Perseus Mining Ends FY2024 with Strong Production and US$587 Million of Free Cashflow

• Perseus Mining produced 120,929 ounces of gold in Q4 FY24 at an all-in sustaining cost of $1,173/oz, generating a $944/oz margin and $177 million in notional cash flow.
• For the full FY24, Perseus produced 509,977 ounces at an AISC of $1,053/oz, and $490 million in notional cash flow.
• The company's balance sheet shows $597 million in cash and bullion, zero debt, and an undrawn debt facility.
• Perseus focuses on acquiring pre-development assets and using in-house engineering to develop projects, aiming to create a balanced portfolio across multiple African jurisdictions.
• The company employs hedging strategies to manage gold price risk, currently hedging about 24% of projected production over 3 years at an average price of $2,200/oz.

Perseus Mining, an ASX-listed gold mining company, has emerged as a noteworthy player in the African gold mining sector. Focusing on sustainable growth, disciplined financial management, and strategic risk mitigation, Perseus offers investors an opportunity to participate in the gold market through a company that prioritizes stability and consistent returns.

Fiscal Year 2024 Financial Performance

Perseus Mining's recent financial results demonstrate the company's ability to capitalise on favourable gold market conditions while maintaining operational efficiency. In the fourth quarter of the 2024 fiscal year, Perseus produced 120,929 ounces of gold at an all-in-sustaining-cost (AISC) of $1,173 per ounce. This resulted in a healthy margin of $944 per ounce, generating $177 million in notional cash flow for the quarter.

Looking at the full fiscal year 2024, Perseus's performance is equally impressive. The company produced 509,977 ounces of gold at an AISC of $1,053 per ounce, achieving a margin of $961 per ounce. This translated to a substantial $490 million in notional cash flow for the year.

Jeff Quartermaine, CEO of Perseus Mining, commented on the company's performance:

"We've released our June quarter and full-year results for the financial year 2024 today. It's been a very good year for us, and it has meant that Perseus is very firmly on track to continue to fund its growth and also to continue to return capital to shareholders."

These results underscore Perseus's ability to maintain strong production levels while controlling costs, a crucial factor in the cyclical gold mining industry.

Interview with Chairman & CEO, Jeff Quartermaine

Financial Position & Capital Allocation

One of Perseus Mining's most striking features is its robust financial position. As of the end of FY24, the company reported $597 million in cash and bullion on its balance sheet. Importantly, Perseus carries zero debt and maintains an undrawn debt facility, providing significant financial flexibility.

This strong cash position allows Perseus to pursue a balanced approach to capital allocation. The company is well-positioned to fund its growth initiatives, including developing new projects, while returning capital to shareholders through dividends.

Growth Strategy & Asset Portfolio

Perseus Mining's growth strategy centres on acquiring and developing assets that offer attractive risk-adjusted returns. The company prefers to acquire pre-development stage assets and leverage its in-house engineering expertise to advance these projects through the development pipeline and into operation. Quartermaine explained this approach:

"Our clear preference is to acquire assets that are in the pre-development stage and to use our in-house engineering skills to take projects through the development pipeline and put them into operations. We believe that we can create the most value for our shareholders by doing that."

This strategy allows Perseus to capture the value creation potential of bringing new mines into production, rather than paying premium prices for already-producing assets.

Geographical Diversification & Risk Management

A key aspect of Perseus Mining's strategy is its focus on building a geographically diversified portfolio of assets across multiple African jurisdictions. This approach serves as a natural hedge against country-specific risks and helps to smooth out the company's overall performance.

Quartermaine highlighted the importance of this diversification:

"Africa does have its challenges, and the best way we can serve our shareholders is to present a balanced portfolio, one where we have multiple mines, multiple jurisdictions, which allow us to take the volatility out of our earnings."

This strategy means that if one operation or country experiences difficulties, the strong performance of other assets can compensate, providing more stable overall returns for investors.

Operational Excellence & Cost Management

Perseus Mining's recent financial results demonstrate its commitment to operational excellence and cost management. The company's ability to maintain AISC below $1,100 per ounce during rising industry costs is commendable. This cost discipline is crucial in maximising margins and cash flow generation, particularly in the volatile gold price environment.

The company's focus on continuous improvement and operational efficiency positions it well to navigate potential future challenges in the gold mining sector.

Gold Price Risk Management

Perseus Mining takes a proactive approach to managing gold price risk through a systematic hedging program. The company's policy allows for hedging up to 30% of projected production over a three-year period. Perseus has hedged about 24% of its projected production at a weighted average price of $2,200 per ounce.

Quartermaine explained the rationale behind this strategy:

"We believe it makes good common sense to manage the biggest risk a gold company faces, namely gold price risk. We do that in a methodical way that doesn't involve expanding the risk of the company by using exotic derivatives that none of us understand."

This hedging approach provides some downside protection for the company's cash flows, ensuring that Perseus can meet its financial obligations and fund its growth initiatives even in a lower gold price environment.

Future Growth Projects

Perseus Mining has several growth projects in its pipeline that have the potential to increase the company's production profile and mine life significantly. One of the most notable is the Nyanzaga project in Tanzania, which is expected to require an investment of $450-500 million.

Quartermaine emphasised the importance of financial prudence in approaching these large capital projects:

"The last thing in the world we want to do is to get halfway through that build, discover that the gold price has fallen back, and then find ourselves in urgent need of either equity or debt capital."

This cautious approach to project development, backed by the company's strong balance sheet and hedging strategy, reduces the risk of financial distress during the capital-intensive development phase of new mines.

Commitment to Shareholder Returns

While Perseus Mining is focused on growth, the company is committed to returning capital to shareholders. The company has established a dividend policy that aims to provide a minimum yield of 1% per annum, with the potential for additional returns when cash flow permits.

This balanced approach to capital allocation - investing in growth while providing current returns to shareholders - may appeal to investors seeking capital appreciation and income from their gold mining investments.

The Investment Thesis for Perseus Mining

• Strong financial performance: Consistent gold production with low AISC, generating substantial cash flow.
• Robust balance sheet: $597 million in cash and bullion, zero debt, providing financial flexibility.
• Disciplined growth strategy: Focus on acquiring and developing pre-production assets to maximise value creation.
• Geographical diversification: Multiple mines across different African jurisdictions, reducing country-specific risks.
• Proactive risk management: Systematic hedging program to manage gold price volatility.
• Pipeline of growth projects: Potential for significant production increases and extended mine life.
• Commitment to shareholder returns: Dividend policy with potential for additional returns.
• Operational excellence: Demonstrated ability to control costs and optimise mine performance.
• Experienced management team: Track record of delivering on promises and managing through industry cycles.
• Exposure to gold: Provides investors with exposure to gold as a potential hedge against economic uncertainty.

Perseus Mining has demonstrated its ability to generate strong financial results while maintaining a disciplined approach to growth and risk management. The company's focus on building a geographically diversified portfolio of assets in Africa and its proactive approach to managing gold price risk position it well in navigating the challenges inherent in the gold mining industry.

For investors, Perseus offers exposure to gold through a company with a track record of operational excellence and a balanced approach to capital allocation. The company's strong balance sheet and pipeline of growth projects provide potential for future value creation, while its dividend policy offers a degree of current income.

However, investors should be mindful of the risks associated with mining in Africa, the potential for gold price volatility, and the execution risks associated with developing new mining projects. As always, a thorough understanding of these factors and how they align with individual investment objectives is crucial when considering an investment in Perseus Mining or any gold producer.

Macro Thematic Analysis

The investment case for Perseus Mining is closely tied to the broader macroeconomic environment and its impact on gold prices. Gold has traditionally been viewed as a safe-haven asset and a hedge against inflation and economic uncertainty. In the current global economic landscape, characterised by persistently high inflation in many countries, geopolitical tensions, and concerns about potential recession, the outlook for gold remains generally positive.

Central banks worldwide have been aggressively raising interest rates to combat inflation, which typically would be a headwind for gold prices as it increases the opportunity cost of holding non-yielding assets like gold. However, fears of a potential economic slowdown or recession resulting from these tightening policies could support gold prices as investors seek safe-haven assets.

Furthermore, ongoing geopolitical tensions, including the Russia-Ukraine conflict and US-China trade frictions, continue creating economic uncertainty, often driving investors towards gold. Some countries' de-dollarisation efforts, particularly the BRICS nations, could also potentially support gold demand as these countries seek to diversify their reserves away from the US dollar.

This macroeconomic backdrop presents both opportunities and challenges for a company like Perseus Mining. Higher gold prices would benefit the company's revenues and margins. However, inflationary pressures could also lead to increased operating costs, particularly in areas such as energy and labour.

Perseus's strategy of geographical diversification and proactive risk management, including its hedging program, positions it well to navigate these macro uncertainties. As CEO Jeff Quartermaine aptly summarised:

"What we're trying to do is ensure that this is a sustainable, resilient business under all operating conditions and one that can continue to generate benefits for all of our stakeholders."

This approach could make Perseus an attractive option for investors seeking gold exposure with some downside protection.