal has told Mining Weekly that the company aims to complete its commitment to invest $1-billion in South Africa in the near future, although its plans are being held up by a lack of reliable infrastructure and energy security.

Vedanta has already invested significantly in zinc mining in South Africa.

Agarwal revealed that Vedanta's investment journey in South Africa was prompted by Indian Prime Minister Narendra Modi's sentimental attachment to the region, as it holds significance as the starting point of pacifist Mahatma Gandhi's freedom-fighting movement.

In 2018, during a visit with the Prime Minister, Agarwal committed to investing $1-billion in South Africa, with the aim of creating a substantial number of jobs.

Highlighting their progress, Agarwal said Vedanta had already invested $500-million in the Gamsberg zinc mine, in which Vedanta holds 69.6%, while Exxaro Resources owns 24.4% and an employee stock ownership plan 6%.

This project has infused capital and brought job opportunities to an area previously devoid of significant employment prospects. Through collaborative efforts with the South African government, Vedanta has initiated the development of an industrial hub, leveraging the region's natural and human resources.

"We are going to invest another $500-million for a smelter and making the final product. The government has been working with us, creating an industrial hub in that area because they have human resources and natural resources," Agarwal said.

He said that, although Vedanta wanted to make the additional $500-million investment as quickly as possible, the timing was dependent on the availability of the necessary infrastructure.

"If I know that infrastructure is going to be provided now and it will be available, I can tell you that I can have $500-million to be invested within 12 to 18 months. But it all depends on the power supply and the railroad," he explained.

The company's commitment to social responsibility is showcased through its employment of 3 000 individuals, with plans to add another 2 000 jobs upon the completion of a smelter, bringing its total investment to $1-billion.

However, Agarwal identified two critical challenges that needed to be addressed for the successful realisation of these plans: power security and infrastructure development.

He underscored the significance of a consistent power supply for industrial operations and hinted at Vedanta's interest in renewable energy sources such as solar and wind. Agarwal lauded South Africa's potential for renewable power generation and alluded to Vedanta's ongoing exploration of these avenues.

"Renewable power has a big potential in South Africa, not only solar but wind as well. We have seen that the velocity of the wind is quite favorable. So we are working on it," he said, noting Vedanta's record as one of the leading renewable power producers.

He added that State-owned power utility Eskom would only improve if it were to be privatised.

"Eskom can be privatised. Trust me, it has huge potential. At least 50% to 100% more power can be generated. The government should consider that, and speed is very important because people are suffering," Agarwal said.

He acknowledged that collaboration between the private and public sectors was essential to overcome infrastructure constraints. He expressed optimism about the prospects of South Africa as an investment destination, citing Vedanta's previous commitment to keeping major companies rooted in the region.

"I have a feeling that now zinc and the metal downstream have huge potential in South Africa - galvanising, pharmaceuticals, chemicals - all these are required all around the world, and South Africa can be an attractive place to produce this as it is a land of entrepreneurs," Agarwal said.

Think tank the Mapungubwe Institute for Strategic Reflection (Mistra) has reiterated its call for the formation of a Platinum Group Metals (PGMs) Exchange in South Africa, given that many stakeholders are losing out on value that could have been created in a less volatile market system.

The organisation on August 28 convened a dialogue between stakeholders including the South African Reserve Bank, trade unions, platinum producers and the Department of Mineral Resources and Energy, to iron out some of the concerns around the practicality of such an exchange.

Mistra in 2013 set out to investigate the desirability of a PGMs Exchange in the country, particularly with the rise of the global hydrogen economy and platinum being a key commodity to this value chain as well as that of other emerging green energy technologies.

The International Energy Agency's statistics show that demand for hydrogen has grown more than threefold since 1975, reaching 95-million tonnes in 2022. The World Bank valued the hydrogen market at $130-billion in 2021, and estimates that it will grow by up to 9.2% a year to 2030.

Hydrogen is essential to decarbonise sectors where emissions are hard to abate, including aviation, maritime and high-heat manufacturing.

International registrar and classification body DNV forecasts global investment in producing hydrogen for energy purposes from now until 2050 will be $6.7-trillion, with an additional $180-billion poised to be spent on hydrogen pipelines and $530-billion to be spent on building and operating ammonia terminals.

Given the massive concentration of PGM endowments in South Africa and other Southern African countries for that matter, with South Africa holding 70% of the world's PGMs reserves, Mistra, the JSE and financial services firm Pan-African Investment and Research Services (Pairs) deems it prudent to extract the maximum value from this national resource.

During the dialogue, Mistra executive director Joel Netshitenzhe emphasised that South Africa must carve its rightful place in the global PGMs value chain, and not do future generations a disservice by not leveraging this unique opportunity.

He said a PGMs Exchange could unlock financial and marketing services development, human resource benefits and, most importantly, price discovery benefits.

Apprehensions have been raised, however, with regard to the ability to implement a PGMs Exchange, given that it would be a voluntary initiative for PGM producers. There are also the technical matters involved, including whether the implementation of an exchange should be conducted in a phased approach or not.

Essentially, Pairs head Dr Iraj Abedian noted, a PGMs Exchange would create a platform for exchange of capital between those who have it and those who need it, as well as introduce a new mechanism for price discovery, lest the commodity's pricing continue to be determined by a select group of stakeholders in London, which are not part of the South African PGMs value chain, as has been the case with the PGMs market for decades.

The establishment of a commodity exchange is an example of a strategic industrial policy intervention, which creates a marketplace to facilitate the exchange of mineral commodities and related derivatives.

Effective price discovery is important for PGM producers and beneficiators to extract the maximum value from this asset, to which an exchange can be a reliable mechanism, Abedian pointed out.

He highlighted that market prices were currently being manipulated and abused, in a process that contributed to value being lost for mineworkers, government and the industry in general, since PGM producers are highly vulnerable to market volatility.

Price discovery results from the rules-based interaction among market participants, including buyers and sellers, for the exchange of a commodity. During this interaction, process information reflecting supply and demand fundamentals is revealed by the market participants, which facilitates the d...

The current platinum group metals (PGMs) basket price puts 70% of the South African production base at a loss when taking into account replacement capital requirements on top of the working costs.

A final gross cash dividend of R2.4-billion from income reserves has been declared.

"The industry at this price is in a very substantial squeeze and pretty precarious position should prices not recover," Northam CEO Paul Dunne said during the company's results presentation for the 12 months to June 30. (Also watch attached Creamer Media video.)

Northam will be conservative in this market in terms of what it will do from the current position.

"We need to be inwardly focused rather than outwardly focused in this market. This market has changed very significantly over the course of the last 12 months. We are cautious about the forward market condition and we'll behave appropriately on that basis," said Dunne.

A contraction in the three main metals of platinum, palladium and rhodium over the coming two decades is forecast

"If we overlay the current economic headwinds on the natural depletion profile, we can reasonably expect earlier closure of marginal mines and the potential to delay projects.

"This will potentially lead to a dramatic contraction in mine supply should current prices prevail," said Dunne during the presentation covered by Mining Weekly.

If palladium prices remain as they are, the Johannesburg Stock Exchange-listed PGM mining company expects significant pressure on supply and the potential for not insubstantial decline from 2025.

The mainstay of production for rhodium is upper group two reef on the western limb of the Bushveld Complex, where operations are amongst the oldest and highest cost in the industry.

"They are vulnerable to a low price environment. We anticipate lower production into the future even if rhodium prices recover somewhat.

"Supply of PGMs will become increasingly constrained and if the world truly needs these critical and strategic metals, then the markets must incentivise additional supply from here.

If this is not the case, the world's primary PGMs production base will rapidly shrink," Dunne forecast.

A fall in the average price received from over R80 000 per platinum ounce to R67 000 per platinum ounce is expected amid a combination of global inflation and consequential rising interest rates, together with Russian metal flows into the Chinese market and automotive original equipment manufacturers destocking.

Prices declined further after Northam's June 30 financial year end and today's spot for Northam offers around R53 000 per platinum ounce.

In addition, the fibreglass industry has liquidated rhodium into an already soft market, leading to a fairly extreme price reduction and subsequent negative impact on the basket.

"This depressed price environment may last for some time in our opinion and we will act accordingly, maintaining focus on operational performance and productivity, cost control and prudent management of the balance sheet and liquidity position.

"Current pricing will place great stress on the sector and Northam maintaining its position in the lower quartile of sector cost curve is a business imperative," Dunne said.

To manage what could be a difficult period, Northam's focus will be on safe production, continued project execution and efficient mining at the right cost.

Northam is forecasting a production of 850 000 oz to 880 000 oz in its current financial year to the end of June next year, at units cost of R40 000/oz to R42 000/oz on inflation experience.

Sales will be higher than production in the range of 950 000 oz to 990 000 oz including material from third parties.

Capital expenditure of R4.5-billion to R4.8-billion allows for continued development of Northam's Eland PGMs mine, as well as provision for the renewable energy programme.

Growth from the Booysendal and Zondereinde mine over the next few years, together with the progressive ramp-up of Eland, which will deliver into ...

During the 12 months to June 30, diversified mining company South32 has progressed initiatives to support its target of halving operational greenhouse gas emissions by 2035.

At Worsley Alumina in Australia, which supplies South Africa's Hillside Aluminium smelter in KwaZulu-Natal, conversion of the first onsite boiler from coal to natural gas has commenced and conversion of the second boiler will begin this financial year (FY23).

At Sierra Gorda copper mine in Chile, the company has transitioned to an agreement for cost-efficient 100% renewable electricity supply.

In South Africa, the Sydney-, Johannesburg- and London-listed company, headed by CEO Graham Kerr, is continuing to work with Eskom and other stakeholders in this country's energy sector on pathways to secure lower carbon electricity supply for the Hillside smelter, which produced a production record in the 12 months to June 30.

The company has also signed a non-binding memorandum of agreement with Eskom to explore the potential to purchase nuclear energy attributes in the near term as it continues to investigate and undertake market testing for renewable power supply at Hillside in the longer term.

Also achieving a yearly production record were South Africa Manganese and Australia Manganese, with aluminium production increasing by 14% and manganese production increasing by 4%.

The company expects to increase low-carbon aluminium production by 12% in FY24 as Brazil Aluminium and Mozal Aluminium in Mozambique ramp up.

On how much time South32 is giving itself to transition away from carbon-intensive energy at Hillside, Kerr said in response to Mining Weekly that the current contract in place with Eskom runs to 2031.

Although South32 thus has time on its side in its climate change commitment, it is also acutely aware of Europe's particular preference for green aluminium and its need to ensure that Hillside has the option to sell into Europe and other green preference jurisdictions such as the Americas.

"So, we're doing a lot of work on this space," Kerr emphasised to Mining Weekly. Hillside plays an important role in keeping South Africa's national electricity grid stable and helping to manage loadshedding given its consistent level of electricity consumption and the interruptibility provision in its energy supply agreement. During times of high strain on the national grid, Eskom interrupts around 450 MW of supply to Hillside's potlines to support the grid, which means less loadshedding for other customers.

Taking into account Hillsides' linkages to numerous other sectors, the smelter's economy-wide contribution amounts to an estimated R25.8-billion, or 0.4%, of South Africa's gross domestic product (GDP). Hillside's economy-wide contribution to KwaZulu-Natal's GDP amounts to R10.1-billion, or about 1.3%.

Moreover, Hillside is one of the largest industrial employers in Richards Bay, directly employing close to 3 400 people in the 2022 financial year.

MANGANESE LOGISTICS

On whether the company's talks with Transnet on improving manganese logistics were enhancing confidence that efficient logistics would be restored, South32 COO Noel Pillay said the company was collaborating to arrive at concrete solutions. "My teams are hopeful that we can recraft some of the lost navigation," Pillay added.

Secure access to rail and port infrastructure is critical to South32 being provided with confidence for future investment decisions at the Wessels manganese mine in South Africa's Northern Cape.

Meanwhile, reliable supply of electricity at an affordable price is what will be required to take the company's Manganese Alloys plant in Meyerton, Gauteng, out of care and maintenance.

LOW-CARBON COMMODITIES

The Hermosa project in Arizona, in the US, is presenting an opportunity to produce low-carbon commodities for several decades, with a final investment decision at Taylor's zinc/lead/silver deposit planed towards the end of this calendar year.

Separately, the opportunity to produce batt...

Mining Weekly Editor Martin Creamer discusses DRDGold's 16th consecutive dividend and its move to solar energy; a best-of-breed approach to put South Africa on a competitive logistics path; and the launch of Thungela’s nursery and its hatchery which is breeding fish.

The decision of DRDGold to expend capital of R3.5-billion this financial year is based on the cash-flush Johannesburg- and New York-listed gold-from-dumps mining company firmly concluding that it is responsible to investment in South Africa amid seemingly unstoppable private sector turnaround momentum.

The board has given the nod for R2-bilion of this year's R3.5-billion capital expenditure (capex) to go into solar power and into long-term sustainability creating deposition facilities. (Also watch attached Creamer Media video.)

A big part of the R800-million expenditure in the Far West Gold Recoveries operation is for a tailings dam and, in the not-too-distant future, an amount not quite as high but similar will be invested at Ergo on the East Rand to expand the size and capacity of the Brakpan/Withok tailings facility.

Debt-free DRDGold, headed by CEO Niël Pretorius, had net cash of R2.47-billion as of June 30, after paying R515.3-million in dividends, re-investing capex of R1.1-billion and paying R314.8-million in income tax on a gold production of 169 820 oz in the 12 months to June 30 this year.

"A question that one has to pass when looking at these sorts of capex numbers is whether you are investing in an environment where it is responsible to invest this level of capital," Pretorius said during the presentation of 2023 results, covered by Mining Weekly.

"When we switch on the television we maybe wonder. You read the Fraser Institute's report and maybe wonder. You look at where capital is going and a lot of it is going away from South Africa and less is coming into South Africa.

"So, one has to reflect on this level of investment carefully before you commit your shareholders.

"We believe that it is responsible to invest in South Africa. We do believe that South Africa doesn't stand or fall based on the quality of political governance in the country. There is a private sector and there's a society which, when they join forces, become unstoppable and can really turn things round.

"Increasingly, in order to assess whether or not it is responsible to invest, one looks not so much at the kind of challenge that we face, but also at what the response is to those challenges, and the responses to some of those challenges have been remarkable.

"Firstly, what we are seeing is that the face of political leadership is systematically changing. We're seeing a different kind of leader emerging, younger, dynamic with lots of energy, firm values. At the moment, maybe more at local and provincial level, but increasingly I think we'll start seeing those faces and those profiles finding their way into the national leadership as well.

"People who are externally focused are genuinely wanting to deliver into the well-being of the constituency, so that certainly is changing. It's going to take a while before it changes completely, but we are seeing very positive first indications of a change of face of political leadership.

"A second thing that's really encouraging is that it seems private capital has found its voice. We're seeing less in the way of nuanced utterances on the part of business leaders and more and more very prominent leaders are becoming involved in initiatives that contribute towards some of the very pressing challenges that we are faced with, like crime and logistics," he said.

But amid all that, he noted that very recognisable groups and influential people, with command over vast capital, are activating the capital over which they have custodianship quite quickly to bring about positive change.

Very encouraging, he added, was the way private capital is being mobilised, exemplified by the volume of energy being generated from rooftop solar panels reaching the 4.4 GW level, which is equivalent to two phases of loadshedding.

"The private sector has come to realise that sitting around and waiting is not going to be the solution. We've got to jump at it and they are jumping at a rate that is catching us by surprise. Generating suc...

Once short-term and medium-term rail restoration has been achieved, a best-of-breed approach should be adopted to put South Africa on a competitive logistics path, says thermal coal exporter Thungela.

"We need to develop a model that allows a best-of-breed to be able to run some of the critical infrastructure so that our national logistics are much more efficient," said Thungela CEO July Ndlovu, who questioned the sustainability of the traditional South African model of the State providing all critical infrastructure and highlighting the distinct 'swim lanes' that need urgent attention in restoring this country's broken rail logistics infrastructure.

"We continue to work tirelessly with the industry, government, and Transnet to find sustainable solutions for the logistics challenges that continue to bedevil South Africa, the industry, and our company.

"We're encouraged by the setting up of the national logistics committee to tackle some these issues on an urgent basis," Ndlovu added.

Mining Weekly: What needs to be done by Transnet in the short, medium, and long term and is that being matched by what is being done in the short term for the medium term and long term?

Ndlovu: The best metaphor for this is swimming and swimming lanes and the swim lanes that we ought to be looking at. Secondly, what we also have to accept as business and as stakeholders in South Africa is that this problem has become bigger than merely Transnet, and our expectation that Transnet must do everything themselves. That horse has bolted.

My standpoint is, firstly, what we've got must be made efficient by fixing the rail infrastructure, improving maintenance, enhancing planning scheduling and working to ensure that security incidents are managed at an acceptable level, and when security incidents happen, we can we recover with speed - and I've seen significant improvement following incidents. We had two significant derailments in May and we recovered from both in record time.

Secondly, I spoke to all of you about the state of the rail infrastructure in the North and Northeast Corridor and the speed restrictions and I pointed out that there was roughly 273 km of speed restrictions. All those have more or less been removed, except for about 38 km, so progress continues. That is one swim lane.

The second swim lane relates to the fact that we will not be able to get Transnet back to its capacity of railing more than 70-million tonnes of coal a year unless we bring back both the long-term standing locomotives and the new locomotives, and the new locos can be sourced from the Chinese that was supposed to supply them or from somebody else. I'm personally encouraged by the continues discussions that we're having with the Chinese to ensure that we find a solution to that, whether through the Chinese or somebody else. We need that capacity to be able to go beyond 60-million tonnes.

The third swim lane is a more macroeconomic policy environment. What this has demonstrated very clearly is that the model that we've had in South Africa of the State providing all critical infrastructure may not be the most sustainable model. We need to develop a model that allows a best-of-breed to be able to run some of the critical infrastructure so that our national logistics are much more efficient. That is a separate swim lane and that means we have to continue to work on the others. The White Paper that came through is quite encouraging. That work has become urgent but deregulating a broken piece of infrastructure is not good enough so we've got to fix it as we do the others. Those would be the three that I see.

I raise the issue of best-in-breed to make a point that globally what we are seeing is that nation states budgets and fiscus are stretched to the limit by the need to provide services to people and there are private players who've got the skills and the capital to be able to provide critical national logistics.

COAL EXPORTS LOWEST SINCE 1993

As reported by Mining Weekl...

To navigate the considerably softer coal prices, as well as inflationary pressures and the underperformance of Transnet Freight Rail, export coal-mining company Thungela has enhanced its business resilience by reducing the number of geology-challenged underground sections and ramping up production at the opencast Khwezela colliery.

Khwezela, 22 km southwest of eMalahleni in Mpumalanga, was formed in 2016 through a merger of the mining operations of the Kleinkopje and Landau collieries.

Board approval has been obtained for the capital investment of R2.4-billion into the Zibulo North shaft, which is expected to extend the life of Thungela's flagship Zibulo operation by 10 to 12 years.

The anticipated completion of the Elders and Zibulo North Shaft projects, with R3.8-billion yet to be invested, is integral to uplifting portfolio quality and competitiveness and extending the business, Thungela stated in declaring a R10-a-share interim dividend worth R1.4-billion from 33% of operating free cash flow.

First coal from the Elders production replacement underground operation is expected in the first half of next year and the close of the acquisition of Australia's Ensham coal mine for R4.1-billion is due on August 31.

"Our focus to increase our competitiveness by improving productivity will produce superior results for our shareholders," Thungela CEO July Ndlovu predicted in a release to Mining Weekly.

The half-year profit of R3-billion was well down from R9.6-billion in the same period in 2022, owing to the sharp decrease in thermal coal prices. Net cash of R13.6-billion was on the balance sheet as of June 30.

A R156-million distribution is being made to employees through the Sisonke Employee Empowerment Scheme and Nkulo Community Partnership Trust. The company contributed R896-million to these trusts in 2022, with the total since listing approaching the R1.4-billion level.

FATALITY REPORTED

Although the total recordable case frequency rate safety measure improved in the half-year from 1.59 last year to 1.33 this year, a fatality was recorded in the period when Breeze Mahlangu passed away in February following complications from an accident in December.

The most notable external factor of the period was the sharp fall in the benchmark seaborne coal price as European buying slowed after a mild winter.

In addition, global inflation management resulted in slower growth and a related reduction in demand for energy.

Following a particularly poor first quarter, Transnet rail performance stabilised in the second quarter, notwithstanding two derailments that cost Thungela at least 340 000 t in rail capacity. Improvements in rail performance during the second quarter were the result of intensive collaboration between Transnet and the South African coal industry, including Thungela.

"A consistently performing and well-managed bulk rail infrastructure is critical to the coal mining industry and the South African economy," said Ndlovu.

Through ongoing collaboration with Transnet, Thungela is dedicated to optimising the performance of this critical infrastructure, benefiting its own operations and those of the broader South African coal industry.

Based on first-half operations - and excluding Ensham until the transaction has been completed - the company's operational outlook for 2023 for export saleable production for the year has been revised to between 11.5-million and 12.5-million tonnes.

The free-on-board cost per export tonne guidance for 2023 has also been revised. This cost, excluding royalties, is expected to be between R1 120/t and R1 200/t. Including royalties, the guidance range has been revised to between R1 170/t and R1 250/t, based on a forecast benchmark coal price of $100/t.

Together with industry, government and Transnet, Thungela is continuing what Ndlovu describes as a relentless journey to find sustainable solutions to the logistics challenges facing South Africa.

Ndlovu expressed confidence that strategy and resilience wou...

Kinetiko reports reserve at pilot field

ASX-listed Kinetiko Energy has announced a maiden gas reserve of 3.1 BCF over its pilot gas production field in South Africa.

An independent gas reserve and resource report has also resulted in a 20% increase in the 2C contingent resource to 3 TCF over the company's' granted exploration rights, with the expectation of further significant upgrades from adjacent application exploration rights.

"This is one of the most significant and exciting moments in Kinetiko's corporate journey to date in South Africa. It should be well understood that the maiden gas reserve was issued on the basis of a very small project. The area considered is minute by comparison to our overall geography (about 0.2%) and yet the economics work out to be substantially positive with 2P certification for the project at about 6.4 BCF of gas," said CEO Nick de Blocq.

"Each time Kinetiko adds commercial production plans within its exploration rights, it will be able to grow reserve certifications by eventual orders of magnitude, with assumptions based on increasingly positive economics driven by deeper wells in the south with potentially higher flow rates, and larger gas contents and better geophysical properties of the sediments to the north," he said in a statement on Monday.

"The company also requested an updated resource assessment due to the results and consistency of recent exploration. The new resource assessment has reflected the upside of the sand-driven gassy reservoirs and returned a substantial 20% increase in 2C contingent resources to just over 6 TCF. It has also added a similar level of prospective resources which will move into the contingent category as further exploration confirms the geological potential."

The report certified 5.8 TCF of prospective resource on the two exploration rights where work is continuing.