Perseus Mining - Barrenjoey's Equity Research Summary

This is a broker report prepared by Barrenjoey on Perseus Mining Limited, compiled for informational purposes and does not constitute a recommendation to buy or sell securities. Crux Investor does not hold any shares in Perseus Mining Limited and provides this analysis solely to offer insights into the company's performance and prospects based on available data.

About Perseus Mining Limited

Perseus Mining Limited (ASX/TSX: PRU) is a dynamic and resilient gold producer operating in West Africa, with mines in Côte d'Ivoire and Ghana, and development projects in Tanzania and Sudan. The company has established itself as a key player in the region, combining steady production growth with strategic exploration.

Perseus produced over 500,000 ounces of gold in FY24 and is on track to approach 600,000 ounces by FY28, underpinned by its strong operational performance and a robust pipeline of projects. With a focus on sustainable development, operational excellence, and a cash-rich balance sheet, Perseus Mining is well-positioned to deliver value for its stakeholders and capitalize on future growth opportunities in the gold mining sector.

Performance Summary

September Quarter 2024 Results

• Production Metrics:
  • Total gold production: 121.3koz, aligning with consensus estimates.
  • Yaouré mine contributed 56.4koz, Edikan produced 47.8koz, and Sissingué generated 17.1koz.
• Cost Analysis:
  • All-in Site Costs (AISC): Averaged at $1,021/oz, significantly below guidance ($1,200-$1,300/oz).
  • Cost improvements were driven by:
    • Operational efficiencies at Yaouré and Edikan.
    • Delayed access to the Nkosou satellite deposit at Edikan, offset by alternative ore sources.
• Financial Highlights:
  • Cash and bullion increased by $56M, bringing the total to $643M.

Challenges & Opportunities for 2025

• Key Risks:
  • Development of the Nkosou satellite deposit at Edikan faces delays due to unresolved land negotiations.
  • Commissioning risks at the CMA underground project, expected mid-2025.
  • Ongoing political challenges in Sudan affecting the Meyas Sand project.
• Potential Upsides:
  • Nyanzaga project in Tanzania, with a Definitive Feasibility Study (DFS) expected this quarter, could enhance future valuations.
  • Exploration activities in Côte d'Ivoire (CMA underground and Yaouré West) and Ghana are focused on extending the mine life of existing assets.

Investment Case

Production Growth

• Expected group gold production is forecast to grow from 511koz in FY24 to nearly 600koz by FY28, driven by:
  • Contributions from the Nyanzaga project.
  • Exploration success and potential new developments, such as Meyas Sand and Bankan.

Financial Metrics

• At current gold prices (~$2,750/oz), Perseus demonstrates strong cash flow potential, with Free Cash Flow (FCF) yields projected at 13-17% over the next three years.
• The company maintains a robust cash position, holding 24% of its market cap in cash and bullion.

Valuation & Price Target

• The report values Perseus Mining at a price target of A$3.40 per share, slightly adjusted from A$3.45, based on discounted cash flow (DCF) modeling.
• Upside drivers include:
  • Higher-than-expected gold prices.
  • Advancements in key projects like Nyanzaga and Meyas Sand.
  • Strategic acquisitions or partnerships, including a potential deal with Predictive Discovery Ltd.

Barrenjoey's Recommendation

Barrenjoey has reaffirmed its Overweight (OW) rating for Perseus Mining Limited, reflecting confidence in the company’s ability to deliver growth and manage operational risks. Despite challenges posed by the Nkosou satellite development and CMA underground commissioning, Perseus’s financial strength, strong cash flow, and significant growth prospects through projects like Nyanzaga and Meyas Sand underpin its positive outlook. The price target has been adjusted slightly to A$3.40 per share (from A$3.45), offering a 17% expected total return, supported by favorable gold price forecasts and strategic development plans.

Risks to Valuation

Upside Risks

• Positive re-evaluation of the Nyanzaga BFS.
• Resolution of conflicts in Sudan enabling faster development of Meyas Sand.
• Exploration success extending the operational life of existing assets.

Downside Risks

• Delays or political challenges in Sudan and Tanzania.
• Declines in gold prices below the forecasted levels.
• Operational setbacks at flagship mines impacting production targets.

Conclusion

Perseus Mining Limited continues to deliver on its operational commitments while navigating challenges in its growth pipeline. With a strong financial position, ongoing cost control, and promising development projects, Perseus is well-placed to achieve sustainable production growth and value enhancement. Despite potential risks, the company's strategic approach to exploration and development supports a positive outlook for long-term investors.