Perseus Mining - Q3 Results Show Strong Production, Cashflow & Growth, with $643m in Cash & Bullion

• Perseus Mining is an Australia-based multi-mine, multi-jurisdiction gold production company focused on operating in Africa
• The company produced 121,290 oz gold in the most recent quarter at an all-in site cost of $1,201/oz, with a margin of $1,048/oz
• Perseus has a strong balance sheet with $643M in cash, enabling continued investment in growth and returns to shareholders via dividends and a $100M share buyback
• The Yaouré mine has a 12+ year life, while Edikan and Sissingué each have 3-4 more years; the Nyanzaga project in Tanzania will come online in 2027 producing 200-250 koz/yr
• Despite strong execution, Perseus trades at a discount to Australian and African peers, with a P/E of 7.6 vs 15-16 for Australian companies; management is focused on consistent execution to drive re-rating

Perseus Mining is an under-the-radar gold producer that offers investors exposure to a diversified operating base in Africa, a strong balance sheet, organic growth potential, and a shareholder-friendly capital returns program. The company has consistently executed on its strategy but still trades at a meaningful discount to its peer group, presenting a compelling opportunity as the market eventually recognises the value on offer.

Operational Consistency & Strong Financial Position

Perseus has built a portfolio of three operating gold mines across Côte d'Ivoire and Ghana, with geographic diversification a key tenet of the company's strategy. In the most recent quarter, Perseus produced 121,290 ounces of gold at an all-in site cost of $1,201 per ounce. With an average gold sale price of $2,2490 per ounce, the company generated a healthy margin of $1,048 on every ounce poured.

This strong operational result drove operating cash flow of $127 million for the quarter and and US$363 million for the year to date. After taxes, corporate overheads, and growth investments, Perseus still saw its cash balance increase by $56 million to $643 million. This rock-solid balance sheet gives Perseus the flexibility to aggressively invest in its organic project pipeline while also returning cash to shareholders.

As CEO Jeff Quartermaine explained:

"Our mission is to generate benefits for all stakeholders, and if you exclude shareholders for a moment, the benefits that are sought by host governments, host communities, employees, suppliers of goods and services, all of those benefits require cash. So that's why we focus on cash as a business."

Interview with Managing Director & CEO, Jeff Quartermaine

Capital Returns

Perseus initiated a dividend in 2022, declaring 5 cents per share for the year, equating to a 1% yield plus a 1% bonus given the strong results. While the yield is modest, it signals management's confidence in the future and its commitment to shareholder returns.

In addition to the base dividend, Perseus recently announced a $100 million on-market share buyback to be executed over the next 12 months. Repurchases will be balanced with an active exploration and development program to maximize value creation. The buyback provides a return of capital for investors while also supporting the stock. Quartermaine noted:

"Many shareholders were saying to us, well, we certainly appreciate the dividend but we would also like to see you embark on a share buyback because from a tax perspective that's a better way for us to receive capital."

Extending Mine Lives

A key challenge for gold miners is replacing depleted reserves to maintain production. Perseus has a mixed portfolio in terms of mine life, with its flagship Yaouré mine in Côte d'Ivoire boasting a reserve-based life of at least 12 years and potentially much longer. Meanwhile, the Edikan and Sissingué mines in Ghana have 3-4 years remaining based on current reserves.

Management is working to extend these mines through near-mine exploration, satellite deposits, and potential underground development, with the goal of maintaining a rolling 3-4 year mine life for the foreseeable future. However, the mid-term production outlook is underpinned by the Nyanzaga project in Tanzania.

Acquired in 2023, Nyanzaga is expected to produce 200-250,000 ounces per year over an initial 12-year mine life after coming online in 2027. Nyanzaga's contribution will more than offset declines at Edikan and Sissingué, lifting the company's overall production profile. Looking further ahead, management is aiming to have a pipeline of projects to sustain the business at 500,000 ounces per year over the long term.

Long-Term Production Growth Target

In addition to the organic growth opportunities at its existing mines and the significant contribution expected from the Nyanzaga project, Perseus Mining has set an ambitious long-term production target. CEO Jeff Quartermaine outlined the company's goal of achieving an annual gold production of approximately 500,000 ounces or more.

Quartermaine emphasised the importance of having a pipeline of development projects that provides shareholders with a clear line of sight to this production target. He stated:

"What we're aiming to do as a company is to have a pipeline of development projects that will ensure that a shareholder looking at the company can see a lot have a line of sight to production of 500,000 ounces a year plus for as long as they can actually see. So that's basically the aim of what we're about to do."

To achieve this goal, Perseus Mining is actively exploring and evaluating potential growth opportunities, both through organic exploration and strategic acquisitions. The company's strong cash position and financial flexibility enable it to pursue high-quality projects that align with its long-term production objectives.

By communicating this clear production growth target, Perseus Mining demonstrates its commitment to sustainable, long-term value creation for its shareholders. As the company executes its growth strategy and advances its project pipeline, investors can anticipate a steady increase in gold production, further enhancing Perseus Mining's position as a significant player in the African gold mining sector.

Undervalued Despite Execution

Despite Perseus' consistent operational delivery, the company still trades at a meaningful discount to both its Australian and West African peers. On a price-to-earnings basis, Perseus trades at just 7.6 times earnings compared to an average of 15-16 times for Australian gold miners. While Perseus has narrowed the valuation gap over time, there is still significant upside potential as the company continues to execute and the market gains confidence in the story.

When asked about the company's approach to closing the valuation gap, Quartermaine emphasised the importance of execution:

"It is about execution, it's about delivering on promises, it's about doing what you say you're going to do. And they're all things that are central to our core values as a company."

The Investment Thesis for Perseus Mining

• Strong operational execution with consistent cost control and margin generation
• Robust balance sheet ($643M cash) providing flexibility for growth and returns
• Clear production growth pathway to 500,000 oz/year
• Geographic diversification reducing single-country risk
• Trading at significant discount to peers (7.6x P/E vs 15-16x peer average)
• Near-term catalysts including Nyanzaga FID and potential M&A
• Established dividend policy and buyback program demonstrating commitment to shareholder returns

Perseus offers a unique investment proposition – a multi-mine, multi-jurisdiction African gold producer with a strong balance sheet, attractive shareholder returns, and meaningful organic growth. The company has proven its ability to consistently execute and deliver on its promises, yet still trades at a substantial discount to peers. As management continues to focus on execution and the market gains confidence in the story, patient investors stand to be rewarded with a significant re-rating of the stock. With a rock-solid financial position and growth pipeline, Perseus is a rare undervalued opportunity in the gold sector.

Macro Thematic Analysis

The current macroeconomic environment of high inflation, geopolitical tensions, and recessionary fears provides a potentially attractive backdrop for gold equities. Gold has historically performed well during periods of economic uncertainty and market volatility, acting as a safe haven and portfolio diversifier. While higher interest rates present a headwind for the precious metal, the extraordinarily high levels of global debt could limit central banks' ability to raise rates much further without triggering a crisis.

In this context, gold miners offer leveraged exposure to the underlying commodity price. As Perseus has demonstrated, companies with high-quality assets, experienced management teams, and strong balance sheets can deliver robust margins even in an inflationary operating environment. Furthermore, valuations across the sector remain undemanding despite the supportive macro backdrop and strong underlying fundamentals.

Longer-term, gold should also benefit from the ongoing de-dollarization trend as countries seek to reduce their dependence on the US dollar and diversify their foreign exchange reserves. Central bank gold demand reached a multi-decade high in 2022 and is expected to remain strong in the coming years.

As Quartermaine succinctly explained:

"Our mission is to generate benefits for all stakeholders and if you exclude shareholders for a moment, the benefits that are sought by host governments, host communities, employees, suppliers of goods and services, all of those benefits require cash. So that's why we focus on cash as a business."

In an uncertain world, gold miners that can consistently generate cash flow stand to benefit, making Perseus a compelling investment proposition.