Edison said the colliery could increase the Pan African group’s earnings by about 5-15%.

This is a branching out for the AIM and Johannesburg-listed company, which has five major assets in South Africa: Barberton Mines (target output 95,000 ounces of gold per annum), the Barberton tailings retreatment project (20,000oz), Evander Gold Mines (95,000oz), the Evander tailings retreatment project (10,000-plus expansion potential) and Phoenix Platinum (12,000oz).

Pan African announced on June 8 it planned to acquire the thermal export-quality coal deposit from Oakleaf Investment Holdings, as it expected a drop in earnings per share and headline earnings per share in South African rand to drop by between 40-60% when it next reports annual financial results.

"The colliery is an existing operational mine and the acquisition is expected to be immediately earnings and cash flow accretive to Pan African," the company said.

Pan African said it believed there were opportunities to “increase production and improve the operational performance of the mine with a view to improve the long-term productivity and economics”

Pan African CEO Cobus Loots said the 2015 financial year had been “extremely challenging” for the company, and “even though we were disappointed that Evander Mines’ turnaround has not happened more rapidly, the operation is now established in higher-grade mining areas”

“Having implemented corrective strategies, the group is well positioned to deliver an improved performance in 2016,” Loots said.

“The acquisition of the Uitkomst colliery does not change our precious metals focus, however our robust financial position in a difficult resources market allows us to take advantage of selective opportunities within South Africa.”

Broker Peel Hunt said that while Pan African’s move into coal mining may surprise some considering it is a precious metals producer, the firm did not expect this to be the start of a strategy to become a diversified producer – but “more of an opportunistic move to add cash flow, strengthen the dividend cover and generate value”

The company said earlier this month that its executive directors were to forfeit their annual salary increase for the forthcoming financial year due to “challenging economic and operating environment experienced during the current financial year”.

It was also recently revealed that Shanduka’s 23.86% holding in Pan African will be sold off to the Mabindu Trust, the China Investment Corporation and the Standard Bank of South Africa once Shanduka’s merger with the Pembard Group is completed.