Perseus Mining maintains strong FCF profile with Yaouré set to boost production : Cormack Securities


Perseus Mining Ltd (ASX:PRU) (TSE:PRU) (OTCMKTS:PMNXF) (FRA:P4Q) has been maintained its SPECULATIVE BUY rating with a target price of C$1.80 by Cormark Securities.

Analyst Nicolas Dion said: “We believe now is a good time to own Perseus Mining; with Yaouré complete and ramping up, free cash flow (FCF) is now set to inflect and PRU has one of the strongest FCF profiles in our coverage.”

Strong free cash flow

Perseus pre-reported calendar H1/H2 production was 137,386 ounces at AISC of $1,000/ounce, and its cash and bullion position was $118 million vs. debt of $130 million (reduced by $20 million in the quarter).

The remaining financial results were generally in line with Cormack’s expectations:

  • Adjusted EPS of A$0.04 – above the A$0.01 estimate;
  • Adjusted EBITDA of A$118 million – above the A$111 million estimate;
  • CFPS of A$0.08 – in line with the estimate; and
  • FCF of negative A$55 million – below the negative A$41 million estimate due to higher capex. Excluding Yaouré development, FCF was positive A$62 million.

Looking forwards, fiscal H2/21 guidance is unchanged at 175,000-190,000 ounces at AISC of $950-1,150/ounce.

Yaouré commercial production

Perseus has three producing gold mines in West Africa, including Yaouré, its newest and largest mine which is on track to achieve commercial production in early 2021.

Cormack said: “With Yaouré to achieve commercial production by March/April, the FCF infection at Perseus is imminent and at $1,900/ounce we continue to forecast over $1.5 billion in FCF over the next 5 years as Yaouré drives production to nearly 500,000 ounces by fiscal 2022.

“This is before incorporating Bagoe into our mine plans, where a DFS (due H1/21) will evaluate the potential to truck ore and add mine-life to Sissingué.

“Recall that Perseus acquired the assets in mid-2020.

“The company also noted that a dividend policy is under consideration and it will continue to reduce its balance on the revolving credit facility (RCF) of $130 million.”

An updated LOM plan is also due for Yaouré and Sissingué in H1/21.

Extending production at Sissingué

The broker said: “With Yaouré complete and ramping up, FCF is now set to inflect and Perseus has one the strongest FCF profiles in our coverage, including >$1.5 billion in FCF over the next five years (at $1,900/ounce) equal to a 147% FCF yield.

“The company intends to deploy this into debt reduction, a possible dividend payment, and organic growth (eg. Bagoe) as it continues to evaluate M&A opportunities.

“We believe now is a good time to own Perseus, and see the Bagoe DFS (H1/21) as the next key catalyst, with the potential to significantly extend production at Sissingué.”


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