Company overview - Perseus Mining Limited is engaged in mining operations and sale of gold, mineral exploration and gold project evaluation and development in the Republics of Ghana, Cote d'Ivoire and Burkina Faso, in West Africa. The Company's segments include Australia, Ghana and Cote d'Ivoire. The Australia segment is engaged in investing activities and corporate management. The Ghana segment is engaged in mining, mineral exploration, evaluation and development activities. The Cote d'Ivoire segment is engaged in mineral exploration, evaluation and development activities. The Company holds over 90% of Edikan Gold Mine (EGM), approximately 90% of Grumesa Gold Project, over 90% of Yaoure Gold Project and approximately 86% of Sissingue Gold Mine. It has commenced exploration at various near-mine prospects, including Bokitsi, Mampong, Pokukrom and the Agyakusu prospecting license. It has also commenced exploration at other prospects in Cote d'Ivoire, including the Mbengue, Mahale and Napie licenses.

PRU Details

Drilling progress at Yaouré Gold Project: Perseus Mining Limited’s (ASX: PRU) Yaouré is expected to become Perseus’s third operating mine after the development and will make a significant contribution towards Perseus’s target of producing more than 500,000 ounces of gold from its West African mines by 2021. Importantly, the recently completed drilling programs will provide critical information on which to base a Definitive Feasibility Study (DFS) at Yaouré, that is now scheduled to be finalized in the December 2017 quarter. Approximately 33,700m of resource definition drilling has been completed in the proposed CMA and Yaouré open pits, and further 12,200m of trial grade control drilling has been completed in the Yaouré pit. Additionally, interpretation of the mineralization in the higher-grade CMA pit is in line with previous interpretations made by Yaouré’s previous owners, Amara Mining plc (Amara) and assay results received from the CMA pit are in line with the tenor of grades from previous drilling programs. The company’s understanding of the mineralization in the Yaouré pit has been significantly improved from the results returned from the latest drilling. Structural reinterpretation has highlighted the potential for additional mineralization to be defined, particularly to the north west of the Yaouré pit, and a new Mineral Resource estimate for the deposits is expected to be released in August 2017 after all assays have been completed.


Recent drill hole locations and mineralized structures; (Source: Company reports)

New Ore Reserve estimate is expected to be completed in the December 2017 Quarter: Currently assays have been received for approximately 29,300 samples and results remain outstanding for approximately 17,000 samples. Results received to date for CMA drilling confirm the tenor of previous intercepts and the continuity of mineralization. Further, it is anticipated that the relatively straightforward structural architecture of the CMA mineralization will result in a robust Mineral Resource estimate as it is expected to contribute the majority of the economic mineralization underpinning Yaoure’s DFS. A potentially important outcome of the 2017 work program is the recognition of possible extensions of both the Yaouré and CMA mineralized systems, particularly to the northwest of current drill coverage. However, drill testing of those areas is beyond the scope of the DFS and they remain targets for future near-mine exploration. Further information associated with progress of the DFS will be progressively released with the next milestone being the publication of a new Mineral Resource estimate in the September 2017 Quarter. The full study including a new Ore Reserve estimate is expected to be completed in the December 2017 Quarter.
 

CMA drill section 777185N; (Source: Company reports)
 
Meaningful results from exploration drilling at the Papara prospect: The company has announced noteworthy results from exploration drilling at the Papara prospect, located approximately 20 kilometers north-northwest of the Sissingué Gold Mine (Sissingué) on Perseus’s mining permit in northern Côte d’Ivoire. Development of Sissingué is on target for first gold to be poured in the March 2018 quarter when it will become Perseus’s second operating gold mine. The drilling results at Papara point to the potential for a significant additional inventory of mineable, mineralized material being discovered within trucking distance of Sissingué, and 53% of the construction work was completed. Assay results from several holes in the current drilling program are still pending and follow-up drilling is planned once all results are received and fully assessed. If the results are positive from this next phase of drilling, it could lead to an upgrade of the current Life of Mine Plan for Sissingué that currently generates an attractive after tax internal rate of return (IRR) of close to 30% at a gold price of US$1,200 per ounce by processing ore for five years. The latest drilling appears to define a new zone of mineralization hosted by metasediments along the southern margin of a diorite intrusion. The mineralization consists of quartz veins and sericite-carbonate altered metasediments with associated pyrite and sparse arsenopyrite.


Sissingué Project regional geology and gold occurrences; (Source: Company reports)

Further exploration opportunities: More broadly within the Papara area, Perseus is conducting auger drilling over widespread gold-in soil anomalism associated with extensive artisanal mining within an 8 kilometer by 6-kilometer area. As at Papara, many of the artisanal sites exploit concentrations of gold in the mottled-zone at the base of the duricrust, and therefore likely represent dispersion from primary bedrock sources. Historically, RAB and shallow RC drilling of the highest tenor soil anomalies failed to provide categorical indications of significant underlying bedrock mineralization. However, the soil anomalies in many cases do not coincide with known artisanal workings, and it is now suspected the anomalies may be offset from their bedrock sources. Further, Auger drilling is required to more closely define the source of the surface anomalism, and particularly the extent and source of the mottled zone mineralization being exploited artisanally. Elsewhere on the Sissingué license, Perseus has commenced a 1,150m RC pre-collared, diamond drilling program at the Katara prospect, located approximately 25 kilometers south of Sissingué. Historical RAB and RC drilling following-up gold-in-soil anomalies intersected significant bedrock mineralization at this site. However, the subsequent reviews of these results considering structural information gained from post-drilling artisanal mining, indicates the original drilling was not optimally oriented to intersect the mineralized structures, and the current program has been designed to rectify this deficiency.


Strong pipeline from exploration to production; (Source: Company reports)
 
Strong result for the three months ending 31 March 2017: Quarterly gold production at Edikan gold mine exceeded December 2016 quarter production by 51% to of 48,655 ounces, placing Edikan on track to achieve its June 2017 Half Year production guidance of 90-110,000 ounces. Further, All-in site costs (AISC) stood at US$1,098/ounce, which was 41% lower than in the December 2016 Quarter, placing Edikan on track to achieve June 2017 Half Year AISC guidance of US$1,000 to US$1,220/ounce. Importantly, Edikan’s Life of Mine Plan (LOMP) was updated based on the re-estimated Ore Reserves, and forecasts an average annual gold production of 240,000 ounces at an AISC of US$875 per ounce for the next five years. The updated LOMP also forecasts strong positive after-tax cash flow of nearly US$403 million (A$0.52per share) from 1 January 2017. The company spent US$12 million during the Quarter on development activities at Sissingué, bringing total expenditure to date (including early works) to US$55 million and the forecast cost to complete Sissingué’s development of US$61 million will be funded by existing cash and US$40 million of project debt finance provided by Macquarie Bank.

For the quarter ending (at 31 March 2017), the company holds cash of A$50.4 million and bullion worth of $13.7 million, (totaled A$64.1 million) $3.4 million less than the 31 December 2016 balance of A$67.5 million after expenditure on Sissingué development, exploration and corporate expenditure. Gold forward sales totaled 159,022 ounces at a weighted average price of US$1,275/ounce for the same period. Drawdown of an additional US$40 million project debt facility intended to fund the development of Sissingué, is planned to occur in the September 2017 quarter, while a payment of US$15 million was made to Bayswater Contract Mining (BCM) during the Quarter as the final instalment of a US$20 million settlement of a legal dispute between Amara Mining plc (Amara), who was acquired by Perseus in 2016, and BCM.


Key Performance Indicators; (Source: Company reports)

PRU stock has fallen 55.2% in the last one year (as on July 05, 2017), and currently trading at its 52-week low levels owing to subdued financial performance in FY16, weak December quarter output and drop in production forecast for half year ending June 2017 at Edikan to 90,000-110,001 ounces from the previous 125,000-145,000 ounces. The group reported for a net loss of $22.28m for the half-year to 31 December 2016. However, given the ongoing mining developments, and improving resource and production outlook, we give a “Buy” recommendation on the stock at the current market price of $0.28
 

PRU Daily chart; (Source: Company reports)
 

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