Perseus Mining Ltd (ASX:PRU) (TSE:PRU) (OTCMKTS:PMNXF) (FRA:P4Q) enjoyed a productive March quarter and looks set to meet FY21 gold guidance according to a report by Citi Research analyst Kate McCutcheon.
McCutcheon said the company’s new mine Yaouré had ramped up faster than Citi expected.
“Group production and costs were lower-end of 2H guidance.
“Approval of permitting for Sissingué-satellite Fimbiasso will be key in the June quarter, with further delays potentially impacting 1H FY22 output.
“We maintain our Buy/HR rating with a higher $1.65/share target price.
“[The] June quarter should bring positive news flow from studies at Sissingué bolt-on Bagoe and improved economics at Yaouré.”
March quarter production
The report stated: “Edikan (Ghana) output was softer than we expected (40,800 ounces – 9% CitiE) with processed tonnes slightly lower QoQ with equipment availability cited on the results call.
“Pleasingly, recovery hit 85% (+3% CitiE and +8% QoQ) with PRU expecting this run-rate to continue.
“Sissingue (CDI) output was dented by lost production time but still beat CitiE by 12% (25,500 ounces).
“Group costs of US$999/ounce, +10% CitiE (+5%v consensus) but lower than prior quarters.”
Expected to meet 2H guidance
Citi noted that, overall, 88,500 ounces was a record but largely in line with CitiE and consensus with costs of US$999/ounce (+10% vs CitiE) an improvement on the December quarter (-4%).
Commercial production at Yaoure – which contributed 22,000 ounces including +10,000 ounces in March alone – was declared on March 31.
The company expects to meet 2H guidance of 175-190,000 ounces at US$950-1150/ounce, and CitiE forecasts 187,000 ounces at US$1005/ounce.
DFS due in the June quarter
McCutcheon said: “[The] updated Yaouré DFS still due by end-June with PRU expecting an improvement in project costs; further update due late CY21, which will include additional resources.
“On a risk-return basis, PRU is parking Esuajah South underground after infill drilling; we didn’t include it in our Edikan base case.
“Aside from the MarQ results and hedges, we trim our gold price expectations by 3/4% in FY21/22, which reduces EPS.
“NAV lifts to $1.75/share on the roll forward of our model.
“Net-net target price lifts 15 cents per share as we roll forward to FY22e.”
Achievable production guidance
Credit Suisse analysts Nick Herbert, Patrick Collier and Alex Ren echoed the confidence that the company is on track to meet FY21 guidance.
They said: “Operationally a sound quarter with Sissingué the standout and Edikan the laggard relative to our forecasts.
“Commercial production declaration at Yaouré is a positive, as is March production 9,600 ounces, with ramp-up tracking as expected.
“Production guidance looks achievable at group level, with upside risk at both Sissingué and Yaouré, and downside risk at Edikan.
“AISC guidance is also on track subject to no surprises including at Yaouré in its maiden commercial production quarter.”
However, the analysts noted that the indefinite deferral of Esuajah South U/G from the Edikan LOM plan was a disappointment but prudent in light of escalating project costs and an inadequate risk/return profile.
The analysts forecast Edikan guidance at the bottom end range (89,400 ounces), Yaouré top end (51,400 ounces) and Sissingué above top end (45,500 ounces).
“Medium-term outlook appears positive with cash to build as Yaouré transitions to ex-capex and strip ratios fall at Yaouré and Edikan.”
- Bagoe (Veronique, Antoinette and Juliette) mineral resource + DFS due June quarter;
- 2x updated Yaouré LOMP due JunQ and later in 2021, the latter to include any resource additions from recent drilling; and
- Updated Sissingué LOMP due end JunQ.
Credit Suisse notes a target price of A$1.40/share, a rating of OUTPERFORM and a spot gold valuation of A$1.32/share.
“M&A appetite appears to be increasing as Yaouré development draws to a close – reducing capex and providing a pathway to cash generation from what should be its premier asset.
“The possibility of dividends/buyback was also flagged as a consideration come its FY21 result.”
Story by ProactiveInvestors
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