Mr. Mark Calderwood reports
MAIDEN PROFIT OF $52.5 MILLION FROM FIRST SIX MONTHS OF COMMERCIAL GOLD PRODUCTION
Perseus Mining Ltd. had a maiden
net profit after tax of $52,461,000 or 10.6 cents per share for the
12-month period ended June 30, 2012, representing a return on funds
employed of 12.4 per cent.
HIGHLIGHTS OF THE RESULTS(1)
(in thousands of Australian dollars, except per share amounts)
2012 financial year 2011 financial year
Revenue from gold sales $ 144,687 $ -
---------- -----------
Net profit (loss) after tax $ 52,461 $ (51,176)
========== ===========
Earnings (loss) per share 10.56 (12.11)
Notes:
1. Assumes fiscal 2012 average Australian-U.S.-dollar exchange rate of 1.0327 and exchange rate as
at June 30, 2012, of 1.0161.
The strong result reflected Perseus's transition from being a successful
gold explorer into an integrated company whose activities span gold
exploration and evaluation, project development and gold production.
The company became a producer when it poured gold at its first gold
mining operation, the Edikan gold mine in Ghana in August, 2011.
The company announced that it had commenced commercial production on Jan. 1, 2012, and by the end of the 2012 financial year, the mine had
produced a total of 137,298 ounces of gold.
Perseus managing director, Mark Calderwood, comments:
"It's very pleasing to be able to announce the company's maiden profit of
$52.5-million or 10.6 cents per share which has been produced from only
six months of production at our first mine, the Edikan gold mine in
Ghana. It's a huge advance on where we were 12 months ago and it has
taken a lot of hard work on the part of many people to get to this
point where we are now capable of generating significant earnings.
"Over the next few years, we are looking forward to building on what's
been achieved to date through expanding our Edikan operation and
developing our second gold mine at Sissingue in Cote d'Ivoire,
confirming our transition into a company that consistently performs
both in terms of cost-efficient gold production and generation of
attractive returns for our shareholders."
Financial commentary
Profit overview
Prior to declaring commercial production at the company's EGM on Jan. 1, 2012, all costs, net of any cash receipts from the sale of
precious metals, were capitalized and recorded as an asset on the
company's statement of financial position. Upon declaring commercial
production, $236,015,000 of assets under construction (which
included sunk exploration costs) were reclassified as property, plant
and equipment ($107,371,000) and mine properties ($128,643,000), and will be amortized over the life of the mine.
From Jan. 1, 2012, the company has expensed operating costs and
recognized revenue associated with gold production and sales from the
EGM. Administration and corporate overheads have been expensed
throughout the 2012 financial year.
On this basis, the after-tax profit recorded for the 12 months to June 30, 2012, of $52,461,000 or 10.6 cents per share, reflect earnings
from the EGM for six months only.
Revenue
Revenue of $144,687,000 was earned from the sale of 98,769 ounces of
gold at an average sale price during the period of $1,508 (U.S.) per ounce,
including 58,769 ounces that were sold at spot gold prices averaging
$1,632 (U.S.) per ounce and the 40,000 ounces of gold that were delivered
into forward sales contracts at an average of $1,219 (U.S.) per ounce. These
forward sales contracts were established as a condition precedent to
the drawdown of project debt used to finance the development of the EGM.
Perseus also earned other income during the period totalling $11,441,000, the majority of which consisted of foreign exchange gains of $10,393,000 reflecting the year-on-year depreciation of the Australian
dollar relative to the U.S. dollar, the functional currency of
Perseus's Ghanaian subsidiaries. This gain was a reversal of the
outcome in the corresponding period in 2011, when a foreign exchange
loss of $10.38-million was recorded.
Cost of sales
Costs of sales included mining and processing costs totalling $68,734,000 and employee's salaries and share-based payments of $10,753,000 before adjusting for movements in inventories, including ore
stockpiles, work in process and finished goods of $5.01-million and
for deferral of excess waste removal costs totalling $6,484,000.
Costs associated with financing during the period totalled $1,946,000, and depreciation and amortization totalling $10,167,000 were also charged to the income statement during the period.
Royalties
Royalties totalling $9,418,000 were paid to external parties during
the financial year. The largest royalty of 5 per cent of revenue earned from
the EGM was paid to the Ghanaian government. Lesser royalties of 1.5 per cent
of revenue and 0.25 per cent of gold produced were also paid to unrelated
private parties in accordance with the terms of purchase of the Edikan
mining lease.
Income tax expense
With the commencement of commercial production at the EGM in Ghana, the
company also started generating income that is taxable under the
Ghanaian tax regime. With effect from March 9, 2012, the corporate tax
rate for mining companies in Ghana increased from 25 per cent to 35 per cent. The total
tax expense incurred for the period was $7.76-million.
Cash flow
Cash receipts from the sale of gold totalled $192,187,000 during the
financial year (including $57,958,000 from gold sales prior to
commencement of commercial production) resulting in total cash flow
from operations during the period of $43,067,000. Since the
commencement of commercial production cash operating costs, after
adjustment for movements in inventory and deferred waste stripping
costs, have averaged $696 (U.S.) per ounce or $802 (U.S.) per ounce after taking
royalty payments into account.
The total net cash flow for the period of $8.43-million (1.9 cents per
share) included cash inflow from operating activities referred to above
plus net cash inflows from financing activities of $68.45-million,
including a net $84,195,000 from a share placement in October, 2011,
offset by repayment of borrowings of $21.24-million. Offsetting these
cash inflows was the outflow of $103,087,000 for investing
activities, most notably the exploration, development and commissioning
of the EGM in Ghana and preliminary works associated with the
development of the Sissingue gold mine in Ivory Coast.
Financial position
At June 30, 2012, the company had net assets of $359,868,000 (80.6
cents per share) and working capital as defined as the excess of
current assets over current liabilities of $56,617,000.
Cash and investments
At June 30, 2012, available cash totalled $105,497,000 or 23.6 cents
per share while additional deposits totalling $2,212,000 (0.5 cent
per share) supported performance guarantees for environmental
rehabilitation of the EGM.
As at June 30, 2012, Perseus held $11.4-million of equity accounted
investments, comprising security holdings in Australian Stock Exchange-listed companies Manas
Resources Ltd. (23.7-per-cent interest) and Burey Gold Ltd. (23.0-per-cent
interest).
Receivables
At June 30, 2012, the company's current receivables were $10,507,000 non-current receivables amounted to $29,563,000. The increase in
current receivables during the 12 months to June 30, 2012, relative to
prior periods is the result of increased gold sales while the increase
in non-current receivables in this period is due to an increase in a
value-added tax refund from the Ghana Revenue Authority. During the
12-month period since June 30, 2011, the VAT refund from the GRA has been
reclassified from current to non-current receivable. Subsequent to year-end the GRA has acknowledged the validity of the debt and is working
with the company to agree a mutually acceptable mechanism for repaying
the outstanding amount.
Debt finance
At June 30, 2012, the group had debt of $60,264,000 ($63.0-million (U.S.))
in the form of borrowings made under a project debt facility provided
by Macquarie Bank Ltd. and Credit Suisse AG to finance the construction
of the EGM. During the period, a total of $22.0-million (U.S.) of scheduled
loan repayments were made to the lenders. Further, 40,000 ounces of
gold were delivered into forward sales contract established under a
230,000-ounce hedging program required by the lenders as a prerequisite to drawdown.
Derivative financial instruments
As at June 30, 2012, the company held forward sales contracts for 190,000
ounces of gold and recorded a liability of $67,123,000 on its
balance sheet. These contracts were designated as effective hedge
contracts beginning Oct. 1, 2010. The movement in mark-to-market
value has been recorded as equity while $32,836,000 of the
liability has been classified as a current liability as these forward
contracts settle within 12 months and the balance of $34,287,000 has been classified as a non-current liability.
The liability in each case reflects the difference in value of the hedge
contracts on the respective balance dates relative to the value of the
contracts on the date of inception of hedge accounting.
This amount of gold hedging equates to less than 5 per cent of the gold
contained in currently defined ore reserves at the EGM and
approximately 25 to 30 per cent of forecast gold production in the period from
June, 2012, to December, 2014.
Corporate
Dividends
The company has established a dividend policy that provides for the
payment of dividends to shareholders when directors are confident that
such payments can be sustained from cash flow on a continuing basis.
Given the company's impending significant capital expenditure program
associated with the development of its second gold mine at Sissingue in
the period up to the end of 2013, no dividends were paid during the
period and the directors did not declare a dividend in respect of the
full year result.
In 2014, Perseus expects to be producing in the range of 400,000 to 450,000
ounces of gold from its two operating West African gold mines and,
subject to the gold price, expects to be generating cash flows that are
capable of sustaining the payment of dividends.
Equity capital raising
In late October, 2011, the company announced that it had entered into an
underwriting agreement with Clarus Securities Inc., Dundee Securities
Ltd. and CIBC World Markets Inc., and Macquarie Capital Markets Canada Ltd., BMO Nesbitt
Burns Inc., Cormark Securities Inc. and Canaccord Genuity Corp. as
underwriters in respect of an offering pursuant to a short form
prospectus dated Oct. 26, 2011, of between 25 million and 28.75
million shares to raise between $81.25-million (Canadian) and $93,437,500 (Canadian) at a
price of $3.25 (Canadian) per share. The offering subsequently closed on Nov. 14, 2011, when the company completed the issue of 28.75 million
shares at $3.25 (Canadian) each to raise $93,437,500 (Canadian). Funds raised through
this equity offering represent a significant proportion of the financing required by the company to finance the development of the Sissingue gold
mine in Ivory Coast.
Outlook
In the financial year ending June 30, 2013, Perseus plans to continue the
program of expansion of the EGM to achieve an annualized mill
throughput rate of approximately eight million tonnes per year and, in
parallel, significantly advance the development of its second gold mine
at Sissingue in Ivory Coast. Gold production from the EGM is expected
in the range of 245,000 to 265,000 ounces at a weighted average cash
cost of $600 (U.S.) per ounce after adjusting for inventory movements and
deferred cost of waste removal. Production from the Sissingue gold mine
is scheduled to commence at the end of 2013 or early in the 2014
calendar year.
From July 1, 2011, to June 30, 2012, the price of gold increased 6 per cent to
$1,598.50 (U.S.) per ounce, (June 30, 2011: $1,505.50 (U.S.) per ounce) on the back of concerns
about sovereign debt levels and struggling economies of several
European countries and the United States. While these
concerns persist, Perseus expects that gold will continue to be
positively regarded as a safe haven and is therefore optimistic that
gold market fundamentals will remain largely unchanged in the short to
medium term.
TOTAL ORE RESERVES
Deposit Proven Probable Total
Quantity Au grade Au Quantity Au grade Au Quantity Au grade Au
Mt g/t 000oz Mt g/t 000oz Mt g/t 000oz
EGM >0.4 g/t(1,2) 64.6 1.2 2,417 29.2 1.0 961 93.8 1.1 3,378
SGP >0.55 g/t(3) - - - 9.7 2.1 657 9.7 2.1 657
---- --- ----- ---- --- ----- ----- --- -----
Total 64.6 1.2 2,417 38.9 1.3 1,618 103.5 1.3 4.035
---- --- ----- ---- --- ----- ----- --- -----
Notes:
1. Greater than 0.4-gram-per-tonne-gold cut-off for Abnabna-Fobinso, greater than 0.5-gram-per-tonne-gold cut-off
for all other deposits.
2. Last updated in August, 2012, and allows for material mined to June 30, 2012.
3. Last updated in November, 2010.
TOTAL MINERAL RESOURCES (INCLUDING ORE RESERVES)
Deposit Measured Indicated Inferred
Quantity Au grade Au Quantity Au grade Au Quantity Au grade Au
Mt g/t 000oz Mt g/t 000oz Mt g/t 000oz
EGM >0.8 g/t(1) 49.5 1.5 2,378 38.2 1.3 1,813 24.9 1.4 1,111
EGM 0.4 g/t to
0.8 g/t(1) 34.2 0.7 718 35.7 0.6 706 25.7 0.7 602
GGP >0.4 g/t(2)(3) - - - 25.1 0.6 471 16.4 0.5 247
SGP >1.0 g/t(4) 0.9 3.2 90 9.1 2.5 706 3.3 1.7 171
SGP 0.5 to 1.0g/t(4) 0.04 0.8 1 5.5 0.8 134 3.6 0.7 86
----- --- ----- ----- --- ----- ---- --- -----
Total -- EGM >0.8 g/t
and SGP >1.0 g/t 50.4 1.5 2,468 47.3 1.5 2,519 28.2 1.4 1,282
Total -- EGM >0.4g/t
and SGP >0.5 g/t 84.6 1.2 3,187 112.4 1.0 3,830 73.9 0.9 2,217
----- --- ----- ----- --- ----- ---- --- -----
Notes:
1. Last updated in March, 2012, and does not allow for mining depletion.
2. Grumesa gold project mineral resource last updated in December, 2010.
3. Primary reported above a 0.4-gram-per-tonne-gold cut-off, oxide/transition report above a 0.2-gram-per-tonne-
gold cut-off.
4. Sissingue gold project mineral resource last updated in November, 2010.
5. The company holds 90 per cent of the EGM, 90 per cent of the GGP and 85 per cent of the SGP after allowing for
government equity at mining stage.
We seek Safe Harbor.
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