Maiden profit of $52.5 million from first six months of commercial gold production

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

PERTH, Western Australia, Aug. 28, 2012 /CNW/ - Perseus Mining Limited ("Perseus" or the "Company") (TSX & ASX: PRU) today announced a maiden net profit after tax of $52.461 million or 10.6 cents per share for the 12-month period ended 30 June 2012, representing a return on funds employed of 12.4%. Highlights of the result include:

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 ("EGM") in Ghana in August 2011. The Company announced that it had commenced commercial production on 1 January 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's 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 6 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 Sissingué in Côte 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 1 January 2012 all costs, net of any cash receipts from the sale of precious metals, were capitalised and recorded as an asset on the Company's Statement of Financial Position. Upon declaring commercial production, $236.015 million of "Assets under construction" (which included sunk exploration costs) were reclassified as "Property, plant and equipment" ($107.371 million) and Mine properties ($128.643 million), and will be amortised over the life of the mine.

From January 1, 2012 the Company has expensed operating costs and recognised 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 30 June 2012 of $52.461 million or 10.6 cents per share, reflect earnings from the EGM for 6 months only.

Revenue

Revenue of $144.687 million was earned from the sale of 98,769 ounces of gold at an average sale price during the period of US$1,508 per ounce including 58,769 ounces that were sold at spot gold prices averaging US$1,632 per ounce and the 40,000 ounces of gold that were delivered into forward sales contracts at an average of US$1,219 per ounce. These forward sales contracts were established as a condition precedent to the drawdown of project debt used to fund the development of the EGM.

Perseus also earned other income during the period totalling $11.441 million, the majority of which were foreign exchange gains of $10.393 million reflecting the year on year depreciation of the Australian dollar relative to the United States 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 $10.380 million was recorded.

Cost of Sales

Costs of sales included mining and processing costs totalling $68.734 million and employee's salaries and share based payments of $10.753 million before adjusting for movements in inventories including ore stockpiles, work in process and finished goods of $5.010 million and for deferral of excess waste removal costs totalling $6.484 million. Costs associated with financing during the period totalled $1.946 million and depreciation and amortisation totalling $10.167 million were also charged to the Income Statement during the period.

Royalties

Royalties totalling $9.418 million were paid to external parties during the financial year.  The largest royalty of 5% of revenue earned from the EGM was paid to the Ghanaian government. Lesser royalties of 1.5% of revenue and 0.25% 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 9 March 2012, the corporate tax rate for mining companies in Ghana increased from 25% to 35%. The total tax expense incurred for the period was $7.760 million.

Cash Flow

Cash receipts from the sale of gold totalled $192.187 million during the financial year (including $57.958 million from gold sales prior to commencement of commercial production) resulting in total cash flow from operations during the period of $43.067 million. Since the commencement of commercial production cash operating costs, after adjustment for movements in inventory and deferred waste stripping costs, have averaged US$696 per ounce or US$802 per ounce after taking royalty payments into account.

The total net cash flow for the period of $8.430 million (1.9 cents per share) included cash inflow from operating activities referred to above plus net cash inflows from financing  activities of $68.450 million including a net $84.195 million from a share placement in October 2011 offset by repayment of borrowings of $21.240 million. Offsetting these cash inflows was the outflow of $103.087 million for investing activities, most notably the exploration, development and commissioning of the EGM in Ghana and preliminary works associated with the development of the Sissingué Gold Mine in Côte d'Ivoire.

Financial Position

At 30 June 2012 the Company had net assets of $359.868 million (80.6 cents per share) and working capital as defined as the excess of current assets over current liabilities of $56.617 million.

Cash and Investments

At 30 June 2012 available cash totalled $105.497 million or 23.6 cents per share while additional deposits totalling $2.212 million (0.5 cents per share) supported performance guarantees for environmental rehabilitation of the EGM.

As at 30 June 2012, Perseus held $11.4 million of equity accounted investments comprising security holdings in ASX listed companies Manas Resources Limited (23.7% interest) and Burey Gold Limited (23.0% interest).

Receivables

At 30 June 2012 the Company's current receivables were $10.507 million non-current receivables amounted to $29.563 million. The increase in current receivables during the 12 months to 30 June 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 VAT refund from the Ghana Revenue Authority ("GRA"). During the 12-month period since 30 June 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 30 June 2012 the group had debt of $60.264 million (US$ 63.0 million) in the form of borrowings made under a project debt facility provided by Macquarie Bank Limited and Credit Suisse AG to fund the construction of the EGM. During the period, a total of US$22.0 million of scheduled loan repayments were made to the lenders. Furthermore, 40,000 ounces of gold were delivered into forward sales contract established under a 230,000 ounce hedging programme required by the lenders as a pre requisite to drawdown.

Derivative financial instruments

As at 30 June 2012 the Company held forward sales contracts for 190,000 ounces of gold and recorded a liability of $67.123 million on its balance sheet. These contracts were designated as effective hedge contracts beginning 1 October 2010. The movement in mark-to-market value has been recorded as equity while $32.836 million of the liability has been classified as a current liability as these forward contracts settle within twelve months and the balance of $34.287 million 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% of the gold contained in currently defined Ore Reserves at the EGM and approximately 25-30% 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 an ongoing basis.

Given the Company's impending significant capital expenditure programme associated with the development of its second gold mine at Sissingué 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 400-450,000 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. (collectively, the ''Co-Lead Underwriters'') 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 26 October 2011 of between 25 million and 28.75 million shares to raise between Cdn$81,250,000 and Cdn$93,437,500 at a price of Cdn$3.25 per share.  The offering subsequently closed on 14 November 2011 when the Company completed the issue of 28.75 million shares at Cdn$3.25 each to raise Cdn$93,437,500.  Funds raised through this equity offering represent a significant proportion of the funding required by the Company to fund the development of the Sissingué Gold Mine in Cote d'Ivoire.

Outlook

In the financial year ending 30 June 2013, Perseus plans to continue the programme of expansion of the EGM to achieve an annualised mill throughput rate of approximately 8.0 million tonnes per annum and, in parallel, significantly advance the development of its second gold mine at Sissingué in Côte d'Ivoire. Gold production from the EGM is expected in the range of 245,000 to 265,000 ounces at a weighted average cash cost of US$600 per ounce after adjusting for inventory movements and deferred cost of waste removal. Production from the Sissingué Gold Mine is scheduled to commence at the end of 2013 or early in the 2014 calendar year.

From 1 July 2011 to 30 June 2012 the price of gold increased 6% to US$1,598.50/oz, (30 June 2011: US$1,505.50/oz) on the back of concerns about sovereign debt levels and struggling economies of several European countries and the United States of America. 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.

Ore Reserves and Mineral Resources

Total Ore Reserves 

Total Mineral Resources (including Ore Reserves)

Mark Calderwood
Managing Director

About Perseus Mining Limited

Perseus Mining Limited (ASX/TSX: PRU) has forged a reputation as one of West Africa's most successful gold explorers focused on under-explored gold belts in West Africa.  In August 2011 Perseus became a producer at its Edikan Gold Mine (previously known as the Central Ashanti Gold Project) in Ghana.   Details of the project and mine plan are set out in the technical report entitled "Technical Report - Central Ashanti Gold Project, Ghana" dated May 30, 2011.

Perseus is now also planning the development of its Sissingué Gold Project, part of the Tengrela Gold Project in Côte d'Ivoire, with production targeted for late 2013 or early 2014. Tengrela has the potential to become a significant contributor to the Company's goal to develop into a 400,000-ounce per annum gold producer during 2014.  Details of the project are set out within "Technical Report - Tengrela Gold Project, Ivory Coast" dated December 22, 2010.

Perseus will continue its strategy of rapidly increasing its resource and reserve base during the ramp-up of the Edikan Gold Mine and development of the Sissingué Gold Project.

The information in this report that relates to exploration results, mineral resources or ore reserves is based on information compiled by Mr Mark Calderwood, who is a Charted Professional Member of The Australasian Institute of Mining and Metallurgy.  Mr Calderwood is a Director and full-time employee of the Company. 

Mr Calderwood has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'") and to qualify as a "Qualified Person" under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").  Mr Calderwood consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. For a description of Perseus's data verification process, quality assurance and quality control measures, the effective date of the Mineral Resource and Ore Reserve estimates contained herein, details of the key assumptions, parameters and methods used to estimate the Mineral Resources and Ore Reserves set out in this report and the extent to which the estimate of Mineral Resources or Ore Reserves set out herein may be materially affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues, readers are directed to the technical report entitled "Technical Report - Central Ashanti Gold Project, Ghana" dated May 30, 2011 and the technical report entitled "Technical Report - Tengrela Gold Project, Ivory Coast" dated December 22, 2010 in respect of the Edikan Gold Mine (formerly the Central Ashanti Gold Project) and the Tengrela Gold Project, respectively.

Caution Regarding Forward Looking Information: This report contains forward-looking information which is based on the assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management of the Company believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. Assumptions have been made by the Company regarding, among other things: the price of gold, continuing commercial production at the Edikan Gold Mine without any major disruption, development of a mine at Tengrela, the receipt of required governmental approvals, the accuracy of capital and operating cost estimates, the ability of the Company to operate in a safe, efficient and effective manner and the ability of the Company to obtain financing as and when required and on reasonable terms. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used by the Company. Although management believes that the assumptions made by the Company and the expectations represented by such information are reasonable, there can be no assurance that the forward-looking information will prove to be accurate.

Forward-looking information involves known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any anticipated future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, the actual market price of gold, the actual results of current exploration, the actual results of future exploration, changes in project parameters as plans continue to be evaluated, as well as those factors disclosed in the Company's publicly filed documents. The Company believes that the assumptions and expectations reflected in the forward-looking information are reasonable. Assumptions have been made regarding, among other things, the Company's ability to carry on its exploration and development activities, the timely receipt of required approvals, the price of gold, the ability of the Company to operate in a safe, efficient and effective manner and the ability of the Company to obtain financing as and when required and on reasonable terms. Readers should not place undue reliance on forward-looking information.  Perseus does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

SOURCE: Perseus Mining Limited