Perseus Mining Limited (ASX:PRU) (TSE:PRU) produced 69,200 ounces of gold in the December 2019 quarter; 48,300 ounces from Edikan and 20,900 ounces from Sissingué.
At Edikan average ore grades and throughput improved, pushing up gold output for the second consecutive quarter.
At Sissingué ore was mined outside the main orebody, forestalling higher ore grades to the second half.
The West-Africa focused gold producer also has a larger, lower-cost Yaouré mine which is on track to achieve its first pour in late 2020.
Cormark Securities has initiated coverage on Perseus with a buy rating and a C$1.15 target (based on a 1.10x P/NAV multiple).
Following is an extract from Cormark’s research report:
Unless otherwise denoted, all figures shown in US$ We are using a $0.70 conversion rate for AUD and $0.77 for CAD
Perseus is an emerging mid-tier gold producer and developer with three key assets in West Africa – Edikan in Ghana (producing), Sissingué in Cote d’Ivoire (producing), and Yaouré in Cote d’Ivoire (under construction, first production late 2020). The company has one of the best production growth and FCF profiles in our coverage universe, and the historically challenged Edikan mine appears to have turned a corner under the newly implemented mine plan (which prioritizes cash flow over ounces). Perseus’ market capitalization now exceeds C$1 BB and it is in both the GDX and GDXJ.
We expect production to grow to nearly 500,000 oz and AISC to decline to the low-$800s in fiscal 2022 (from 272,000 oz at $960/oz AISC in fiscal 2019) as the larger/lower-cost Yaouré mine comes online and Sissingué enters higher grade material. At $1,475/oz gold, we forecast over $200 MM in FCF in fiscal 2022 (a peer-leading 28% FCF yield) and over $850 MM in FCF over Yaouré’s first 5 years of mine life (fiscal 2022-2026).
We are initiating coverage with a Buy rating and a C$1.15 target (based on a 1.10x P/NAV multiple). Our NAV is conservative and based on reserveonly mine plans, with limited value given to upside we see beyond that.
Although we see the potential for exploration to add mine-life (many targets remain undrilled), barring a significant near-mine/regional discovery we expect production to decline from the peak in fiscal 2022. Perseus is likely to utilize the forecast FCF to pursue M&A in Africa to fill this longer-term gap.