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

Perseus Mining Ltd (ASX: PRU), a diversified West African-focused gold production, development and exploration company, is putting forth many efforts to become a multi-mine gold producer based on organic growth through its exploration strategies. The group’s project portfolio includes Edikan Gold Mine in Ghana and Sissingué and Yaouré projects under development in Côte d’Ivoire, wherein the Sissingué Gold Project is expected to provide first gold in early 2018 and recently completed Definitive Feasibility Study for the Yaouré Gold Project is indicating more potential to be seen this year. PRU aims to emerge as a 500,000 ounce per year gold producer by 2020.

First gold production from Sissingué Mill on track: PRU recently advised that the development and commissioning of its second gold mine, the Sissingué Gold Mine in Cote d’Ivoire will be completed soon and the crushed ore to the mill and the CIL plant was to be introduced by January 13, 2018. Based on the updated life of the mine plant for Sissingué, the estimated gold production of 358,000 ounces over the life of mine including 80,000 ounces per annum for the first 3.25 years and approximately of 70,000 ounces per annum over the full 5-year life of mine, have been indicated. First gold is expected to be produced at Sissingué before the end of January 2018, which is ahead of its schedule; and commercial production is expected to be achieved by 31 March 2018. A significant potential exists to increase Sissingué’s currently delineated Mineral Resources, Oil Reserves and mine life. There are few exploration programs that target mineralisation within trucking distance of the mine, have already been undertaken. These are scheduled to be implemented once the mine starts generating positive cash flows. The estimated capital cost of the full development of the Sissingué mine and infrastructure excluding early workouts but including operational readiness was US$107 million and is expected not to exceed the value based on the current estimates.

 
Sissingué Site Works (Source: Company Reports)
 
Good mine life expected for Yaouré Gold Project: PRU’s Definitive Feasibility Study done for the development of the Yaouré Gold Project in Cote d’Ivoire, was a success and indicated that the mine is economically very attractive with Internal Rate of Return of 27% and was also technically robust. It is also readily financeable and is capable of delivering significant value to shareholders by confirming pre-acquisition expectations. Under the study, various prospective areas were targeted, and the project incorporates block support and information effect adjustments. Further, it came out with the reserves estimates including indicated mineral resources totalling 43.1 million tonnes of gold while 46 million tonnes of gold were estimated under inferred resources. Probable Ore Reserves stood at 1.5Moz at 1.8 g/t Au, which, based on the parameters outlined in the DFS support an initial Reserve life of about 9 years. The other key aspect that was found indicated that the ore obtained was typically clean with no major cyanide consumers. Based on the findings, the group also prepared a NI 43-101 compliant Technical Report for filing with Canadian regulatory authorities.
 

Resource Estimate (Source: Company Reports)
 
Support for financing the strategy: Perseus group was provided with a total of US$60 million of debt finance for its growth strategy in 2017. The group reported that US$20 million debt facility was offered to Perseus’s Ghanaian subsidiary, PMGL by Macquarie and it was fully drawn in March 2017. This facility was made available for the purpose of providing general working capital until July 2018 while PRU’s corporate cash resources were being applied to fund the development of Sissingué and also in exploration and in corporate expenses. About US$5 million of this debt facility was repaid in June 2017 to Macquarie and this left an outstanding balance of US$15 million. At the year end, a total of US$68 million of capital was spent on preliminary work and on the full-scale development of Sissingué while the remaining development of Sissingué will be funded internally from Perseus’ internal cash resources and from the project loan which will be provided by Macquarie Loan Documentation.

Re-shaping the community: During the year 2017, PRU continued to support the local communities in its areas of influence with the focus on the projects relating to improving the health, education and sanitation and as well as culture events. Cash donations of USD 202,138 were made to support these areas. The Edikan Trust Fund was established to provide the financial support to the local communities and PRU contributed USD 281,689 to the fund and USD 495,267 was spent on community development projects like construction of an elevated water tower at Ayanfuri and construction of health centre at Fobinso.

Financial Performance: The group recorded a net loss after tax of $79.3 million for year ending June 2017 against a net loss after tax of $37.5 million in the previous financial year indicating a significant rise of 111.2% at the back of factors including foreign exchange loss, acquisition cost and reduction in the carrying value of low grade stockpiles. As at 30 June 2017, available cash was $24.0 million against $151.3 million as on 30 June 2016. The group’s net assets of $715.3 million were below the FY16 figure of $769.3 million, indicating a decrease of 7.0% due to the legal settlement and movements in foreign exchange which reduced the assets balance. However, the group aims to showcase better exploration results and continues to work on uplifting its financial performance.
 

Production and Cost Guidance (Source: Company Reports)
 
Outlook: FY18 gold production is forecasted to be in the range of 250,000 to 285,000 ounces at an all-in site cost of US$950/oz to US$1,100/oz. It continues to implement the practices aimed on improving the mine to mill reconciliation for Edikan and continues to train the operating and maintenance staff. As far as Sissingué is concerned, PRU indicated to continue its drilling at the Papara prospect with the main aim of determining the potential for additional Mineral Resources which could be processed at the Sissingué processing facility. As far as Yaouré is concerned, it aimed to complete its drilling program for DFS purposes and based on results up till now, gold production of 150koz in year 1 is expected to average out to 230koz/year for next 4 years.
 

Gold Production for Yaouré (Source: Company Reports)
 
Stock Performance: The stock price rose by 56% in the past six months (as at January 16, 2018) and was up about 16% in the past one week. Late last year, Edikan Gold Mine was recognised by the Ghanaian Minerals Commission and the Ghanaian Chamber of Mines as the best mine in Ghana in the categories of Health, Safety and Environment. Therefore, Perseus not only merely focuses on gold production, but also puts efforts in an all-inclusive way considering other mine parameters relating to safety etc. The group is expected to have Sissingué coming on line in 1H 18 and benefits from Yaouré that has been partially de-risked through the DFS, will help the group set for lifting its production significantly that might touch up to 500kozpa by FY21 along with a fall in AISC. Overall, boost from gold prices, improvements at Edikan, delivery from Sissingué and progress and financing efforts for Yaouré will help PRU move on growth track.  We give a “Buy” recommendation on the stock at the current price of $0.44
 

PRU Daily Chart (Source: Thomson Reuters)

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