Perseus Mining Absorbs Ivory Coast Royalty Reset & Highlights Tier-One Operator Advantages

• Ivory Coast's move to a flat 8% mining royalty, backdated to January 2025, marks a material shift in fiscal risk assumptions for West African gold producers.
• The failure of industry resistance highlights a rebalancing of state-miner power, with implications for future project net present values and discount rates.
• High gold prices have muted near-term earnings impact, but long-term valuation sensitivity to sovereign risk has increased.
• Perseus Mining demonstrates how scale, margins, and balance-sheet strength can absorb fiscal shocks more effectively than peers.
• For investors, royalty resets sharpen the distinction between tier-one operators and marginal producers when allocating capital in Africa.

Ivory Coast's Royalty Reset & the Repricing of Fiscal Risk

The fiscal landscape for gold mining in West Africa underwent a structural change when Ivory Coast implemented a flat 8% royalty rate in early 2025. This policy shift carries implications that extend well beyond the immediate cost increase, signaling a broader recalibration of how host governments approach mining rents during periods of elevated commodity prices.

From Sliding Scales to a Flat Take

The previous royalty structure in Ivory Coast operated on a sliding scale ranging from 3% to 6%, with the rate determined by prevailing gold prices and contract terms. Under this framework, marginal operations benefited from lower royalty burdens during periods of compressed margins, while high-margin producers contributed proportionally more during favorable price environments.

The transition to a flat 8% rate fundamentally alters this dynamic. High-margin producers now face a fixed percentage regardless of their operational efficiency or cost structure, while marginal assets experience a proportionally larger impact on their already constrained economics. For operators with all-in sustaining costs around $1,200 per ounce, the incremental royalty burden represents a manageable compression of cash margins. For those operating at AISC levels above $1,500 per ounce, the same percentage increase consumes a materially larger share of free cash flow.

From a cash flow forecasting perspective, the flat rate introduces greater certainty in fiscal modeling while eliminating the downside protection that sliding scales historically provided during periods of price weakness.

Backdated Policy as a Signal

The decision to backdate the royalty increase to January 2025 carries significance beyond the immediate financial impact. Retroactive fiscal changes challenge the credibility of stability clauses embedded in mining conventions and introduce a precedent that capital allocators must weigh when assessing sovereign risk premiums.

This policy signal warrants an adjustment to discount rate assumptions for West African gold assets. Projects that previously modeled fiscal stability over their mine lives must now incorporate higher probability weights for mid-cycle policy revisions.

Failed Resistance & the Limits of Contractual Protection

The industry response to Ivory Coast's royalty reset tested the practical enforceability of fiscal stability provisions, revealing important lessons about the asymmetric nature of contractual protections in emerging market mining jurisdictions.

Legal Pushback & Its Limitations

Initial resistance from mining operators centered on fiscal stability clauses negotiated as part of original mining conventions. Companies including Perseus Mining, Endeavour Mining, Fortuna, Allied Gold, and Montage Gold initially disputed the legality of the levy and entered negotiations to have the new royalty scrapped.

However, enforcement of such clauses requires either cooperative dispute resolution or recourse to international arbitration tribunals. In practice, governments retain considerable leverage through their control of operating permits, export licenses, and regulatory approvals. This structural asymmetry means that contractual protections function more as negotiating frameworks than absolute guarantees.

Compliance as Strategic Calculus

With negotiations failing to progress and the government refusing to amend its position, operators ultimately chose compliance over confrontation. Faced with the risk of penalties, interest charges, or potential regulatory action, companies moved to settle outstanding royalty payments and demonstrate compliance with the new framework.

For investors evaluating African gold exposure, this outcome reinforces that political optionality in emerging jurisdictions is fundamentally asymmetric. Contractual provisions provide frameworks for dialogue but rarely deliver binding protection when governments determine that policy adjustment serves national interests.

Gold Prices as Margin Buffer

The timing of Ivory Coast's royalty reset coincided with gold prices near record levels, creating conditions where the immediate earnings impact was substantially absorbed by elevated margins. This cyclical cushion, however, should not obscure the structural nature of the fiscal change.

Margin Resilience at Current Price Levels

With gold prices having risen approximately 65% over the past year, producers operating at AISC levels below $1,500 per ounce maintain robust cash margins even after accounting for the incremental royalty burden. For a producer achieving AISC of $1,463 per ounce, as Perseus Mining reported for its September 2025 quarter, current gold prices generate margins exceeding $1,500 per ounce before the royalty adjustment.

Perseus maintains an EBITDA margin of 59.3%, significantly higher than the ASX gold peer median of 42.7%. This margin differential illustrates why tier-one producers can absorb higher royalties without destroying shareholder value.

Perseus Mining as a Case Study in Fiscal Resilience

Perseus Mining's response to the Ivory Coast royalty reset illustrates how operational and financial positioning determines the degree to which fiscal changes affect shareholder value.

Asset Quality & Margin Structure

Perseus operates three producing gold mines: Yaouré and Sissingué in Côte d'Ivoire, and Edikan in Ghana. This multi-mine portfolio with long reserve lives distributes fiscal exposure across assets with varying cost structures. The company's September 2025 quarter production of 99,953 ounces at an AISC of $1,463 per ounce positions it in the lower half of the industry cost curve, providing meaningful margin headroom to absorb royalty increases.

High-margin, long-life assets dilute the per-ounce impact of higher royalties across extended production profiles. The company's five-year outlook projects average annual production of 515,000 to 535,000 ounces at an AISC of $1,400 to $1,500 per ounce through FY30.

Balance-Sheet Strength & Strategic Optionality

Perseus's financial position heading into the fiscal reset demonstrates the value of conservative capital management. As of September 30, 2025, the company held $837 million in cash and bullion, with total liquidity of $1.13 billion including undrawn facilities.

Craig Jones, Managing Director and Chief Executive Officer of Perseus Mining, outlined the company's funding position:

"At this stage, there's no need for us to take any debt on. We can fund all of our aspirations through the cash that we have on the balance sheet."

This balance-sheet strength enables Perseus to fund growth projects internally, execute share buybacks, and maintain strategic flexibility without relying on external capital markets. In August 2025, the board committed to another A$100 million buyback programme.

Craig Jones reinforced this capital discipline:

"The board's committed to another $100 million buyback programme this year. So that should give some confidence around where we see our balance sheet."

Jurisdictional Diversification & Portfolio Risk Management

Single-country exposure amplifies the impact of sovereign policy changes on portfolio valuations. Diversified operators spread this risk across multiple fiscal regimes, creating natural hedges against jurisdiction-specific policy shifts.

Diversification as Risk Mitigation

Perseus's operations span two producing jurisdictions, Ghana and Côte d'Ivoire, with a major development project advancing in Tanzania. The Nyanzaga Gold Project is progressing on schedule with first production targeted for the March quarter of 2027. This geographic distribution moderates the portfolio-level impact of Ivory Coast's royalty increase.

Social Licence & Long-Term Positioning

Community relationships and local economic contributions influence how operators navigate fiscal negotiations. Craig Jones emphasized the importance of maintaining trust with stakeholders:

"Continuing Perseus's culture of delivering on its promises and a company that's respected by its owners and stakeholders for what it does and how it does it. Those are the sorts of legacies  that I'd like to leave in the company."

Social licence functions as risk mitigation rather than protection. Companies with strong ESG credentials and community relationships may achieve more constructive outcomes in fiscal discussions, though these factors do not guarantee immunity from policy changes.

Implications for Mining Investment in West Africa

Ivory Coast's royalty reset establishes precedents that will influence capital allocation decisions across the West African gold sector.

Capital Allocation in a Higher-Take Environment

Project sanctioning decisions incorporate fiscal assumptions that directly affect internal rates of return and payback periods. Higher royalty rates compress project economics, raising hurdle rates for new developments and potentially deferring greenfield investments in favour of lower-risk brownfield expansions.

Consolidation & Asset Rotation

Fiscal pressure may accelerate industry consolidation as operators with constrained balance sheets seek partnerships or exit transactions. Strong balance sheets create opportunities to acquire quality assets from distressed sellers at favourable valuations.

Craig Jones highlighted Perseus's competitive positioning:

"Perseus is known for its accretive acquisitions and then developing ore bodies into successful mines, and I think that's the strength of this organisation."

The Investment Thesis for Gold Producers in Fiscal Transition

The following factors merit consideration when evaluating gold producers operating in jurisdictions undergoing fiscal recalibration:

• Margin resilience matters more than headline costs, as producers with low AISC and high EBITDA margins can absorb higher royalties without destroying shareholder value.
• Balance-sheet strength provides strategic flexibility, enabling net-cash operators to pursue growth opportunities and return capital under shifting fiscal regimes.
• Jurisdictional diversification reduces tail risk by distributing sovereign policy exposure across multiple countries and fiscal frameworks.
• Royalty risk must be priced rather than ignored, with higher discount rates warranted for concentrated exposures though not uniformly applied across diversified portfolios.
• Management track records in delivering on commitments to shareholders and host communities provide insight into operational credibility during periods of policy uncertainty.
• Perseus Mining illustrates how scale, margin depth, and capital discipline can preserve equity value amid policy resets, offering a framework for assessing fiscal resilience across the sector.

Ivory Coast's royalty reset is not merely a tax increase. It functions as a stress test for mining business models operating in emerging jurisdictions. The episode reinforces that future returns in West African gold will increasingly favour operators with scale, margin depth, and balance-sheet strength.

While elevated gold prices currently mask the immediate earnings impact, long-term valuation will hinge on how effectively companies integrate fiscal uncertainty into disciplined capital allocation frameworks. Perseus Mining, characterized by financial strength, operational focus, and strategic optionality, provides a practical template for assessing which producers are positioned to endure, and which may struggle, as governments across the region seek larger shares of mining rents.

TL;DR

Ivory Coast's shift to a flat 8% mining royalty, backdated to January 2025, marks a significant repricing of fiscal risk for West African gold producers. Industry resistance failed, highlighting the limits of contractual protections against sovereign policy changes. While elevated gold prices currently cushion immediate earnings impact, the structural change raises discount rates for regional assets. Perseus Mining demonstrates tier-one operator resilience through low AISC ($1,463/oz), strong EBITDA margins (59.3%), and substantial balance-sheet liquidity ($837M cash). Geographic diversification across Ghana, Ivory Coast, and Tanzania further mitigates jurisdiction-specific risk. For investors, this fiscal reset sharpens the distinction between operators with scale and margin depth versus marginal producers.

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