Perseus Mining – Broker Analysis by Argonaut

This summary provides an overview of Argonaut's broker report on Perseus Mining (ASX: PRU), focusing on the company's operational and financial performance, as well as its growth outlook. It is important to note that this is a review of Argonaut’s analysis, not financial advice or a recommendation from Crux Investor. We are not providing a buy or sell recommendation, and Crux Investor does not hold any shares in Perseus Mining. Readers are encouraged to consider their own investment objectives and seek professional advice before making any financial decisions.

About Perseus Mining

Perseus Mining (ASX: PRU) is a standout performer in the gold mining sector, recognised for its diversified portfolio of high-quality assets in West Africa and its ability to deliver consistent operational results. With mines strategically located in Ghana and Côte d’Ivoire, and the exciting development of the Nyanzaga project in Tanzania, Perseus is uniquely positioned to balance stable production with growth potential. The company’s focus on cost management, operational efficiency, and disciplined project development sets it apart from its peers, as does its robust financial position, highlighted by significant cash reserves and a clear strategy for future growth. Perseus Mining continues to demonstrate a strong commitment to creating sustainable value for its shareholders while maintaining a forward-looking approach to expansion and innovation.

Argonaut's Overview & Recommendation

• Recommendation: BUY
• Price Target: Adjusted from $3.60 to $3.50.
• Current Price: $2.96
• Total Shareholder Return (TSR): 20%
• Perseus Mining (PRU) demonstrates strong fundamentals, maintaining steady production levels and controlling costs despite some headwinds at specific sites.

Production & Financial Performance

• 1QFY25 Production:
  • Produced 121.3 koz, flat quarter-on-quarter (QoQ), but 7% below estimates.
  • The key underperformance was due to lower-than-expected head grades at Yaouré.
  • Adjustments made to FY25 production estimates, reducing group forecasts from 545 koz to 512 koz.
• Cash Costs and Margins:
  • Group All-In Sustaining Cost (AISC): US$1,201/oz, in line with estimates.
  • Gold sales: 108.9 koz at a realised price of US$2,249/oz, generating a cash flow of US$127 million.
  • Edikan outperformed with low costs (AISC: US$1,031/oz), offsetting elevated costs at Yaouré.

Key Project Updates

• Yaouré:
  • Reported lower head grades (1.86 g/t) but improvements expected in subsequent quarters.
  • Anticipated stronger production in 2QFY25.
• Nyanzaga:
  • Early works commenced, including housing resettlement and engineering designs.
  • Capex requirement for development estimated at US$450–500 million for a 5Mtpa CIL plant.
  • Potential production: +235 koz/year, with first gold targeted for January 2027.
• Bankan Stake:
  • PRU holds a 19.9% stake in Predictive Discovery, valued at US$84 million.
  • No immediate plans to acquire full control; waiting for feasibility studies and permitting completion by late CY2025.

Valuation & Risks

• Valuation:
  • Based on a 50/50 blend of spot prices and Argonaut forecasts.
  • Key contributors include Edikan, Yaouré, and Nyanzaga projects.
  • Current net cash position: A$960 million.
• Risks:
  • Operational Risks: Potential cost overruns and production variances due to geological or operational challenges.
  • Country Risks: Political stability in Côte d’Ivoire and Ghana remains crucial for operational continuity.
  • Market Risks: Fluctuating gold prices and foreign exchange rates can impact margins.

Future Outlook

• Production Guidance:
  • CY2024 group production guidance set between 468–508 koz, with Argonaut modeling 495 koz.
  • Medium-term focus on optimising operations at Yaouré and commencing production at Nyanzaga.
• Financial Metrics (FY25E):
  • Revenue: US$1,274 million.
  • EBITDA: US$637 million.
  • Free Cash Flow (FCF): US$296 million.
  • Dividend yield: 2.5%.

Conclusion

Perseus Mining demonstrates resilience and strong operational capabilities, with steady production and effective cost management, even amidst challenges at Yaouré. The company’s robust performance at Edikan and ongoing development at Nyanzaga highlight its commitment to long-term growth and value creation. With a solid financial position, promising project pipeline, and strategic focus on improving operational efficiencies, Perseus Mining is well-positioned to deliver sustained growth. Argonaut maintain a BUY recommendation reflects confidence in the company’s ability to capitalise on its strengths and deliver shareholder value over the medium to long term.