Citi Research's Broker Report on Perseus Mining - A Summary

This report is a summary based on Citi Research's analysis of Perseus Mining Ltd as presented in October 2024. The information herein should not be interpreted as financial or investment advice. Crux Investor does not hold any shares in Perseus Mining Ltd.

About Perseus Mining

Perseus Mining Ltd is a leading West African gold producer with a diversified portfolio of assets, including the Edikan Gold Mine in Ghana and the Sissingué and Yaouré mines in Côte d’Ivoire. The company has been steadily expanding its production capabilities while maintaining a focus on sustainable and low-cost operations. With additional projects such as Bagoe, Liberty, and Nyanzaga in Tanzania, Perseus is poised for future growth, targeting sustained gold production of around 500,000 ounces per annum.

Recent Performance Highlights

In the September quarter of 2024, Perseus Mining delivered robust operational results, generating $127 million in cash flow, an increase of $10 million from the previous quarter. The company produced 121,290 ounces of gold at an all-in sustaining cost (AISC) of $1,040 per ounce, placing it in the first quartile of the global AISC curve. Perseus’ cash margins benefited from higher gold prices, with net cash and bullion rising by $56 million to a total of $643 million.

Operationally, the company’s Yaouré mine contributed 47% of group production, while Edikan and Sissingué accounted for 40% and the remainder, respectively. Yaouré’s performance was particularly notable, achieving a 110% reconciliation on contained gold.

Growth & Development

Perseus Mining is advancing several key projects to sustain and enhance its production profile:

• Nyanzaga Project: A final investment decision (FID) for the Nyanzaga project, capable of producing ~200,000 ounces per year, is expected in January 2025. The project’s capital expenditure is estimated at $450-$500 million.
• Côte d’Ivoire Projects: Progress is underway on securing permits and transitioning operations at the Bagoe permit, which will replace Sissingué’s Fimbiasso.
• Yaouré Underground Development: The Yaouré mine is preparing for its next phase, with underground mining legislation anticipated in November 2024. The underground project is expected to commence following a positive FID.
• Exploration Activities: Perseus continues to invest in exploration, including the +3.0 Moz Bankan project in Guinea through its 19.9% stake in Predictive Discovery.

Financial Position

The company’s financial health remains strong, with $643 million in cash and bullion reserves. Additionally, Perseus maintains a $300 million undrawn credit facility, providing ample flexibility to fund its ongoing projects and future growth initiatives. The sale of its Montage Gold stake added $45 million to its cash reserves during the SepQ.

Challenges & Risks

Perseus faces several risks typical of operating in emerging markets, including:

• Geopolitical Risks: Operating primarily in West Africa, the company is exposed to regulatory and social challenges that could impact operations.
• Project Development: Delays in permits or land negotiations, such as those at the Nkosuo deposit in Ghana, could affect production timelines.
• Commodity Price Volatility: Perseus’ financial performance is sensitive to fluctuations in gold prices and currency exchange rates.

Citi’s Recommendation

Citi Research's analysis rates Perseus Mining as “Neutral” with a target price of A$3.10 per share. While the expected total return is modest at 5.7%, the firm acknowledges Perseus’ strong operational delivery and its ability to execute on development projects. The high-risk designation reflects the geopolitical and operational challenges inherent in its asset portfolio.

Conclusion

Perseus Mining continues to demonstrate resilience and growth potential as a leading West African gold producer. With strong cash flows, a robust project pipeline, and a focus on cost discipline, the company is well-positioned to sustain and enhance shareholder value. While challenges remain, Perseus’ strategic initiatives and financial strength provide a solid foundation for future success.