Perseus Mining Limited (OTCPK:PMNXF) Q4 2024 Earnings Conference Call July 29, 2024 7:00 PM ET
Company Participants
Nathan Ryan - Media Relations
Jeff Quartermaine - Executive Chairman and CEO
Lee-Anne de Bruin - CFO
Conference Call Participants
Richard Knights - Barrenjoey
Operator
[Good morning and welcome to the Perseus Mining] Investor webinar and Conference Call. [Operator Instructions]
I'll now hand over to Perseus Mining Executive Chairman and CEO, Jeff Quartermaine. Thank you, Jeff.
Jeff Quartermaine
Thank you, Nathan, and welcome to Perseus Mining webinar to discuss our June '24 quarter report. I'm joined on the call today once again by Lee-Anne de Bruin, our CFO. Both Lee-Anne and I will be available later in the call to take any questions that you may have. Now as usual, the agenda for today's webinar is that, firstly, I'll provide an overview of what Perseus has achieved operationally during the quarter and indeed the full fiscal '24 year. Then we'll have a Q&A session to dive into any specific matters that have not been addressed during the presentation.
For those of you who are listening to this call on your computer, you should be able to track the presentation visually on your screens. Alternatively, though, the presentation was released to the market this morning, and you can follow that manually, if you wish. I'll try to keep the presentation as brief as possible. All the details that you need to understand our achievements this quarter are fully documented in the release. But let me first highlight a few key points.
As the title of our quarterly reports says, our team here at Perseus have delivered another impressive operating performance this quarter and indeed the full financial year, not only in terms of gold production, all-in site costs and cash flow, but also the area of business growth where, during the quarter, we enhanced the quality of our asset portfolio by successfully completing the acquisition of the Nyanzaga Gold Project in Tanzania. We also advanced our CMA Underground mine development at Yaouré in Côte d'Ivoire, where a final investment decision will be taken very shortly.
Now, once again, the June quarter, half year and full year were characterized by the consistency of our operating performance and a strong commitment to deliver as guided. Doing what we say we're going to do is a key value on which this business here at Perseus is based.
The financial year, we produced 509,977 ounces of gold at an all-in site cost of USD1,053 per ounce, so making us one of the lowest cost gold producers of this scale in the world. Our gold production for the last three financial years has averaged about 513,000 ounces. I think it is at an average all-in site cost of a touch under $1,000 an ounce U.S., $988 per ounce.
So this year, we're pretty much on track with these averages and what a great time to be doing it when the gold is selling at around $2,400 an ounce. This is not to say that we don't face challenges from time to time. We certainly do, and we did during the quarter, and we will again in the future. But the positive thing is that our team seems to find a way to deliver. And once again, they've done that very, very well.
So without further ado, let's take a look at the scoreboard and just see what I'm talking about. So looking at our results for the quarter, 120,929 ounces, slightly down on the prior quarter. All-in site costs were $1,173, just up on the previous quarter, and I'll come back to that later on to explain what's going on there. The average sale price was up $92 an ounce to $2,017. The margin was USD944 and the notional cash flow USD117 million for the quarter, just slightly down on the previous quarter, leaving us with cash and bullion at the end of the period of $587 million.
Now converting that into the full year performance, as I said, the production is around 510,000 -- 509,977 in fact, all-in site cost of $1,053, similar sorts of gold price and margins. Notional cash flow for the full year was at USD490 million, which means that Perseus is very firmly on track to continue to fund growth and continue to return capital to our shareholders.
Over the last three years, as I said, we averaged around 513,000 ounces per year at just a touch under the $1,000 an ounce. And once again, we've achieved our market guidance and it's something that we do pride ourselves on, and we've been achieving guidance or exceeding it ever since the first half of 2020. The all-in site costs reasonably stable, given that we are operating in an inflationary environment.
There has been a slight increase in recent times. But of course, keeping the cost flat in a rising gold price environment means that you're increasing your margin, and that is what is driving the very strong cash flow and putting us into a very strong cash position on the balance sheet, $587 million at the end of the period with no debt, and that is after paying in full for the acquisition of Nyanzaga.
As I said, we did deliver on our guidance for the half year. The guidance was 226,000 to 254,000, and we came in at 248,000 for the half year period. And similarly, on the cost side of things, $1,180 to $1,340. We're a little bit under the bottom end of the range there, which was quite a credible result. The mines at Yaouré and Edikan were -- performed very strongly relative to the guidance.
Sissingué was slightly under, having had a fairly dismal first quarter of the financial year that we never fully recovered from. But you can see from this, the benefit of having a diversified portfolio where you might have one project that may not be going as well as the others, but the other two can compensate.
And as a group, we continue to achieve the targets that we have set ourselves. And on a full year basis, we've also done fairly well. So the guidance was 491,000 to 517,000 and we've come in at around 510,000, so well and truly in the guidance range similarly on the cost side of things in the guidance range and doing, what we said we were going to do, very important for us.
As I mentioned, Yaouré had a reasonably strong year, although it has to be said that during the June half year, we were struggling to -- with our waste stripping to get rid of the backlog of waste stripping. We were aiming to have that completed by the end of June, but unfortunately, that didn't occur and will continue into the September quarter.
But should be done by the end of the quarter. What the impact of that is, is that it does push up the costs slightly as a result of higher mining costs during the period. And of course, when the grade is affected as well, that brings down gold production slightly, which also has an impact on the operating cost.
But as you can see, the notional cash margin, $937 an ounce, gave rise to a fairly healthy cash flow from the operation. And very pleasingly, we're getting pretty reasonable reconciliation on our between-book model and the mill. So we're getting what we're expecting to achieve.
At Edikan, similarly -- actually, Edikan has been an excellent performer for us for some time now. And in fact, I think this actually does warrant mention because for many years, quite a number of people were rather critical of Edikan's performance. But it's producing close enough to 200,000 ounces a year, it's 195,000 for the year at $1,000 an ounce. And there are not too many mines producing at that scale, at that level of all-in site cost. So yes, that's quite an achievement, and that's been achieved with a 100% Ghanaian workforce and management team, I might say.
And those guys are very justly proud of their performance and well done to them. So Edikan is running very nicely. As I said, Sissingué got away to a poor start in the September quarter last year as a result of exceedingly wet weather and various other challenges, but it has bounced back, but not sufficient to fully recover from the poor start to the year. But it is going very well at the present time, and we are pushing down into -- on the Fimbiasso deposit. We've actually expanded that resource somewhat over the last 12 months, and that's giving us further material to process.
The exploitation permit for Bagoé deposit, which is another satellite, and was also granted during the period. So that will come into the mine plan in due course. Now looking to the future, the next six months guidance, we're suggesting that the production will be in the range of 220,000 to 260,000 ounces at an all-in site cost of $1,230 to $1,330. And that will mean that for the calendar year '24, we're forecasting 468,000 to 508,000 at $1,182, to $1,223. Now that's a reasonably steady performance for us once again coming forward.
And I think after one month, one month on the 6-month period, we're certainly on track to well and truly deliver that outcome. So things are moving along fairly well for us. And as I say, once again, we're expecting a reasonably strong half year coming up to December.
Now on the financial side, I'll pass this now to Lee-Anne to take you through that.
Lee-Anne de Bruin
Thanks, Jeff. Hi everybody.
As Jeff mentioned earlier on, we ended the quarter of the financial year with cash and bullion of USD587 million, zero debt and access to an undrawn debt facility of USD300 million. This is compared to $702 million at the end of the March '24 quarter. Importantly, our cash flow from operations was USD162 million, with 45% of that coming from Yaouré, 46% from Edikan and 9% from Sissingué. This has been offset by investment in our exploration activities.
We've also paid $52 million in taxes to our host countries, and we acquired, OreCorp Limited, which owns the Nyanzaga development project for USD153 million, and this includes $16 million in change of control taxes. Our cash flow, importantly, are underpinned with a hedge book of 330,000 ounces, which is about 24% of our 3-year forecast production at a weighted average price of USD2,109 per ounce.
Moving on to our capital management framework. Firstly, this was the first time publishing its capital allocation framework with some very key components that we have used over the last few years, with the most important one being delivering reliable and strong operating cash flow. We strive to maintain a balance sheet that is resilient under a range of trading conditions, and we do this by maintaining liquidity, getting clear net debt gearing targets and ensuring our cash reserves are available to sustain the dividends to shareholders of a minimum of a 1% annual yield.
With these two fundamentals in place, we're then looking for opportunities for discretionary investments through asset optimization, driving simplification, efficiency and cost reduction, importantly, funding our growth strategy through dividend acquisitions like we just did with OreCorp, and we're available returning capital to shareholders either through special or bonus dividends and share buybacks.
As evident in the financial metrics presented, Perseus generates significant quantities of cash through its gold production profile, elevated gold prices and relatively low all-in site cost. During the quarter, we focused on our growth strategy and acquired the Nyanzaga Gold Deposit for $151 million, as I mentioned early on, and focus on our exploration activities or organic growth and invested in some equity investments.
And this is all aligned with what we actually articulate as internal strategy to improve our asset quality across the group. Despite the substantial investment in growth, it is likely that we'll have cash surplus available for distribution this year over and above our minimum of a 1% annual yield. Importantly, on the 28th of August, we will release our financials, and this will include details of any final dividend or capital management initiatives approved by our Directors. And we will likely give consideration to shareholder returns by a bonus dividend, capital returns and/or share buybacks.
I'll now hand back to Jeff to take us through our sustainability performance.
Jeff Quartermaine
Okay. Thanks very much, Lee-Anne, for that.
Yes. On the sustainability side, I think safety has been a bit of a standout for us. We've done very, very well in this area during the course of the quarter. Our group TRIFR for the period is at 1.06, which is below our target of 1.14. And I might say that those are numbers that are very favorable relative to our peer group globally. We have put a lot of effort on our safety programs on the site.
We run a program called SHED, Safely Home Every Day, in which we work with our employees to ensure that not only are they safe at work, but they're safe on their way home, to and from work and while they're there as well. And we also have put a lot of effort into our fatality risk management program, which I think has had very positive impacts on both our employees and our contractors.
In terms of contribution to the community this quarter was $194 million dollars went into the economies of our host countries, which is a fairly substantial sum. And if you look at it on an annualized basis, that equates to -- - I think it was USD611 million -- I think it was across for the full year, which is a fairly substantial sum. Now a significant proportion of that goes into payment for goods and services from local suppliers. But in addition to that, we're also putting money into host communities paying employees, paying taxes, paying royalties, et cetera, et cetera. So certainly, our host countries and host communities benefit from our presence there.
One way, in particular, they benefit is that we do strive at all times to employ -- maximize employment of local people. And during the quarter, our local employment was sitting at around 96% of our entire workforce.
So I think that speaks well for a localization -- approach to localization. I mean we do have a relatively low percentage of female employees at 13%, which is, I guess, a reflection as much as anything of the cultural settings in which we operate being in the -- on the African continent, which is somewhat different to the West. But nevertheless, we do have a lot of very high-quality people in our workforce, both men and women.
And I think from the results that we're talking about, you can see that they're doing a pretty fair job. But at the same time, we're doing it in an environmentally sound way as well, making sure that greenhouse gas emissions, et cetera, are on target and also making sure that our tailings dams are suitably built and monitored to ensure that there are no issues with those dams at any of our sites.
Looking at our growth activities. On the organic side, we've been doing quite a bit of exploration drilling at and around the infrastructure at all sites. At the Yaouré -- on the Yaouré exploitation permit, we've had some real successes around the CMA underground deposit and also a little to the north at a place we're calling Zain.
So we do have serious expectations of continuing to grow that ore body over coming periods and extend the life of the Yaouré mine. I mentioned earlier on some of the success we've had up around Fimbiasso, and particularly the Fimbiasso West deposit, where we've done some drilling there and we've been able to extend the ore body somewhat, and that will be -- that extension will come into the updated resources and reserves that are published later on.
And at Edikan, we've been working also on our expanded tenement holding, looking for additional deposits to be able to put through the Edikan mill. And at this stage, again, we have -- we haven't done a huge amount of drilling, but we have been looking pretty carefully at the property and have some very good targets in mind. In Sudan, we have brought our rigs -- brought rigs back on to the site and have recommenced drilling.
We commenced drilling in May, testing high-priority exploration targets in the GSS deposit. Now we will continue to do drilling at Sudan and with the aim of expanding what is already a fairly sizable reserve at 2.85 million ounces.
We look to convert that into a JORC-compliant ore reserve before too long as well at the present time, it's a foreign mineral reserve estimates that we acquired from the previous owners. I mean, Sudan, there are hostilities still going on in the country between the Sudanese Armed Forces and the Rapid Support Forces. The situation is not terribly pleasing to any of us, but the area around our mining lease is unaffected by combatants, although there are artisinal mining activities in the area.
But these things are not impacting on our operation per se, and the exploration activities will continue into the future. The other piece of organic growth that has been important is the underground development project at the Yaouré deposit.
And we've made some very good progress during the quarter to be putting ourselves into a position to take a final investment decision on this project in the very near future. We started recruitment of people. We've got some of the key management people in place, people who bring a vast amount of experience to the operation, both from a corporate and also a contracting perspective, which is very, very important to be able to understand both sides of the business.
We're also working closely with our host government to try and get in place suitable mining regulations for an underground mine because this is going to be the first underground mine in Cote d'Ivoire. We expect that there will be changes to legislation, but we may need a ministerial order in order to be able to move forward as the legislation drafting does tend to take some time in the countries.
Other activities, we have gone out to tender for an underground mining contractor. And we've got a number of very, very good experienced contractors who have submitted offers to us, including a couple of Australians and Americans and South Africans. And so we've got a very good mix of offers on the table.
I'm very pleased to say that the pricing is very competitive, and in fact it is well placed relative to our estimates for our feasibility study. So that's attractive. We're working forward on getting mine services area and admin buildings and the like in place, making sure that we've got plenty of support available when the contractor comes to site. We've been working on our power supply. We need about an incremental six megawatts for full backup power capacity.
So we've got enough power coming through the grid, but we want to make sure that we've got enough backup power to cover the underground requirements as well as the open pit. And then the mills, of course. Being ready to get going it's obviously hugely important and particularly when we're working on a site that's already active.
So we do have a lot of work going on in the operational readiness space, making sure that our supply systems are well and truly tuned up as we're getting the materials through as we need them, and that our infrastructure and the like is well and truly in place and that our designs for the mine are done to a fine level. We are also, as I said, doing some building around the place.
You can see from this slide, there's a few pictures of some of the work that's being done in preparation for an influx of further workers coming onto the site. So all in all, the program is as follows, that we are looking to make financial -- the final investment decision in October this year. So prior to that, we will complete those early works and finalize the underground contractor tendering.
And then we'll get cracking from there, which will involve working on the infrastructure, bringing the contractor on site and starting to work on the portals around July 2025, with the aim of producing our first ore the following month from the underground operation. So things are moving along fairly nicely there.
And looking forward to that becoming a key part of our business in the future. On the inorganic side, as we have both -- Lee-Anne and I both mentioned earlier on, we completed the acquisition, the off-market acquisition of OreCorp during the quarter. And through that process, obtained an 80% interest in the Nyanzaga Gold Project in Tanzania. We own 80%, the government of Tanzania is the remaining 20%. The project itself is fairly sizable.
OreCorp reported a probable reserve of 2.6 million ounces of gold. We will be doing further work on that to confirm and hopefully expand on that. We have received extremely strong support from the Tanzanian government to date since assuming control of the project.
And we have publicized the fact that we're seeking to make a final investment decision on this project in December this year and to start construction immediately thereafter, with the aim of producing first gold from the operation in the first quarter of 2027. So that's allowing about a 2-year construction period.
All the key licenses that are needed to make this operation work are in place, including there's a framework agreement, setting our fiscal terms that was previously executed, and we will be engaging with the government to clarify some of those terms in the not-too-distant future. We do have a number of parallel paths underway at the moment in order to get ourselves to a position to make the final investment decision.
So they include resource definition drilling, which is currently -- has started recently. We're doing various work in the technical area, technical studies and the like. And we're about to start the front-end engineering and design, subject to signing a contract with our contractors Lycopodium.
Work has -- early work has started on site establishments, so there are people on the site working away as we speak. We do expect that the relocation housing exercise will work -- contracts will be awarded, and we will start on that in August, next month. And similarly, work on a bypass road around one of the key villages, we'll start very shortly thereafter. So very definitely activity on the ground. And from this current slide, you can see, we've been pretty -- fairly busy engaging with the government.
Actually the photograph in the middle of that slide, the bridge there is pretty important because the government of Tanzania has invested very heavily in building infrastructure in the region. And this bridge connects both sides of an inlet on Lake Victoria, which means that the time to site has been cut down dramatically from what it was in the past. It's about 1.5 hours from the second largest city in Tanzania, and that's important because that means that access to suppliers and people is very, very, very good. The site itself is fairly sparsely populated. There are some people to be moved, and we're currently working on that, as I said.
And as we also mentioned, the rigs are currently on the site. Capital drilling and a local contractor have mobilized and the drills are starting to turn. So all in all, the Nyanzaga development project is starting to take shape, and we're looking very much forward to taking that investment decision later this year and moving into full-scale development early in the year. So the timeline, as I already said, looking to get going early in the new year and to be producing in 2027.
So that's pretty much all of the presentation that I wanted to give you. As I said at the start of the call, we have had another strong quarter on all fronts, including gold production, all-in site costs, cash flow and business development. And pleasingly, this work is being conducted in a safe manner ahead of targeted safety standards and materially better than many of those in the industry.
We continue to generate very material benefits for all of our stakeholders, including host governments, communities, employees, providers of goods and services and, of course, our investors. And in doing so, we achieved our stated mission of the company, which is a pleasing thing.
As I said, looking forward, our production and cost guidance for the next six months to 31 December is predicting another solid performance. And as I also said out in the first month of production, things are on track in that department. So that's very good. Our group's financial fortunes are very strong. Certainly helped by buoyant gold prices, but our cost management means that we do manage to keep costs under control in this inflationary environment.
And our cash balance does remain very, very strong, notwithstanding the fact that we have invested some of our cash in acquiring Nyanzaga, paying significant amounts of tax to our host countries and funding organic growth. Going forward, we also need to fund the development of the Nyanzaga Gold Mine, which we are currently estimating to cost at around $500 million plus or minus.
But as you've seen from today's report, we are continuing to generate strong cash flows every day. And so we will have plenty of financial capacity for the development of Nyanzaga and further initiatives beyond that. Now how we're going to manage our capital going forward is a very hot topic, as Lee-Anne has mentioned earlier on.
And we will be saying more of this when we release our full year financial report on 28th of August this year. And without disclosing our hand prematurely, we can say that we do intend to continue to grow our company, but we also intend to continue to return capital to shareholders in appropriate amounts and using appropriate mechanisms. So watch this space, as they say.
Finally, in conclusion, I do once again want to acknowledge the wonderful contribution made by all of the men and women that make up the Perseus Board, management and operating teams in what is now five countries, including Australia. As a team, you've done an outstanding job in fiscal '24, and I sincerely thank all of you who are on this call listening to this on behalf of all shareholders, for all your efforts in helping us to continue to deliver on our promises. So thanks very much, everyone, for your attention today.
This brings my presentation to a close. Lee-Anne and I are now happy to take any questions that you may have. Thank you.
Question-and-Answer Session
A - Nathan Ryan
[Operator Instructions] I've got your first question, comes from Richard Knights at Barrenjoey. Please go ahead. Richard, just unmute
Richard Knights
Sorry about that. Hi Jeff. Hi Lee-Anne. Just wondering if you could give a little more detail around the cash tax payment of $50 million or thereabouts that came through in the quarter.
Lee-Anne de Bruin
Sure, no problem. So that relates to taxes largely paid on income tax in Ghana, but also when we declared dividends out of Ivory Coast from the Yaouré offices, then we would pay withholding taxes on that. So that's what's made up of those two taxes. So it's pretty much equal about $25 million to $27 million in all from Ghana and about $25 million on the dividend withholding taxes paid out of Ivory Coast.
Richard Knights
Okay. Thanks. That makes sense. And also just one on the commercial production for the CMA Underground. I noticed there was a -- I think it was about a 7- or 8-month gap between the first production and commercial production there. Can you maybe just give me a bit more color around that?
Jeff Quartermaine
Yes. Well, I guess that's relates to the fact, that as soon as we go into the area we're going to pulling off mineralization. So we'll be -- as we do development drives, we'll be mining, but they won't be on full scale until we get right through into the main ore body.
Lee-Anne de Bruin
The accounting standard set out of requirements will be assets to be point management items that's going to be a first reduction profile before you can declare commercial production.
Richard Knights
Okay, yes, that makes sense. Thanks guys.
Jeff Quartermaine
Thank you.
Nathan Ryan
Thank you. There are no further questions at this time. So I'll now hand back to Jeff for closing remarks.
Jeff Quartermaine
Okay. Well, thanks, Nathan, and thanks, everybody, for joining the call today. I mean this is an -- it's been a fairly strong quarter for us. The next quarter and beyond that look strong also. And we look forward to giving you further news in the coming periods, both in terms of the capital management strategy the full year financial results and hopefully, some further news in the business growth side of things as well.
So once again, thanks very much, and look forward to talking to you again.