Value Microcaps Junior Miners

[dr_airtime]

PRU.TO **Here is detailed DD post**

All – most important read from an opportunity standpoint is the conference call link below. Lots of operational issues in last quarter as they bring two new pits into production. Since most of us aren’t or weren’t shareholders before takeaway here is that we COULD be getting in at the sweet spot right before a turn around and a higher gold price. This makes PRU.TO even more worth a look IMO.

Another reason I think there is limited downside and the consolidation triangle breaks to the upside is that Perseus has no debt and has $USD 70M of cash within $120M of working capital at December 31, 2015. Not going under. This is just a hold and wait for 1 of 2 catalyst opportunity. Read to the bottom for the two catalysts!

Here is the CEO alluding to the turn-around opportunity on pg. 4 of conference call script linked below:

So in summary, while gold production was slower than excepted cost performance was fairly encouraging and coupled with the fact that our processing plant is working very efficiently. We are in a very good position to do extremely well when we do get into higher grade ore and that will happen in coming periods. We have very little doubt about that because we do have a high level of faith in our resource models we’re seeing good reconciliation from the resource model to the block model – to the grade control model

Quick overview

- Perseus currently operates Edikan in Ghana (2.4M oz P&P, 188k oz production in 2015). Lower grade compared to EDV.TO. Grade at 1.2 g/t (P&P). Endeavour’s lowest grade mine is 1.5 g/t and up to 2.5 g/t.

- Their next mine will be Sissingue in the Ivory Coast which is small (0.4M P&P within 0.9M M&I. P&P is 5.5MT @ 2.4 g/t – 75k oz/year for 5 years). Not a bad little mine and decent open pit grade.

- Offer to acquire UK Amara who’s flagship asset is pre-feasibility stage Yaoure in the Ivory Coast (3.2M P&P within 5.2M M&I – LOM is 62.3MT @ 1.18 g/t). Still not that high grade but the SA Alpha article below shows Amara’s new optimized pre-feasibility announced just before the Perseus offer has a LOM AISC of $USD 667 with that 1.18 g/t .

- Mergeco will have 7.3M oz P&P within 14.0M oz M&I. EDV.TO Endeavour has only 11M M&I ounces for example.

- Yaoure has a Pre-feasibility study and plans are to advance a Definitive Feasibility Study (DFS) over next 18-24 months. Production not till 2019 at earliest likely but Perseus could be a 300k/year producer by then at a much higher gold price.

- Mergeco will have $USD 74M of cash and no debt, so have cash on hand to bring Yaoure into production with debt financing without dilution. Also another $45M in warrants could be exercised.

Here is the merger presentation but recommend you glance and focus on article below.

http://www.perseusmining.com/aurora/assets/user_content/01717104.pdf

Here is most recent article that covers the merger.

http://seekingalpha.com/article/3939296-dreams-come-true-perseus-mining-amara-mining-announce-merger-plans

Here another recent article from a SA analyst who has been following the company for years. The most important takeaway from recent operations is that last quarter was severely constrained by mining transition between pits:

As a result, in 2H 2015, the company mined 2.05 million tons of ore grading 0.95 gram per ton, compared to the ore grading 1.21 gram per ton in fiscal year 2015

http://seekingalpha.com/article/3920006-perseus-mining-shares-undervalued?li_source=LI&li_medium=liftigniter-widget

Finally – I highly recommend you read the latest conference call transcript on SA. Perseus may be coming off their worst quarter ever because of issues with Ivory Coast permitting allowing them to gain access to their 2nd and 3rd open pits. Takeaway here is that we COULD be getting in at the sweet spot right before a turn around and a higher gold price.

http://seekingalpha.com/article/3841176-perseus-minings-pmnxf-ceo-jeff-quartermaine-q4-2015-results-earnings-call-transcript?page=1

Basically – Perseus is coming off issues in 2015 because the switch from mining the main pit to incorporating ore from two other pits did not go as smoothly as planned. On top of this there has been underproduction since commissioning.

Also from the CEO in transcript above:

We have been flagging for several years that fiscal 2016 and fiscal 2017 was going to be a period of fairly significant reinvestment for the company as we opened up new mining areas and worked on development housing. And that is in fact exactly what is happening. The issue was of course compounded by laws and expected gold production but nevertheless, this is part of the plan and has been part of the plan for long time and I do say part of the reason why our share price hasn’t reflected the underlying asset value.

Conclusion: Perseus’ underperformance and operational issues are well known to market. I think shares will go higher in 2016 if we really are entering the second phase of the gold pull as either 1) solving the operational issues or 2) a higher gold price, takes PRU.TO higher.

P.S. if you buy shares on the LSE the Amara shares look even better as apparently there are warrants issues with the merger but I glanced over this fact as can’t buy.

Other

CEO on Ivory Coast development risk for their next Sissingue project in the Muslim north of country from transcript above:

(Responding to analyst question on AUS producer Newcrest's road blockage in Ivory Coast): I don’t know what Newcrest do to be frank. But I can absolutely hundred percent assure you, that at where we are, there is nothing, but one hundred percent support for this project, in fact our non-executive directors where on site last week up there and were blown away by the and little bit anxious I guess around the level of enthusiasm that there was in the community for the project particularly given now current propensity to be cautious with regard to global environment.
Now, the Côte d’Ivoire is a very good environment to operate good to say. And there is support for our activities at community level and very definitely at government level as well. And I can assure you that makes life a lot easier than the alternatives which we have experienced elsewhere.