Mr. Jeff Quartermaine reports
PERSEUS MINING UPDATES EDIKAN'S LIFE OF MINE PLAN
Perseus Mining Ltd. has provided details of its updated life-of-mine plan (LOMP) for its Edikan gold mine in Ghana, West Africa.
HIGHLIGHTS
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Perseus has updated its LOMP for Edikan from July 1, 2018, following a re-estimation of Mineral Reserves. Proved and Probable Mineral Reserves total 44.7 million tonnes of ore, grading 1.09 g/t gold and containing 1,566,000 ounces of gold as at June 30, 2018.
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Comparisons of Edikan's Mineral Resource models against ore delineated by grade control since January 2017 indicate that the Mineral Resource estimates on which the Mineral Reserves are based are reliable predictors of ore tonnes and grades. Ore loss and dilution are allowed for in the estimate of Mineral Reserves based on recent mine to mill reconciliation results.
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Estimated total gold production of 1,084,000 ounces over the current 6 year mine life is 93% of the amount estimated for the corresponding period in the previous LOMP. The reduction is largely a result of net changes in cost, throughput rate and run time impacting cut-off grade and pit design.
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The updated LOMP assumes a revised mining strategy from January 2019 involving use of a single mining contractor, mining at a reduced rate of total material movement compared to the February 2017 LOMP. Mining will not be as selective as in the past as experience has indicated that selectively mining and processing high grade ore does not generate superior cash flows. All other costs, recoveries and mill throughput rates and run times have been updated to reflect recent performance.
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Gold production averages 181,000 ounces per annum over Edikan's current 6 year mine life with the production profile altered relative to the previous LOMP due to the change in mining strategy, which distributes the total material movement and associated mining costs, the amount of ore mined and the grade of the ore available to be fed to the mill, more evenly over the life of mine.
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Forecast weighted average all-in site costs including all direct production costs, royalties, waste stripping costs and sustaining capital expenditure ("AISC") are US$950 per ounce over the remaining life of mine. Over the life of mine, this represents a 10% increase in average AISC relative to the previous LOMP, resulting mainly from production of 7% fewer ounces, cost inflation on contracted mining costs, fuel and labour. Forecast sustaining capital costs (including the cost of site rehabilitation) are included in the estimate of the AISC, and total US$31.9 million or US$29 per ounce.
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Edikan's revised LOMP forecasts the generation of strong positive after-tax cash flow totalling approximately US$264 million (or A$0.34per share at an A$:US$ exchange rate of 0.75), assuming a flat spot gold price of US$1,250 per ounce for the remaining mine life.
The updated LOMP is reflected in the full year production and cost guidance for the Perseus group included in the Company's Financial Report for the year ended June 30, 2018 published on August 29, 2018.
Chief Executive Officer and Managing Director, Jeff Quartermaine said:
"Having successfully brought our second operating mine, Sissingue, on stream earlier this year, we have achieved a level of operational flexibility that has enabled us to think strategically about how we execute our business at Edikan. Instead of focusing on satisfying expectations of Edikan that were created in a different market environment, we have designed a mine plan that seeks to maximise the production of profitable ounces rather than maximise ounces of gold produced at this mine.
While our updated plan does result in lower gold production and revenue in the short term (and higher production and revenue later in the mine life), it also allows us to reduce our short-term operating costs at Edikan by more than the decrease in revenue, thus increasing our cash flow at an important time in our growth cycle.
The cost pressures that companies like Perseus face from a range of sources are immense, and the updated life of mine plan for Edikan announced today seeks to address these pressures and positions Perseus in a way that it can continue to deliver growth for shareholders without recourse to the equity capital market."
UPDATED LIFE OF MINE PLAN FOR EDIKAN GOLD MINE
1. OVERVIEW
The updated LOMP for Edikan involves mining and processing of ore from five open pits (Refer to
Figure 1
below) based on optimisation, design and scheduling using a gold price of US$1,200 per ounce and input parameters based on Perseus's operating experience including costs from recently executed supply contracts.
Table 1: Overview Key Parameters of the updated LOMP
Parameter Units Total
Ex-Pit Mining Life of Mine
Total ore + waste mined Mt 116.2
Waste mined Mt 86.3
Ore mined Mt 29.92
Head grade g/t gold 1.09
Strip ratio t:t 2.9
Processing
Quantity ore processed Mt 39.22
Head grade processed g/t gold 0.98
Contained gold 000 ounces 1,240
Gold recovery rate % 87.5
Gold production 000 ounces 1,084
Operating and Capital Costs
Average mining costs US$/tonne mined 3.81
Average processing costs US$/tonne processed9.42
Average general & administration ("G&A) costsUS$/tonne processed2.39
Production costs US$/ounce 835
Royalty US$/ounce 85
Sustaining capital US$/ounce 29
All-in site costs US$/ounce 950
Notes:
Perseus has a financial year that ends on June 30.
The LOMP excludes the Esuajah South Ore Reserve, but all other Ore Reserves are included consistent with Table 5. It is based on June 2018 face positions
Includes Ore mined ex-pit plus Ore drawn from ROM stockpile and Heap Leach pads.
2. COMPARISON OF KEY PARAMETERS RELATIVE TO THE FEBRUARY 2017 EDIKAN LOMP
The updated LOMP differs to the prior version of the LOMP released in February 2017, as shown below in
Table 2
.
Table 2: Comparative Analysis of Key Parameters
Parameter Units 2017 LOMP12018 LOMP2% Change
Mining
Total ore + waste mined Mt 117.3 116.2 -1
Waste mined Mt 85.4 86.3 +1
Ore mined Mt 31.8 29.9 -5
Head grade g/t gold 1.02 1.09 +6
Strip ratio t:t 2.7 2.9 +4
Processing
Average quantity ore processedMt/year 6.7 6.5 -3
Head grade processed g/t gold 1.02 0.98 -4
Contained gold 000 ounces 1,322 1,240 -6
Gold recovery rate % 85.6 87.5 +2
Gold production 000 ounces 1,132 1,084 -4
Average gold production 000 ounces/ year 189 181 -4
Operating and Capital Costs
Average mining costs US$/tonne mined 3.27 3.81 +16
Average processing costs US$/tonne processed9.27 9.42 +2
Average Site G&A costs US$/tonne processed2.08 2.39 +15
Production costs US$/ounce 740 835 +13
Royalty US$/ounce 81 85 +5
Sustaining capital US$/ounce 25 29 +16
All-in site costs US$/ounce 846 950 +12
Notes:
FY2018 omitted from 2017 LOMP for comparison purposes
LOMP commences July 1, 2018 and ends May 31, 2024.
The LOM Plan is based on June 2018 face positions.
3. MINERAL RESOURCES AND ORE RESERVES
The updated global Measured and Indicated Mineral Resource for Edikan is now estimated as 84.9 Mt grading at 1.10 g/t gold, containing 3,025 koz of gold as shown in
Table 3.
The Mineral Resource includes the Esuajah South Underground Resource, which is not included in the current LOMP.
A further 6.8 Mt of material grading at 1.25 g/t gold and containing a further 267 koz of gold are classified as Inferred Resources. Details of these estimates are shown below in
Table 4
.
Table 3: Edikan's Measured and Indicated Mineral Resources June 30, 20187, 8, 9
Deposit Deposit TypeMeasured Resources Indicated Resources Measured + IndicatedResources
QuantityGrade Gold QuantityGrade Gold Quantity Grade Gold
Mt g/t gold}000 ozMt g/t gold000 ozMt g/t gold 000 oz
AF Gap1, 2, 3 Open Pit 7.8 1.00 253 11.1 0.95 338 19.0 0.97 591
Fobinso1, 2, 3 Open Pit 1.0 1.15 37 4.1 0.98 130 5.1 1.01 167
Esuajah North1, 2, 3Open Pit 6.7 0.95 206 9.4 0.90 272 16.2 0.92 478
Fetish1, 2, 3, 4 Open Pit 6.8 1.04 228 11.7 0.96 363 18.5 0.99 591
Bokitsi South1, 2, 3Open Pit 0.8 2.64 67 0.6 2.23 43 1.4 2.47 110
Sub-Total Open Pit 23.2 1.06 791 37.0 0.96 1,146 60.2 1.00 1,936
Esuajah South5 U/ground 8.5 1.9 533 6.3 1.7 353 14.8 1.8 879
Heap Leach6 Stockpile 4.3 0.6 89 4.3 0.6 89
Stockpiles Stockpile 5.7 0.67 121 - - - 5.7 0.67 121
Total 37.3 1.19 1,445 47.6 1.03 1,588 84.9 1.10 3,025
Notes:
Based on January 2017 Mineral Resource models constrained to US$1,800/oz pit shells.
Depleted to June 30, 2018 mining surfaces.
0.4g/t gold cut-off grade applied.
Includes Bokitsi North lode.
0.7g/t gold cut-off grade applied.
At zero cut-off grade.
All Mineral Resources are current as at June 30, 2018.
Mineral Resources are inclusive of Mineral Reserves.
Rounding of numbers to appropriate precisions may have resulted in apparent inconsistencies.
Table 4: Edikan's Inferred Mineral Resources June 30, 2018 6, 7
Deposit Deposit TypeInferred Resources
QuantityGrade Gold
Mt g/t gold 000 oz
AF Gap1, 2, 3 Open Pit 0.1 1.04 4
Fobinso1, 2, 3 Open Pit 0.9 1.21 35
Esuajah North1, 2, 3Open Pit <0.1 1.12 1
Fetish1, 2, 3, 4 Open Pit 0.5 0.98 14
Bokitsi South1, 2, 3Open Pit 0.6 1.13 20
Esuajah South5 Underground 4.7 1.3 192
Total 6.8 1.25 267
Notes:
Based on January 2017 Mineral Resource models constrained to US$1,00/oz pit shells.
Depleted to June 30, 2018 mining surfaces.
0.4g/t gold cut-off grade applied
Includes Bokitsi North lode
0.7g/t gold cut-off grade applied.
All Mineral Resources are current as at June 30, 2018.
Rounding of numbers to appropriate precisions may have resulted in apparent inconsistencies.
The updated Edikan Ore Reserve which is summarised below in Table 5 is estimated at 44.7 million tonnes of ore, grading 1.09 g/t gold and containing 1,566 koz of gold and is based on the re-estimated Edikan Mineral Resources as at June 30, 2018 and updated pit optimisation, design and scheduling of the Open Pit resources and Esuajah South Ore Reserve based on underground mining methods. Table 5 reports the Ore Reserves by category, deposit and type, above variable cut-off grades. The classification categories of Proved and Probable under the JORC Code are equivalent to the CIM categories of the same name (CIM, 2010).
Table 5: Edikan Gold Mine Proved and Probable Mineral Reserves as at June 30, 2018 3,6,7
Deposit Deposit TypeProved Probable Proved + Probable
QuantityGrade GoldQuantityGrade GoldQuantityGrade Gold
Mt g/t goldkoz Mt g/t goldkoz Mt g/t goldkoz
AF Gap 1,4 Open Pit 4.3 1.09 150 4.7 1.11 169 9.0 1.10 319
Fobinso 1,4 Open Pit 0.2 1.22 7 0.5 0.98 17 0.7 1.05 24
EsuajahNorth 1,4 Open Pit 3.0 1.07 103 4.6 0.99 148 7.6 1.02 250
Fetish 1,4 Open Pit 4.7 1.09 164 7.7 1.00 248 12.4 1.03 412
Bokitsi South 1,4Open Pit 0.5 2.72 42 0.1 2.60 10 0.6 2.70 52
Sub-total Open Pit 12.6 1.15 466 17.7 1.04 591 30.3 1.08 1,057
Esuajah South U/ground 4.9 1.99 312 4.9 1.99 312
Heap Leach5 Stockpile 3.8 0.6 76 3.8 0.6 76
ROM Stockpiles 2 Stockpile 5.7 0.67 121 5.7 0.67 121
Total 18.3 1.00 587 26.4 1.15 979 44.7 1.09 1,566
Notes:
Based on June 2018 Mineral Resource estimate which is depleted to June 30, 2018.
Based on stockpile balance as at June 30, 2018.
All Mineral Reserves current as at June 30, 2018.
Variable gold grade cut-off based on recovery of each material type in each deposit: Oxide 0.40 {A –} 0.55 g/t, Transition 0.55 {A –} 0.75 g/t and Fresh 0.50 {A –} 0.60 g/t.
Based on 0.40 g/t gold grade cut-off.
Inferred Mineral Resource is considered as waste, t : t.
Rounding of numbers to appropriate precisions may have resulted in apparent inconsistencies.
Proven and Probable Mineral Reserves are found within the economic limits of five discrete open pits, an underground project (not currently included in the LOMP) and stockpiles that have been designed based on Measured and Indicated Mineral Resources that incorporated all available Resource drilling results, mining, processing and general and administration costs derived from recent operating experience, and a gold price of US$1,200 per ounce.
4. GOLD PRODUCTION PROFILE
With the aim of maximising the return on funds employed at Edikan, the mining sequence of the pits along with mill feed profile has been optimised and scheduled. The result of this scheduling is that the gold production profile and resulting cash flows from Edikan remain strong for the remainder of the mine life.
While the development of the Esuajah South deposit is not currently included in Edikan's production profile, the risk/return equation relating to the development of this deposit using underground mining techniques would change in a higher gold price environment and therefore development of this deposit may be included in future versions of the LOMP.
5. IMPROVED OPERATING EFFICIENCIES
In 2016, Perseus invested heavily in upgrading key elements of Edikan's process plant and also establishing standby power generating capacity to ensure continuity of operations irrespective of the availability of power from the national electricity grid. These works were largely completed in the December 2016 quarter and were intended to enhance the Company's ability to deliver the updated LOMP. Plant performance since then confirm that forecast run time, throughput rates and gold recovery rate are readily achievable.
Assumed average annual processing throughput rate of ore is 6.9Mtpa, with throughput rates variable by material type and deposit. The processing circuit involves single stage crushing, semi-autogenous grinding, gravity recovery, flotation, regrind and CIL. Run time, which is the product of availability and utilisation, is forecast to average 92.6% for the remaining life of mine. The process metallurgical recovery for gold is fixed by material type in each deposit. Gold recovery rates range from 59.5-69% for oxide ore and 87-90% for primary ore. The variable recoveries are a function of differing metallurgical properties of ores from different deposits. Recovery by pit and ore type are as shown in
Table
6
.
Table 6: Metallurgical recoveries by material type and pit
Recovery by Ore Type (%)
Deposit OxideTransitionFresh
AF Gap 61.0 73.4 88.0
Fobinso 61.0 73.4 88.0
Bokitsi 69.0 78.0 87.01
Fetish 61.0 73.4 90.0
Esuajah North61.0 73.4 90.0
Heap Leach 67.0 - -
1 Average value, the recovery for Bokitsi is variable based on the input grade
6. FUTURE CASH FLOWS AND SENSITIVITY ANALYSIS
Based on Edikan's revised LOM gold production and cost parameters, the net after tax cash flows forecast to be generated by the mine from July 1, 2018, at US$1,250 per ounce gold price, are estimated to total US$264 million or A$0.33 per share (assuming an A$:US$ exchange rate of 0.75).
The sensitivity analysis shown below in
Table 7
summarises the sensitivity of Edikan's net after tax cash flows to movements in the gold price.
Table 7: Sensitivity Edikan's After Tax Cashflow to gold price movements
Gold Price
US$1,100/ounce US$1,200/ounce US$1,250/ounce US$1,300/ounce
US$171 million US$233 million US$264 million US$294 million
A$0.22/share A$0.30/share A$0.33/share A$0.38 / share
Within an expected short-term gold price trading range of US$1,100 per ounce to US$1,300 per ounce, the projected cash flows of the mine remain robust and capable of materially contributing to the development funding of Perseus's next growth project, namely the Yaoure Gold Mine, located in Cote d'Ivoire.
We seek Safe Harbor.
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