United States

Analyst Research Report Snapshot


Persues Mining Limited




Jennings Capital Inc.


29 Oct 2013





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Q1 OPERATIONS UPDATE ZERO OPERATING MARGIN AS GOLD PRODUCTION AND COSTS MISS GUIDANCE – TARGET REVISED In its Quarterly Activities Report, Perseus pre-released Q1 operations results. Below, we compare these to our estimates, which were largely derived from previous Company guidance. Gold production was 11% below our estimates, at 45,830oz during the quarter. This was caused by lower mill throughput (13%) and recoveries (3%) due to inconsistent ore blends and mill operating levels, largely arising from operator error and inexperience. Partially offsetting these issues were grades that were 5% higher than expected. All-in site costs were 19% higher, at $1,342/oz, due to 19% higher mining costs ($4.16/tonne mined) 16% higher processing costs ($11.61/tonne milled), and the lower gold production cited above. Mining costs were higher as a result of lower volumes, longer haul distances, and increased grade control drilling and drill and blast costs. Cash balances at quarter-end totalled $23.1M, down from $35.5M last quarter, due to a $0 operating margin. Full year (to June 30, 2014) guidance was maintained at 190,000-210,000 ounces, at an All-In Cash Cost of $1,050-$1,250/oz ($50/oz higher than previous guidance). Catalysts: Catalysts for share price appreciation (and a re-rating to BUY) would be Perseus’ ability to: (1) reach and maintain near nameplate capacity (7.5Mtpa) throughput rates; and (2) demonstrate profitability at current gold prices under its recently implemented LOM mine plan and ongoing cost reduction initiatives. Valuation: Pending the catalysts outlined above, we are maintaining our HOLD recommendation and revising our 12-month target price to C$0.65 per share, from C$0.90 per share. Our valuation is based on a weighted average (50/50) of a 5X P/CF multiple and a .5X P/NAV multiple, reflecting the higher operational risk associated with Edikan.

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