http://www.theaustralian.com.au/bus...s/news-story/d3a11c3724ff54823fe57cd5d0583f02
MINING & ENERGY
Goldminer Perseus ‘in good shape’, eases capital raising fears
Perseus Mining managing director Jeff Quartermaine.
Gold producer Perseus Mining says investors waiting for the company to raise equity should not hold their breath, with the company increasingly confident that it has put its terrible recent run behind it.
Perseus endured a horror 2016, with operational issues and an unexpected and costly contractual dispute causing it to bleed money at a time when most of its gold mining peers were rolling in cash.
The company had the ignominy of being one of only five of 27 companies on the ASX All Ordinaries Gold index to record a fall in share price over the past year, which was generally seen as one of the most favourable on record for the gold industry.
But after recording a much improved set of production figures in the March quarter, managing director Jeff Quartermaine firmly believes the company has turned the corner.
“The concerns around the future prospects of the company are just wrong,” Mr Quartermaine told
The Australian.
“We’re in good shape. We don’t need to raise money; we are fully funded. There were some shareholders who sold shares in the prospect of buying back in a rights issue, that wasn’t the right decision.”
Perseus’ latest quarterly figures, released just before Easter, showed sharp improvement across all measures at its Edikan mine in Ghana. Gold production jumped from 32,223 ounces to 48,655oz, all-in costs plunged from $US1847 an oz to $1098 an oz, while gold sales soared from 22,431oz to 55,532oz.
It all led to Perseus generating positive cash flow from Edikan for the first time in 15 months.
The mine had suffered over the past year due a combination of factors. Mining moved to a low-grade portion of the project, while costs jumped as Perseus poured cash into capital projects including $30 million on housing relocation and $10m on a back-up power station to relieve its reliance on an increasingly inconsistent power grid that had been wreaking havoc on the project.
The miner was also hit with a $US20m settlement from a contractor dispute it inherited through its $85m takeover of Amara Mining.
“It was money we could ill afford to spend at the time and it did put pressure on the company,” he said. “A lot of people thought we’d run out of cash after that and that affected the share price.”
The run of disappointments over the past year means investors appear to be waiting for more conclusive proof that the improvement of the past quarter isn’t a false dawn.
Perseus is continuing with construction of its Sissingue mine in the Ivory Coast, which will provide a second source of cash flow for the company and geographic diversity outside Ghana. Sissingue will start production early next year. The two mines, Mr Quartermaine says, should generate a combined 66c a share in earnings over the years ahead — substantially ahead of the 35.5c a share Perseus closed at on Thursday.
“We understand the sentiment (that the last quarter should lift Perseus’s credibility) but would first like to see a sustained meeting of production and project guidance,” Citi analyst Trent Allen said.
Perseus’s Edikan mine in Ghana where gold output has risen from 32,223oz to 48,655oz.
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