2021/04/20, 11(18

Transcripts Basic Materials

Perseus Mining Limited (PMNXF)

CEO Jeff Quartermaine on Q3 2021
Results - Earnings Call Transcript
Apr. 20, 2021 2*50 AM ET | Perseus Mining Limited (PMNXF)

Perseus Mining Limited (OTCPK:PMNXF) Q3 2021 Earnings Conference

Call April 19, 2021 7*00 PM ET

Company Participants

Nathan Ryan - Investor Relations

Jeff Quartermaine - Chief Executive Officer & Managing Director

Conference Call Participants

Nathan Ryan

[Call starts abruptly]

March 2021 Quarterly Report. All attendees are in a listen-only mode. If

you'd like to ask a question, please enter it in the Q&A panel within zoom. I
will now hand over to Perseus Mining Chief Executive and Managing
Director, Jeff Quartermaine. Over to you, Jeff.

Jeff Quartermaine

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Thanks very much. Thanks, Nathan. And welcome to this webinar to

discuss Perseus's March 2021 quarterly report that was released to the
market earlier today.

Now, at the risk of sounding like a broken record each quarter, Perseus has
recorded yet another strong quarterly performance, increasing production
by 29% and providing the clearest indicator yet that the company is willing
truly on it's way to achieving it's targeted production rate of 500,000
ounces of gold per year, at a cash margin of US$400 per ounce or more.
We completed the commissioning of our third mine, Yaouré, and by the
end of March, the mine was cash positive and we're able to declare
commercial production from 31 March. This was the last major milestone in
the development of this very important project.

In fact, each year -- during the quarter, each of our three months including
Edikan in Ghana, as well as Sissingué and the Yaouré in Côte d'Ivoire have
all performed very much in line with our expectations. As a group, we
produced 88,458 ounces of gold and sold 87,215 ounces, about 31% more
than in the prior quarter. Pleasingly, our all inside costs were less than
US$1,000 per ounce, and with the help of a recently booming gold price,
we're able to generate a fair material amount of cash putting us into a
strong position to fund the future.

Our organic growth strategy is starting to show signs of delivering results.

Those reported earlier this month, some of our work at Bagoé and Yaouré
is looking quite interesting, and in time to come we expect to publish
further positive news flow about real organic growth from those sites.
We've made excellent progress in terms of managing our sustainability and
materiality [ph] analysis and a gap analysis to see exactly where we need
to apply further effort to align ourselves to global standards, most recently
completed by our newly appointed Head of Sustainability; and all of this
will be documented in our very comprehensive 2020 sustainability report
that will be published very shortly, and that is something to look out for.

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So anyway, in summary, Perseus is in a very good place and this is the

result of a lot of hard work and support of our very dedicated and
professional team of employees and their families over a number of years,
and I would sincerely thank them all for their efforts. For those of you who
haven't yet had the opportunity to read our March quarterly, let me briefly
talk in a bit more depth about a couple of key elements of our performance
before opening up to any questions that you may have.

So firstly, as I said, our major achievement this quarter was indeed the
successful commissioning of the Yaouré mine and associated
infrastructure, culminating in commercial production at the end of the
quarter. Now as you'll recall, last quarter we ported our first goal at Yaouré
in December, and then shortly after experience some equipment failure at
the site; this required us to implement a few contingency plans to
commission the rest of the plant until we could replace the failed
equipment. Now after managing to procure and install a replacement
transformer for our sag mill [ph] like in February, things moved very, very
rapidly. And we were able to satisfy all of our completion tests and
demonstrate that the mine was indeed cash positive by the end of March,
hence the declaration of commercial production.

We produced 22,095 ounces of gold at Yaouré category during the

quarter, including nearly 10,000 ounces in the month of March. And going
forward into the June quarter, we expect to start introducing higher grade
fresh material from the CMA pit, ensuring that we comfortably achieve our
production and cost guidance at Yaouré for the June half year. And just
reminding you that that guidance is 48,000 to 52,000 ounces at an all
inside cost of US$1,100 to US$1,300 per ounce, and we believe that we
can quite easily -- quite readily achieve that.

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Now, we plan to release an updated life of mine plan for Yaouré towards
the end of the June quarter. This plan will be based on a mineral resource
that includes a modest increase in resources compared to the original DFS,
but it's unlikely to include additional resources resulting from recent drilling
or other studies that we've undertaken. When these additional resources
have been estimated they'll materially increase the life of the mine but this
further update will be produced later in the year after we publish this life of
mine plan that's due at the end of the quarter. The June 2021
[indiscernible] mine update will however reflect actual costs and this I
expect will show an improvement in project economics relative to the DFS.

So Yaouré is up and running, and may I take the opportunity to sincerely

thank and congratulate everybody who contributed to what really has been
quite a remarkable achievement given the challenges seen as a result of
the COVID pandemic last year. There have been many outstanding
contributors, and I'm not only referring to our excellent development team
and our contractors who built the mine, a lot of work went into the
discovery, engineering, financing, licensing and administration of the
property. And of course, last but not least, I'd also like to acknowledge the
tremendous support and cooperation that we received from our house
communities and their traditional leaders, as well as representatives of the
Government of Cote d'Ivoire, including former ministers, Brew and Kumasi
[ph]. As a result of the endeavors of all of these people, we're now able to
look forward to generating material benefits from Yaouré for all of our
shareholders for many years to come.

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Now, not to be outdone, the Edikan and Sissingué mines have also
performed very strongly during the quarter. Combined, the two mines
produced 66,364 ounces of gold and production cost of US$852 an
ounce, and a weighted all inside cost of US$999 per ounce. So production
was up a little on the last quarter, which is neither here nor there, but the
7% and 4% decrease respectively in production and all inside costs were
much more material in terms of generating incremental cash flow. This was
an extremely good performance when you consider that Sissingué lost
nearly 10% of available production time during the quarter due to
disruptions caused by the actions of a small group of youth from one of
the nearby villages; and at Edikan, our mining contractors equipment
availability was subpar for periods of the quarter due to COVID-related
maintenance challenges. I should say that both of these issues have
largely been resolved, but to achieve that we did in the face of those
challenges was a very good effort, indeed.

One point related to Edikan that I would like to particularly draw your
attention to is the gold recovery rates we've achieved this quarter. Now
regular readers of our quarterly reports would know that for several
quarters last year, we struggled to optimize feed blend at Edikan, and to
get the best balance of head grade throughput rates recovery, and on
occasions we recorded disappointing recovery rates. I'm very pleased to
say that with the end of the Bikitsy [ph] fresh ore and the opening up of
new ore sources in the [indiscernible] pits, we've seen a steady climb in
recovery rates. And in fact, in March, they averaged around 88.5%, which
is a lot higher than the 74% that we saw in December. We do expect these
elevated recovery rates to be the norm from here, and that's certainly the
case so far in this month. We'll still need to balance head grade and
throughput rates for some of the ore's that are harder than others, but
that's a much more manageable than the metallurgical challenges we
faced in the past.

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So, that's a significant point of improvement at Edikan. Now, with respect

to Sissingué notwithstanding the lost production time, everything else
there has gone exceptionally well this quarter, and we've consistently
exceeded our internal targets on most, if not all of the key parameters; so
our run-time, throughput rates, grade recovery, etcetera. The only thing
that remotely resembles a cloud on the horizon at this mine ironically, it
has nothing to do with Sissingué's operating performance per se. This
quarter we've once again been frustrated by our inability to have the
mining lease needed for the mining of the Fimbiasso deposit approved by
the Ivorian Cabinet of Ministers.

Now, since later stated last year, there's been a series of matters that have
taken precedence in cabinet over approving mining leases, including a
Presidential election, reconciliation of opposition forces post-election,
preparation for the legislative election that was held in March, the death of
the second Prime Minister in eight months, and most recently, a cabinet
reshuffle. Now, I do believe that we'll be meeting with the new minister this
week in Abidjan and the Fimbiasso license will be at the top of the agenda
for discussion. The issue here is that if the license is delayed further, it will
impact our mining schedule in the back end of this year, and we'll need to
process lower grade ore stockpiles until we get full access to the higher
grade or at Fimbiasso.

Now, this will have no influence whatsoever on the remainder of this

financial year, or on our ability to achieve market guidance for this year but
it could become an issue later in the year if not resolved. And so, quite
clearly, it's a matter of real importance for us.

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Now looking to the future production; our production and cost guidance to
the market for the 6 and 12 month periods ending June 30 is -- well, the 6
months it's 175,000 to 190,000 ounces at US$950 to US$1,150. And for
the full financial year, it's about 313,000 to 327,000 at US$970 to
US$1,070. Now, I think we've still got two and a half months of the
reporting period to go, and plenty can go wrong in this time but given our
performance to-date, including both, the March quarter and the June
quarter to-date, we are very confident of not only achieving both
production and cost guidance, but hopefully doing very well relative to
those targets.

Now, in terms of our financial performance during the quarter, our average
cash margin on each ounce of gold produced from Edikan and Sissingué
was US$629 per ounce, down a little from US$651 in the prior quarter due
to a decrease in the weighted average sales price from US$1,687 to
US$1,628. Now notwithstanding this, our cash margin was more than 50%
greater than our strategic target of US$400 an ounce, which generated us
-- which enabled us to generate something like US$42 million of notional
cash flow for Edikan and Sissingué alone.

Now, as we haven't declared commercial production at Yaouré till the end

of the quarter, in accordance with international financial reporting
standards we have capitalized all revenues and costs from Yaouré up to
that date. So we don't count cash flow from Yaouré in our titles, but from
April 1 onwards Yaouré's costs and cash flows will be published together
with the other mines. Now as I said earlier, Yaouré was actually strongly
cash positive in March; so we do expect to see a national cash flow from
operations take a big lift in quarters to come if things go as we expected all
of the mines.

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And finally, throughout the March quarter, Perseus has managed to

maintain it's balance sheet strength through those strong cash flows and
also prudent financial management. As I said, the notional cash flow from
the operations was US$42 million this quarter, allowed us to pay
outstanding bills from the development of Yaouré fund exploration at all
three operating sites, pay income tax in Ghana, pay corporate overheads,
and still hold cash and bullion at the end of March of US$136 million, up
from US$118 million in the previous period. That gave us net cash gifts of
US$6 million after you take into account our outstanding debt of US$130
million.

Now when you consider that since late 2016, we've invested close enough
to US$400 million in bringing firstly, Sissingué, and then Yaouré online, and
we've still managed to end up in a cash positive position without major
equity raises along the way. We have done quite well and I guess
positioned Perseus to really reap the benefits of this hard work as we go
forward. Now, speaking of the future, our plans for future growth of the
business is a topic that I'm regularly asked about these days with Yaouré
online and running our focus has firmly moved into implementing various
strategies for maintaining our targeted production level of 500,000 ounces
per annum consistently into the future by either organic or inorganic
means.

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In the shorter term, Perseus's main focus is simply to replace mining

depletion through organic growth, while setting up for longer term organic
growth. Now to achieve this, the emphasis over the next 6 to 12 months
will be placed on the incremental addition of mineral resources and ore
reserves from near mine deposits that are currently the subject of
exploration and/or feasibility studies. And as I said earlier, a little over a
week ago we published drilling results from a couple of the exploration
programs that we've been conducting recently. One of these was at Cubiz
[ph], on the Yaouré tenements, and the other was on the Bagoé tenements
located close to Sissingué. And if you haven't seen these results, I would
urge you to take a closer look at the release because as people will recall,
the results were very encouraging. And I expect to be the first of many
such results that will come from our work in coming months and indeed
years. We have some really excellent targets to pursue at all three of our
mines, and with the completion of our recent mine development program,
this is the first time at Perseus in a very long time that we've actually had
the means to properly fund exploration.

Now off the back of the Bagoé results that we published the other day,
they relating to drilling at Antoinette, Véronique and Juliette; we are
preparing a definitive feasibility study for the development of these
deposits. This will be completed by the end of June 21 quarter, this is a
little bit later than what I had previously flagged but this was the result of
slow turnaround of results from over worked SA Labs in Cote d'Ivoire. Now,
we do expect that there'll be significant addition of mineral resources at all
reserves and that we estimate that the result of this will be quite an
extension to the forecast life of the Sissingué operations. So that's very
pleasing indeed, given the efficiency of that particular operation.

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Now speaking of feasibility work, it would be a remiss for me not to

mention our evaluation of developing an underground mine on the Esuajah
South deposit at Edikan. Now, following careful consideration of the
economics of the proposed development and notwithstanding the fact that
further technical work has increased confidence in a number of key
technical parameters, including estimated tons and grade, and the size of
the mineable resource, actually by about 63,000 ounces; we have
concluded that the overall project risk-return ratio as it currently stands
doesn't meet our investment criteria. So as a result of that, we've decided
to defer the planned start of the implementation of the Esuajah South
underground development for the time being.

Now, I should also say that we have not given up on this project. Further
technical reviews will be undertaken to investigate potential for additions
to the ore reserve at depth, and also additional optimization of designs and
mining methods will be undertaken. While we're doing this, we will engage
with the government in Ghana, have various discussions there and also
complete licensing. And one thing we will also do is, we will meet all
outstanding commitments to our host community in relation to the project,
so that should circumstances change sufficiently, we will be able to switch
this project on without any drama.

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In the meantime, though beyond the June quarter, we do have several

large targets that have been identified for potential conversion to mineral
resources and possibly ore reserves, close to infrastructure at the mines.
As I said, the preferred targets for organic growth at Yaouré include the
CMA underground, and other targets established from the initial
interpretation of the 3D seismic survey that was completed on the site last
year; that looks exceptionally interesting there, I have to say. At Edikan,
subject to gaining access for drilling, a drill program is planned at the
Bremen deposit on the [indiscernible], where significant mineralization has
been identified under surface in artisanal mine workings. Now as far as
that access is concerned, we have made very good progress in recent
times and we're hopeful that final agreement will be reached allowing
access fairly shortly.

At Sissingué, there is certainly further potential to add mineral resources

and ore reserves from the Bagoé area, in fact, we have a drill rig heading
back there; I think it's this week or early next week to recommence drilling
in that area. I should also say that potential inorganic growth business
opportunities involving either mergers or acquisitions are also regularly
assessed by our in-house technical and commercial teams. Now, given the
challenges of implementing value accretive M&A and applying strict
financial discipline in assessing opportunities, we're not putting our hopes
on this activity for delivering growth in the immediate future, preferring to
focus near mine and early exploration growth strategies. But I can say we
are actively looking.

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I think the strategic acquisitions of Ammara that yield the Yaouré project
and more recently, XOR [ph] resources that yielded Bagoé have shown
that we have the capacity to successfully identify value and transact when
the right M&A situation presents. The point of this is that having now got
Yaouré up and running, we are actively involved in shaping the future of
this company. And doing it in a way that we believe will create -- will be
significantly value accretive for our shareholders. And news flow over the
next few quarters will reveal that progress, and I do expect that there will
be a steady stream of positive news to share with you as we push forward.

So, in conclusion, as I've said at the start of the call, the March quarter has
been yet another very solid quarter for Perseus as we promised it would
be. The June 2021 quarter has started very well at Edikan, Sissingué and
Yaouré, it's building up and hitting all the key parameters and trending --
certainly trending in the right direction. Financially, we're getting stronger
by the day due to the solid production results, containment of costs and
strong gold prices. Exploration-wise, we've got a clear plan and we have a
budget and we're getting on with the task of organically growing our
business and creating value for shareholders. And as I said in terms of
inorganic growth or M&A, we are in the game and while we're making no
promises in relation to this, we are putting ourselves in a position to
transact and capture shareholder value if the stars happen to align.

And finally, we're now in a position where we can seriously discuss

internally the returning capital to shareholders by way of a dividend or
share buyback. Now it should only be a matter of time before the quality of
Perseus's performance -- recent performances, and earnings capacity is
recognized by the market and our patient shareholders will be fully
rewarded for their support of this company.

So, thanks very much for listening. And I'm now happy to take any
questions that you may have.

Question-and-Answer Session

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A - Nathan Ryan

Thank you, Jeff. Just a reminder, if you'd like to ask a question, please
enter it into the Q&A panel within Zoom. Got the first one from Mike
Mulligan. He says, "Hi, Jeff. Good to see another strong quarter of
production. If you get the grant to the mining license for Fabinso in the
June quarter, will that allow time for mining to start in the September
quarter? I mean, if it goes on further in regards to gold hedging; do you
plan to maintain the 2020 ID profile, i.e. 80% unhedged?" Those three
questions.

Jeff Quartermaine

Okay. So just correcting that point; it's not Fabinso, it's Fimbiasso.

Nathan Ryan

Fimbiasso, sorry. I didn't say that, sorry.

Jeff Quartermaine

Yes. No, look, I mean, if we -- we have a wet season upon us now, we

started building the road to Fimbiasso last or earlier this year, late last year.
So we've done the first leg of it, we now have to wait for a couple of
months to let the wet season do its thing, and then we'll finish that road.
So we are very hopeful of being able to mine without interruption. But the
Ivorian government is difficult to predict in terms of timing, they do have
their own important priorities but I can assure people that we have values
working extremely hard to bring that forward as early as we can, and to
avoid any disruption to production schedules, if that's at all possible.

Nathan Ryan

Yes. And the second one in regards to the gold hedging? Do you plan to…

Jeff Quartermaine

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Sorry, gold hedging, yes. No, look, we don't anticipate any material change
to what we're doing at the present time. I mean, as people know, our hedge
policy does administer hedge up to 30%; so 30*70, we are sitting around
the 20% at the moment and see no real reason to change that. But if
circumstances were to dictate that it was a sensible thing to do, we might
put a little bit more hedging on. But look, we actively manage that position
and I think that we have been able to demonstrate over a long period of
time now that it is a way of managing downside risk, a significant downside
risk for us, and make sure that we can continue to generate cash flows so
that we can deal with the benefits that we've promised all of our
stakeholders.

Nathan Ryan

Thank you. The next question is from Adam Baker [ph]. He's asked can you
walk us through what part of Esuajah South underground weren't
attractive? Was it due to the higher expected costs or lower grades? And
will you publish a new Edikan life of mine plan?

Jeff Quartermaine

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Yes. Look, it does -- as I said, what the work we've done recently actually
improved our confidence around the technical parameters. So the
resource actually -- when we first did the study, the real concern was the
risk around the resource, but we've convinced ourselves through extra
drilling that, in fact, that risk is not of the high order that we had previously
estimated. Now, I think the situation really comes down to commercial
matters at the moment. We -- the cost of mining has gone up, and that
certainly impacts on what we're doing. There has been an element of fiscal
creep, and I guess when we look at the situation, and we say, "Well, we
understand what the maximum exposure is, and the risks around it. And we
ask ourselves is this the best use of capital in our company in terms of
creating value?" And when I say the best, I mean, the best return relative to
the risk. And the question -- the answer to that at the present time is that
no, we have other ways of deploying capital that will create more value for
shareholders, and that's what has driven that decision.

Now, as to the second part of the question will be will we be producing an

updated life of mine plan? Yes, we will. And that will be published in due
course, but it doesn't mean we've -- in fact, we've already looked at that
very carefully, obviously, as part of this evaluation. And the point is that it
doesn't really impact our production profile that much and we -- and as I
said earlier, we do have alternatives that will likely be brought online as a
replacement in short order in any event. So, in the overall scheme of things
we don't believe that this decision that we have taken now is going to be a
big negative as far as the company is concerned. And as I also said, we've
put ourselves -- we're putting ourselves into a position where maybe we
can change that decision in the future if we can find better ways of doing
what we're seeking to do.

Nathan Ryan

Thanks, Jeff. As there are no further questions at this time, I'll now hand it
back to you for closing remarks.

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Jeff Quartermaine

Okay. Well, thanks, Nathan. Well, look, as I've already said, I mean, we are
well and truly on the path to achieving the objectives that we've set
ourselves some time ago. We are in exceptionally good shape, right, from
an operational point of view, from a financial point of view, and from a
growth point of view. And I think that this company is now moving into a
very different place to what it has been in the past, and it certainly wants a
close attention of all investors, I would think at this particular time. And
we're looking forward to delivering further very positive results in coming
periods.

Thank you very much for your attendance.

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