Perseus Mining Limited

PRU Details

Gold Production Improved in September Quarter:Perseus Mining Limited (ASX: PRU) isinvolved in the gold exploration, mineral exploration and gold project development in the Republic of Ghana and the Republic of Côte d’Ivoire, both located in West Africa. The group recognizes revenue from gold bullion sales as its obligations are satisfied in accordance with an agreed contract between the group and its customers.

Recently, Jeffrey Quartermaine, the company’s Director acquired 1,346,500 performance rights, taking the final holdings to 3,346,500 performance rights, effective from November 29, 2019. In another update, Mako Gold Limited advised that it has completed its latest Reverse Circulation (RC) drilling program on the Tchaga Prospect at the Company’s 224 km square Napié Project in Côte d’Ivoire. The Napié Project is a joint venture agreement between Mako and PRU’s subsidiary Occidental Gold SARL. Mako is the operator of the Napié Project and earns up to a 75% interest in it.  

On November 4, 2019, PRU informed the market that its 90% owned Ghanaian subsidiary, Perseus Mining (Ghana) Limited, has signed an option agreement with local Ghanaian company, Adio-Mabas Ghana Ltd, to acquire the 23.85 km square Agyakusu Prospecting License PL 2/177, which is located between 2 and 8 km from the Edikan processing facility and adjoins Perseus’s Edikan mining leases.Under the agreement, PRU has the right to acquire 100% of the Agyakusu prospecting license for consideration of US$0.6 Mn staged over a 3-year period as well as the commitment to spend up to US$1.6 Mn on exploration during that period.

Key Highlights of September’19 Quarter:Gold production for the quarter stood at 65,825 ounces with All-In Site Cost (AISC) of US$922/ounce. Gold sales for the quarter stood at 73,561 ounces, with an average sales price of US$1,374/ounce. Notional cashflow for the quarter stood at US$29.8 Mn. The improvement in gold production and reduction in AISC for the period can be attributed to operational efficiency achieved at both of the company’s sites Edikan and Sissingué.
 

September Quarter Cash & Bullion Information (Source: Company Reports)

What to Expect:Latest drilling program at Napié Project was completed in a timely fashion, and assay results can be expected by early December. FY20 guidance for gold production comes in at 260-300K ounces with AISC of US$800-975/ounce. Gold production for the first half of FY20 has been estimated at 120-140K ounces with AISC of US$850-1,000/ounce, and production for the second half of FY20 has been estimated at 140-160K ounces with AISC of US$750-950/ounces.

Valuation Methodology: EV/Sales Multiple Approach:

EV/Sales Multiple Approach (Source: Thomson Reuters), *NTM-Next Twelve Months

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months

Stock Recommendation:PRU’s share generated a positive YTD return of 142.53%. The stock is trading close to its 52-week high price of $1.075. Its gross margin and net margin for FY19 stood at 2.8% and 1.5%, lower than the industry median of 41.1% and 11.0%, respectively. Its ROE for FY19 stood at 0.9%, lower than the industry median of 12.3%. Considering the company’s business model, financials, September quarter results and FY20 production guidance, we have valued the stock using a relative valuation method, i.e., EV/Sales, leading us to a view that stock is overvalued at the current juncture. Hence, we recommend a “Sell” rating on the stock at the current market price of $1.030, down 2.37% on December 6, 2019.

 
PRU Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.