Perseus Mining Limited (PRU) Earnings Call Transcript & Summary

Good morning, and welcome to the Perseus Mining webinar for its full year financial results. [Operator Instructions] I will now hand over to Perseus Mining's Managing Director and Chief Executive, Jeff Quartermaine. Thanks, Jeff.

Thanks very much, Nathan, and welcome, ladies and gentlemen, to this webinar. I'm joined here today by Lee-Anne de Bruin, our Chief Financial Officer. And Lee-Anne is going to work with me to provide a little more detail on the results that we have announced today. However, before I pass to Lee-Anne, let me just put a bit of context around the results we have published. I think it's fairly clear from the results, if you've had an opportunity to glance through them at this stage, that what we published today really does present further compelling evidence of the transition of Perseus into a high-quality, mid-tier international gold company. Fiscal '21 has been quite a transformational year for us. We successfully brought out our third operating mine in Yaouré in Australia. I think as importantly, we've managed to convert our group's strong gold production into improved earnings and cash flow. Now and into the future, we do expect this trend of improved earnings and cash flow to continue as we close in on the objective of producing around 0.5 million ounces per year mark. This year, for the first time, we've also been able to implement a program of returning capital to our shareholders. We've made an announcement today of an initial capital return of $0.015 per share and the dividend policy to go with that. And I'll speak more about it in just a moment. But just to put the financial results into context, I'll just remind you that in terms of production, it has been a strong year for us. So we produced around 328,600 ounces for the full financial year, which was slightly above the top end of the market guidance range. At the same time, our costs were well and duly contained during the COVID year, so we averaged an all-in site cost of $1,016 an ounce, which was slightly at the midpoint of the guidance range. We were assisted by the gold price. Our weighted average sales price during the year was $1,642 an ounce. So between strong production, containing costs and strong gold price, we've been able to generate very healthy financial results. And I'll now pass to Lee-Anne to take you through those in more detail. And then when she's finished that, she'll return back to me, and we'll talk a little more about the dividend policy that we reported today. Lee-Anne?

Thanks, Jeff, and hello, everybody. It is with great pleasure that I am able to present Perseus financial results for the 12 months ended June 2021. And you will have seen Perseus has had an exceptional year despite the challenge of COVID-19, delivering improvements across most of its financial metrics. Revenue was obviously up 15%, up to AUD 678 million. Profit after tax was up 47.6% to $139 million. And pleasingly, we generated $302 million of operating cash flow. And our net tangible assets are up 10%. And as Jeff mentioned, we got the exciting news of our dividend policy, which he'll talk to you later today. Going a little bit more and focus on our growth in earnings. Revenue, as we said, is up, and that has largely been aided by the average gold price. But definitely, the contribution of the Sissingué Gold Mine [indiscernible] Yaouré Gold Mine on schedule and on budget and obviously slightly offset by the effect of lower production at Edikan this year. That high revenue delivered an increase -- in the 11% increase year-on-year in EBITDA. And this was obviously just with an associated increase in cost of sales. So this led to the increased production and the inclusion of the Yaouré Gold Mine costs from commercial production commencing on 1st of April 2021. Gross profit from operations was up 42% due to the impact of that EBITDA and a 22% decrease in depreciation and amortization. And this is as a result of less ore mine in both Edikan and Sissingué and resulting in the decreasing of the amortization charge when compared to the previous year. And then to focus on the profit after tax, this delivered an exceptional 47.6% increase and included a reduction in taxation at Edikan due to slightly reduced profit -- taxable profits there. It was also being offset by a write-down and impairment expense of $6.8 million, which is largely related to exploration expenditure written off on the near-mine targets at Sissingué and Edikan and a foreign exchange loss of about $4.4 million versus a gain of $13.7 million in the previous year just as on [indiscernible] our intercompany loan structures. That growth in earnings has culminated in the basic earnings per share increase of 18.4% on the previous year, giving us AUD 0.0957 per share despite obviously an increase in the weighted average number of shares. And likewise, our earnings per ounce continued its upward trajectory, increasing by 25% to AUD 458, with Yaouré only contributing for the last quarter post commercial production on 1 April. If I move on to the cash flow. The operating cash flow from operations increased by 42% to $302 million on the back of the increased production, increase average sales price and our continued focus on maintaining low costs. The cash flow generation was invested on the finalization of the Yaouré gold projects, continued exploration on key targets and aligned with our capital allocation focus, we made 2 accelerated repayments of debt totaling USD 50 million during the year. And we also then saw an increase in the operating cash flow from operations which resulted in a 36.5% increase in our operating cash flow per share of AUD 0.2487 and a 20% increase in the operating cash flow per ounce of $994. And this continued focus remains to deliver on our 500,000 ounces of gold at a cash margin of not less than USD 400 per ounce. Our growth in net tangible assets and the overall balance sheet of Perseus is strong with cash and bullion balance of 200 million -- AUD 208 million and interest-bearing liabilities of AUD 133 million, moving into a net cash position of AUD 75 million at financial year-end. With the Yaouré Gold Mine projects completed, the required capital expenditure is significantly reduced, and we'll focus our strategic capital allocation with future reduction of interest-bearing debt and strategic organic growth opportunities. Our net tangible assets increased by 10% with key contributions being the reduction in interest-bearing liabilities due to the repayment of about USD 50 million of debt and investment in the ramp-up and commissioning of the Yaouré Gold Mine and on the acquisition of the Exore Resources in September 2020. Overall, you can see that we've delivered solid financial results, and we're really looking forward to an exciting 2022. And on that, I'll hand over to Jeff Quartermaine to talk us through the guidance.

Okay. Thanks, Lee-Anne. So yes, so obviously, the financial results we reported are very strong. And as I've said earlier on, we do expect that to continue into the next reporting periods. We have provided enough guidance with our quarterly report. And certainly for the second -- for this second half year, we're expecting to be producing in the range of 225,000 to 255,000 ounces. So that's an increase certainly on where we've been in the past. And the costs will range in the order of $925 to $1,025, given all that, for the year -- for the calendar year, something in the order of 416,000 to 446,000 ounces at a range of costs in the $975 to $1,035 per ounce. So certainly, this upward trajectory that we have spoken of is well in drilling and [ train ]. And our target of achieving the 500,000 ounces per year level is well within our track. Now in terms of the dividend policy that we have spoken of already now and also the capital allocation policy, as Lee-Anne mentioned, we will be generating a lot of cash coming forward over the -- in future years as we maintain our production forecast at costs, which we expect to do. And principally, there are 3 areas where we'll be deploying capital: one is in managing our balance sheet; two is managing our future growth; but the third is that we're very keen to start to return capital to our shareholders by way of dividend. Now in this particular year, we would do some restructuring considerations to the company. We have declared this return -- the capital return to shareholder -- or approved capital return, in fact. And our shareholders will be asked to approve this reduction at the Annual General Meeting that will be held in late in November this year. We will be publishing fairly shortly a full timetable for this. We do hope to have an initial ruling from Australian Tax Office around any tax implications that apply to the return. But this will come out to shareholders in the next month or so as materials ahead. Now in terms of the policy itself, what we have decided to do is the return that we've announced today represents approximately 1% annual yield this year. And we will continue at this level in future years, making semiannual dividend payments along the way, predominantly amounting to 1% through the course of the year. We plan those announcements will be made to coincide with half year and full year financial results, of course. Now what we do is that we do reserve the right at various times to increase that amount returned to shareholders either through a special dividend or potentially through share buybacks if we feel that we do have cash surplus to our requirements. And we'll certainly share that with shareholders. We have started the policy. We've start the distribution that are relatively low. But what this should be seen to represent is a very strong level of confidence by the company in our future cash flows and our ability to maintain at the very least this level of return to shareholders. We would certainly be expecting, given the projected cash flows, to be able to increase this over time. But where we sit today and with where our cash flows are today, we think that an allocation representing a 1% yield is a very sensible distribution to be made to shareholders. So it's an exciting time for Perseus. It's been quite a journey. And a number of our shareholders have been with us all the way, so I think that they will be pleased to finally receive a return from the company. But I think that this is the beginning of a run that we believe will certainly benefit our shareholders positively. So with that, I think I'll bring our commentary to a close and open the floor to any particular questions. And as I said, I'm very pleased to be joined by Lee-Anne, who will answer all the really hard questions. And all the easy ones she'll leave for me to take. Anyway, thank you very much for attending, and happy to take questions.

Thanks, Jeff. [Operator Instructions] Your first question comes from Reg Spencer at Canaccord. He's congratulated you on the financial result. And then he's asked when might we expect results from the Bagoé DFS.

Okay. That was not one in the financial results, Reg, but just to address your question, we have actually completed the feasibility study. And what we're doing at the present time is, as I said, we're not developing Bagoé as a standalone operation. We're developing it as part of the overall Sissingué complex. So what we need to do is to work out how to optimally process ore from Sissingué, Fimbiasso and Bagoé. And we will -- based on that exercise, and later in this quarter, we'll come out with an updated life-of-mine plan for the Sissingué complex per se, which we called out 2 or 3 of those properties. I think that the astute readers of our updated life -- or our reserves and resources statement earlier this week would have noted a fairly material increase in the resources and reserve around Sissingué in -- associated with Sissingué. And you can see -- work back from that and see that when we do announce the -- we'll publish the updated life-of-mine plan later this quarter, there will be a fairly material increase in the life of that operation. We're very pleased about that. But anyway, the details will come out fairly shortly as we put the final touches on that work.

Thank you. Your next question comes from Patrick Collier at Crédit Suisse. He says, are you able to comment on the decision to link the dividend policy to the share price? Where other measures considered?

Yes, we looked at the full spectrum of processes that people use, and we decided that this was the most sensible for us at this particular time. Lee-Anne?

Yes. I think we did do a detailed analysis. And I mean, obviously, our cash flows are very dictated by gold price and production profile. And obviously, that has an impact on our share price. Our view is, generally, if our share price is doing well, we're going to be doing well, which means that we're in a position to pay dividends.

I think the other thing I'd just like to add on this is that what Perseus aims to do is really to tell its shareholders that they can rely on receiving a dividend from us. So what we do not want to do was to declare a dividend in one year based on a high gold price; and then the following year, if gold price fell, we'd have to reduce that dividend. Now some people are quite happy doing that, but that's not what we want to do. What we want to do is to be able to represent to our shareholders that they can rely on us paying a consistent dividend over a period of time. So it's just a matter of choice. This is what we think works best for us right now. We're obviously open to reassess the situation if it becomes compelling to do something different. But we think this is what works for Perseus very well.

Thank you. Your next question comes from Adam Baker at Global Mining Research. He's asked if you could outline details on the tax holiday at Sissingué and Yaouré.