Perseus Mining Limited
The shares of Perseus Mining Limited (ASX: PRU) have been under pressure from several years, posting a negative returns of 81.4% over the last five years. However, Perseus Mining shares delivered outstanding year to date returns of 57.7% and generated 34.43% in the last three months driven by the improved production at its Edikan gold project and operating efficiency.
The company posted better than expected results during the March quarter, driven by the strong performance by Edikan gold mine project. Although the firm suffered government imposed power restrictions during the quarter, the gold production in the mine was only 2% lower to 47,450ozs, as compared to the December 2014 quarter. The site costs reduced 11% to US$903/oz, as compared to the previous quarter. Moreover, the company was successful enough to achieve the costs 25% lower as compared to the cost guidance for the half year ended on June 2015. Over 48,936ozs of Gold was sold at an average sales price of US$1,375/oz, generating a solid cash margin averaging US$472/oz.
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Quarter Highlights (Source: Company Reports)
Meanwhile, the firm made several initiatives to boost the performance of its Edikan project in the coming months. The company acquired four diesel generators to generate 5.8MW of electricity, finalized eastern pits mining contract at mining rates, and re-optimized Edikan’s Life of Mine Plan effective from July, to generate an annual gold production of over 240kozs at a weighted average all in site cost of US$937/oz for the mine’s remaining 8 year life. The firm is working towards decreasing Edikan’s unit mining costs for eastern pits mining and Fobinso Pit mining.
With regards to the Sissingue gold mine project in West Africa, the feasibility Study showed excellent technical feasibility as well as economic robustness. The study showed that the mine had a potential to generate an internal rate of return of 27% at gold price of US$1,200/oz. The mine had proved and probable ore reserve of 429,000oz of gold and indicated mineral resources of 880,000ozs gold. A production of 385,000oz of gold could be achieved during a 5.25 year mine life. The startup capital costs for the project is expected to US$106 million including contingency, while the average all-in sustaining costs is expected to be US$632/oz over the life of mine. Perseus estimates to begin the construction by September of this year, and intends to fund the project through cash and some debt through third party.
PRU was able to increase the cash and bullion by $25.9 million to $83.7 million as of March 31
st, 2015. The firm also entered into gold forward sales contracts which includes 69,500ozs of gold at an average price of US$1,514/oz, valued at $29.7 million. Meanwhile the shares of PRU have corrected over 9.9% in the last four weeks, but we view this correction as a buying opportunity given the potential Edikan gold mine and Sissingue gold mine has.
Accordingly, we recommend a “BUY” on the stock at the current price of $0.42
Beadell Resources
Beadell Resources Ltd (ASX: BDR) has recently reaffirmed its confidence of achieving a full year production guidance in the range of 170 000 oz and 190 000 oz. However, since its openpit operations witnessed a lower-than-expected material movement during April and May, the firm has recently adjusted its June quarter production figures accordingly. The Tucano mine’s operations in Brazil got affected by the rainfall, which in turn obstructed material movement by turning the Urucum openpit from clay-rich colluvium and oxide overburden to harder ore. Consequently, the group has reduced the Gold sales estimates from the Tucano to be in the range of 25 000 oz and 28 000 oz for the June quarter, which is 33 000 oz lower as compared to the March quarter.
On the other hand, we believe that this negative impact has already been factored in the firm’s share prices and the group has been making solid efforts to boost its performance for the second half of the year. As and when the dry season starts, the group has planned a huge material movement on the site. As a result, the firm estimates a gold sales in the range of 115 000 oz - 125 000 oz during the second half of the year, at costs in the range of $810/oz and $890/oz.
Moreover the firm has reported solid new drill results from its Urucum Underground in Tucano gold mine. The Surface diamond drilling aiming Urucum underground has intersected high grade results under the open pit reserve, indicating outstanding steadiness from the lode plunges. The drilling aimed at the primary underground reserve in the 200-400 m vertical area beneath the Urucum North open pit while the pre-feasibility is estimated to be finished by this year.
The group’s Gold Nose and Mutum at Tucano gold mine in Brazil has also shown excellent exploration results. The discovery at Gold Nose was confirmed by the auger drilling of 1 km SE of Duckhead. For the Mutum, major surface gold geochemical anomaly was witnessed at 15 km east of Tucano. The targets will be followed during the second half of 2015 with an objective to boost the present Tucano resource base of 5.4 million ounces with new high grade open pit ore sources.
Gold Nose and Mutum Location (Source: Company Reports)
The shares of Beadell Resources have been under pressure from quite some time now, with the stock posting a negative returns of 69.7% over the last 52 weeks. Moreover, Beadell Resources have plunged over 27.5% in the three months only, given the lower than expected material movement in its sites impacted by the rainfall. However, we believe that the group’s aggressive material movement during the coming dry months, can boost its performance. Moreover, the recent significant drilling results at its Tucano gold mine also offers some respite to the stock.
We view the recent huge correction in the stock to be used as a buying opportunity and invest in Beadell Resources at the current levels of $0.18
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