Perseus Mining Limited (ASX:PRU) is on target to steadily grow its gold production to about 500,000 ounces per annum by financial year 2022.
The company has received a rating upgrade from neutral to outperform from Credit Suisse. Perseus’ target price has been raised to 88 cents from 62 cents.
Following is an extract from Credit Suisse’s recent research update on Perseus:
Yaouré progress supports a structural re-rate
- SepQ on 21 October. Yaouré development progress relative to schedule is in good standing for first gold by end CY20. Yaouré extends life visibility materially, increases diversity and grows group production to about 500koz per annum at ~US$800/oz AISC, although not sustainably as Sissingué is rapidly depleting and Edikan's life appears finite.
- Slight improvement in SepQ expected on JunQ before a stronger DecQ expected to deliver towards upper end of 1HF 120-140koz and lower end of guided US$85O-1000/oz AISC. A stronger 2H 140-160koz at US$750-950/0z is gguided. Expect first modest draw of undrawn facility but little change to 30 June US$120mn cash and bullion as operating cash flow is currently broadly funding Yaouré capex.
- Edikan Jan19 LOM strategy moved from accelerated mining, ore stockpiling and grade streaming to a materially lower mining rate for a modest reduction in production but without the prior investment in working capital. Further resource optimisation and potential underground development could extend life beyond current five and a half years. Update expected toward the year-end.
- Sissingué US$106mn capital cost expected to be fully repaid by year-end, but current short mine life needs to be extended to deliver a greater return. Exploration success has been limited but Airstrip and Zanikan are expected to contribute resources and be included in the mine plan by year-end.
- Yaouré exploration potential to extend life is significant. First priority is the underground potential based on the 5m wide ore zone at 5g/t that continues below the base of the life of mine pit with an initial RSC of 600koz at 6g/t.
- Earnings & valuation. EPS increases on higher gold price assumptions. Target price to $O.88/sh on 50/50 valuation methodology of 0.9x P/NAV and 5.0x FY20F EV/EBITDA. Rating OUTPERFORM (from Neutral).