Perseus Mining Limited (PRU) Earnings Call Transcript & Summary

Good morning, and welcome to the Perseus Mining Investor Webinar and Conference Call for its December 2021 half year report. [Operator Instructions] I will now hand over to Perseus Mining Director and CEO, Jeff Quartermaine. Thank you, Jeff.

Thank you, Nathan, and welcome to Perseus Mining's webinar to discuss our financial results for the 6 months ending 31 December. Today, I'm joined on this call by Perseus' Chief Financial Officer, Lee-Anne de Bruin, who, in a moment, I will invite to take you through the details of the very solid results that were released to the market earlier today. Before handing to Lee-Anne though, may I just say a few words about the December 2021 half year from a corporate perspective to give you some context to the results that Lee-Anne will present. Now during the 6 months to December 31, our company, Perseus, has performed very strongly in both an operational and a financial sense and has also delivered positive drilling results from our exploration programs designed to generate organic growth. In terms of inorganic growth, our teams have also been active evaluating opportunities with the aim of vesting future growth prospects. Now in doing all of this, Perseus is now well-positioned to drive to the next level of our quest to become a reliable, profitable and geopolitically diversified mid-tier gold company. Now in terms of market guidance, in July 2021, we forecast production of 225,000 to 255,000 ounces at an all-in site cost of $925 to $1,025 for the December half year. In fact, as previously reported, we produced 241,164 ounces for the half year at an all-in site cost of USD 949 per ounce. It was in the upper half of the guidance range for production and well into the lower half for cost guidance. Now during the half year, 2 of our 3 mines, namely Yaouré and Sissingué and Côte d'Ivoire performed exceptionally well relative to their guidance. And in the process, exceeded most of our internal technical KPIs, such as run time, throughput rate, recovery, head grade, et cetera. Our third mine, Edikan and Ghana was challenged by lower-than-expected grades. But given that we now have multiple mines in the portfolio, the impact of Edikan's performance didn't detract too much from the overall performance of the group. We did after all established a new production record by increasing our production by 26% year on -- half year on half year. So once again, Perseus has done what we said we would do and then some. We are on course to achieve our stated aim of producing around 0.5 million ounces, 500,000 ounces or more of gold a year at a margin of in excess of $400 per ounce from fiscal '22 onwards. In fact, on an annualized basis, we achieved this production rate in the December quarter. Now looking to the future. Our market guidance for the next 6 months has us producing 230,000 to 265,000 ounces at an all-in cost of $915 to $1,085 per ounce. And I'm pleased to say that after 1.5 months of the new half year, we are tracking very well against that forecast. So without further ado, let me now pass to Lee-Anne to take you through the half year financial performance. And when Lee-Anne is done, we'll both be available to answer any questions that you may have either on today's announcement or anything else related to the company. So Lee-Anne, could you please pick it up from here? Thank you.

Hi, everybody, and thanks, Jeff. It's obviously a great pleasure as the CFO to be able to talk to the incredible financial performance of the Perseus group for the 6 months ended December '21. These kind of results are largely attributable to the culture of teamwork that resonates at Perseus, and I would be remised not to thank our Chief Operating Officer and the operational teams in West Africa who have worked tirelessly at our 3 operations to deliver this outstanding performance, strongly supported by our Perth and Abidjan offices, and our business growth team who have been very busy with under our GM business growth. I've put the normal cautionary statements out there for everyone to read. So if we just focus on our strong performance against key financial metrics, it's through these immense efforts of all our people we were able to deliver these strong performance across all these areas for the 6 months. Namely, we delivered a 90% increase in our revenue, delivering AUD 546 million. Our profit after tax was up 159% at $126.9 million. Sorry, I'm on the wrong slide about that, just pick that up. Our operating cash flow was an immense $254.9 million, and this was just a 137% increase on HY 2020. Our net tangible asset position increased 20% to over AUD 1 billion, and our Board has supported the declaration of an interim dividend of AUD 0.81 per share, in line with our recently announced dividend policy. Taking a deeper focus on each of these key financial metrics, earnings metrics. The revenue, as I said, increased to $546 million, and this was as we compare to December '20. The uplift is obviously largely attributable to the inclusion of the Yaouré gold mine for the full 6 months since the declaration of commercial reduction in April 2021. This incredible increase in revenue increased our EBITDA by 101%, and this was also not remiss without a strong focus on our cost management at all 3 of our sites despite an ongoing COVID-impacted environment. The profit after tax of $126.9 million was after bringing into account $99 million of depreciation and amortization charge, which was up 118% on HY 2020 due to the inclusion of the Yaouré assets and its associated depreciation and amortization charges for the 6 months. There was also an exchange loss of AUD 7.7 million, corporate and admin costs of $8.5 million and finance costs on our debt facilities of $5.4 million. Our tax reduced slightly due to Edikan's performance in the half year. And obviously, our Yaouré and Sissingué operations are both installed in tax holidays. This all culminated in an incredible basic earnings per share growth of 202% to AUD 0.908 per share and our increase in earnings per ounce by 38% through the contribution of the lower cost profile of the newly introduced Yaouré gold mine into our portfolio. Turning on our cash flow. The cash flow from operating activities for the 6 months was $245.9 million, up an immense $137 million on the comparative period. This strong cash flow allowed Perseus to early pay down its debt by a further USD 50 million, considerable investment in business growth, exploration and evaluation activities and, as you'd all be aware, paying a capital reduction of AUD 18.2 million in December '21 to its shareholders. Importantly, as well, the operating cash flow per share was up 132% to AUD 20.04 per share. So overall, a considerably great performance in the growth and cash flow area for the business. Shifting our focus to our balance sheet. The growth in the operating cash flow has positioned Perseus well going into 2022 with a net cash position of AUD 223 million, which is comprising cash and bullion of $292 million and total interest-bearing liabilities of an equivalent AUD 69 million. The balance sheet now has a strong total asset position of $1.5 billion with net tangible assets sitting at AUD 1 billion. As Jeff had mentioned, Perseus produced 241,164 ounces for the 6 months ended December '21, with the portfolio diversifying further now that Yaouré is fully operational. Our guidance for the financial year '22, as previously published in our December '21 quarterly, remains to deliver between 471,000 to 506,000 ounces at an all-in site cost of USD 932 to $1,020 per ounce. H2 will no doubt be another exciting period for Perseus, where performance will benefit from the contribution of our third operating mine. And obviously, a significant reduction in capital expenditure now that Yaouré is up and humming. And Perseus will continue to remain focused on the continued building of a strong balance sheet through financial discipline. As communicated by our dividend policy in HY '22, Perseus aims to reward its shareholders through its dividend policy, whilst maintaining the focus, as always, on a balanced capital structure and ensuring funds are available to meet our corporate growth aspirations. Our dividend policy, as we've stated, intends to make semiannual dividend payments representing cumulatively at least a 1% annual dividend per share. We've obviously, as everyone, we declared a Maiden dividend in the form of a capital reduction in August '21, and further distributions will be considered in excess of this 1% annual yield. With that policy in mind, we are also been pleased to announce this morning that the Board supported the payment of an interim dividend in line with the 1% annual yield with further dividends to be declared or to be considered in FY '22 based on the financial performance and corporate growth aspiration requirements. As the CFO, I can say this is all in all been a fantastic 6 months for Perseus, and we're all very excited as a team to see what the next 6 months and beyond will deliver. Thanks, everyone, for listening. And I'm now going to hand over back to Jeff and possibly some questions from everybody.

Okay. Well, thanks, Lee-Anne. You can tell that the team is obviously enthused by the results. But as I said earlier on, what we have done through the 6-month period is lock ourselves into a position where we're generating our production in line with expectations. We're keeping a lid on costs in a fairly challenging environment. In fact, our cost base is coming down. We're paying our debts down. So managing the balance sheet. We're returning capital to shareholders in the form of dividends and we're working at delivering future growth for the company. So all of the things that we have set out to do over the last several years, we are now doing. And it is a fairly exciting position to be in. And we believe that from here, we can move to the next stage. And we're looking forward very much to delivering further results to you in coming periods. So thanks very much for your attendance today. Very happy to take any questions that you may have, as I say, either on the detail of the financial report, which I'll ask Lee-Anne alternatively on questions on the broader strategy or positioning of the company, I'll deal with those. So thank you very much.

Thank you. Your first question comes from Patrick Collier at Credit Suisse. He's given his congratulations on the result. And then he's asked, with regards to maintaining 0.5 million ounces to the end of the decade, can you talk about what's required from each of these assets to achieve this? And to what extent inorganic growth is factored into that aspiration?

Okay. Well, what's required from the operations as they stand today is they need to keep performing in line with expectations fairly straightforward. In terms of organic growth, we are drilling around all 3 sites at Yaouré, Edikan and in the Sissingué area. We're achieving significant success at each of those sites as we have documented in releases to the market over the last month or so. We do expect to bring out an updated resource reserve statement following the end of the financial year, so in the September quarter. And I believe that what that will indicate is that not only have we replaced the ore that we processed this year across the group, but we'll substantially add to that position. And of course, that helps us to maintain that level out towards the end of the decade, which is what we're aspiring to do. In terms of inorganic growth, that the results of inorganic growth, such as Yaouré, are not factored into any of our expectations at this particular time. We did announce a small foothold positioning of the company recently, but that isn't built into our forecast at this particular time. So should we do the M&A, then that would clearly be in addition to the aspirations that we've stated already.

Thank you. Your next question comes from Kate at Citigroup -- Citibank, sorry. She's also congratulated Perseus on the result. And then she's asked, is there an update on discussions with Orca regarding a lighter transaction playing out?

No is the short answer. There is no update on that.

Okay. No problem. There's no further questions at this time. So I'll now hand back to Jeff for closing remarks.

Okay. Well, thanks, Nathan. Well, yes, as we said, it is a solid result, and we are looking forward to what is coming down the turnpike, and we believe that the future is extremely strong. So we're looking forward to delivering further good news as we go forward. Thanks very much for your participation today.