2 New PRs + SeekingAlpha on Perseus
Perseus Mining (OTCPK:PMNXF) - Still Flying From SeekingAlpha in April
Current Price: C$0.43
Shares Outstanding: 529.3 million
Cash: C$92.7 million
Target Price: C$0.60
Total Return to Target: 40%
52-Week Range: C$0.26 - C$0.48
Since initiation, Perseus Mining is up 30%, and like the other mid-tier producers, has major room to climb. Perseus' performance has somewhat lagged behind its peers, however, its flagship Edikan gold mine in Ghana appears to finally be operating in-line with management expectations. The lower grades and higher AISC may be of some concern, nonetheless, we believe management is being overly conservative in its guidance. More importantly, the stock is still undervalued even utilizing the higher operating costs.
As mentioned earlier, Sissingué is Perseus' next project in line, and according to management's last update, will require less than $100 million for development. PRU is sitting on almost $100 million in cash and no debt so has good options for funding. We still imagine the management team taking on debt for the majority of the financing. Sissingué has an updated feasibility study that was released in April 2015 and early work has already commenced in preparation for construction. We will revise PRU's price target accordingly as Sissingué advances and de-risks accordingly.
In late February, Perseus announced the friendly takeover of Amara Mining which adds the advanced stage Yaoure project in Cote d'Ivoire to the company's pipeline. Yaoure comes with a PFS, which was completed in Q1 2016 and sets to deliver 203,000 ounces of gold annually over 15 years at average AISC of $667 per ounce. Total upfront capital cost is expected to be $334 milion, and touts a post-tax NPV of $555 million at $1,200 gold.
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Source: Corporate presentation.
While the takeover of Amara does not bring any immediate production to the table, Perseus' attributable proved & probable ore reserve increases by 160% to 7.3 million ounces, and M&I resources increase by 112% to 14 million ounces. Not to sound like a broken record, the pro-forma portfolio has incredible optionality moving forward.
This year Perseus will continue to optimize operations and decrease operating costs at Edikan. In the background we expect Sissingué or Yaoure to be sold, but some additional work may be needed to make the assets more attractive to potential suitors. We expect it will be Sissingué up for sale, and the company will dedicate the bulk of its growth efforts fine-tuning the more costly Yaoure. Either way, Perseus has good production to rely on for cash flow with a proven management team that can get things done regardless of the markets. We are excited with upcoming updates as we expect the grades to become higher and the costs to become lower.
Disclaimer: Palisade Global Investments Limited and/or its employees holds shares of EDV, AR, and PRU. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information.
Aug29thPR: An intensive work programme was undertaken at Edikan during the second half of FY2016 which has resulted in materially improved operating performance as well as reduced unit costs compared to FY2015: mining cost per tonne of material mined reduced by 40%; processing cost per tonne of ore milled reduced by 11%; and G & A cost reduced by 19%. Coupled with a period of accelerated capital investment to achieve power self-sufficiency, processing plant improvements, waste stripping and infrastructure and relocation housing, all of which are scheduled to finish by December 2016, Edikan is expected to enter a period of sustained strong positive cash flows from early calendar year 2017.
Following execution of a Mining Convention for Perseus's second operating mine, the Sissingué Gold Mine in Côte d'Ivoire ("Sissingué") in July 2015, execution plans for the full scale development of the project have been activated and production of first gold from Sissingué is scheduled to occur in the December 2017 quarter.
On April 18, 2016, Perseus acquired Amara Mining plc giving Perseus ownership of one of West Africa's highest quality pre-development stage projects, the Yaouré Gold Project in Côte d'Ivoire ("Yaouré"). Contracts for all material work packages required to complete the Yaouré definitive feasibility study have been awarded and work on the study is well underway.
On June 20, 2016, Perseus announced an equity placement and an accelerated entitlements offer. In total A$102 million of equity capital was raised from new and existing institutional and retail investors. Perseus has also advanced negotiations for a project finance debt facility of US$60 million to be used to partially fund the development of Sissingué with Macquarie Bank and BNP Paribas. Final credit approval and documentation of the debt facility are anticipated to be completed early in the 2017 financial year.
Combining proceeds of the equity capital raising and planned debt facility with expected future positive cash flows from Edikan from January 2017 and Sissingué from the March quarter of 2018, means that Perseus is well placed to fund its growth strategy that is expected to transform the Company from being a single-country, single-mine enterprise into a multi-mine, multi-country gold producer with production in excess of 500,000 ounces of gold within five years.
Other key points of the 2016 Financial Year results include:
24% decrease in revenue
7% increase in expenses
Cash balance of A$151.2M, or 15.1cps - A$47.5M (46%) more than FY2015
Combined value of cash and bullion of A$166.0M, or 16.5cps at the end of FY2016 - up A$38.7M or 30% on FY2015
Working capital of A$159.7M - a decrease of A$17.9M, or 10%, on FY2015
No third party debt.
Edikan produced the following results in the 2016 Financial Year:
Gold production 153,900 ounces
All In Site Costs US$1,351/oz
Average sale price of gold US$1,224/oz.
Marketwired - Sept. 4, 2016)
West African gold producer Perseus Mining Limited (PRU.TO)(PRU.TO) ("Perseus") advises that two further milestones have been achieved on the path to implementing its strategy of transforming Perseus into a multi-jurisdictional, multi-mine producer of in excess of 500,000 ounces of gold per year by 2021.
Credit Approval of Project Debt Facility for the Sissingué Gold Project ("Sissingué")
Full credit committee approval of a US$60 million project debt facility has been received by Macquarie Bank Limited and BNP Paribas, the prospective lenders to Sissingué. Final documentation and satisfaction of conditions precedent for the facilities are due for completion in the December 2016 quarter at which time funds should be available for draw down.
In the interim, development work at Sissingué, funded from the proceeds of a recent equity offering by Perseus, has advanced and the project is on schedule for the production of first gold in the December 2017 quarter.
Appointment of a Chief Operating Officer
In anticipation of the expansion of its operating activities to include both the Edikan Gold Mine in Ghana and Sissingué by the end of 2017, and with the prospect of developing a third mine at Yaouré within several years, Perseus has appointed Mr. Chris Woodall to the role of Chief Operating Officer ("COO").
Chris is a Australian mining professional who comes to Perseus equipped with a large amount of highly relevant operating experience needed to successfully perform the COO role for Perseus, having most recently held the positions of Senior Vice President Operations (Canada and US) for Goldcorp Inc. and immediately prior to that the role of Global Director Mining - Operations Support for Barrick Gold Corporation.
Reporting to the CEO, Chris will be based out of Perseus's corporate office in Perth but will necessarily spend a significant proportion of his time in West Africa overseeing the growth of Perseus's gold mining operations.
