Perseus Mining Limited (PRU) Earnings Call Transcript & Summary

Good morning, and welcome to the Perseus Mining investor webinar and conference call. [Operator Instructions] I'll now hand over to Perseus Mining Managing Director and CEO, Jeffrey Quartermaine. Thank you, Jeff.

Thanks very much, Nathan. And yes, welcome to Perseus Mining's webinar to discuss our December 2024 interim financial report. This document, along with a range of related documents, was released to the market earlier this morning. I'm joined today by my colleague Lee-Anne de Bruin, who, as you know, is Perseus' Chief Financial Officer. Lee-Anne and her team have been working tirelessly to produce this financial report, and full thanks go to her and all of her team members for their excellent work. I'll ask Lee-Anne to take you through the details of the report in just a moment. When she is done, I will share a few thoughts with you on the way forward for Perseus, and then, as Nathan has already indicated, we'll continue -- conclude today's webinar with a Q&A session. If you're listening to this webinar through your computer, you should be able to follow the presentation on your screen. If not, it has been released to the market and you can take a look at it later on. Over to you Lee-Anne. Thank you.

Thanks, Jeff, and hello everybody on the call. Thanks so much for joining us. As you can see from the summary in front of you, we've had a market leading performance again in this December 2024 half year, and thanks very much to our operational team, who have worked continuously and consistently to deliver these. It's easy to present a set of financials when you've got your operational team supporting you in this way. Gold produced for the year was at about 253,709 ounces in the up -- sorry, for the half year, in the upper half of the guided production. Our all-in site costs was $1,162 per ounce, well below the guided cost range. Our average gold sales price up 13% at USD 2,350 per ounce, delivering a notional cash flow up 27% of USD 300 million. We ended the financial -- or the calendar year with a net cash and bullion on the balance sheet of USD 704 million. This was an increase of $117 million in the 6 months. As you can see, this has helped us deliver a very strong financial performance, which is translated into these very strong performance metrics. The revenue for the year was up at USD 582 million or an equivalent AUD 880 million for the 6 months. This was largely aided by the 13% increase in gold price achieved for the 6-month period. Profit after tax is up at 22%, delivering USD 201 million or AUD of 304 million. Our 3 operating sites delivered $248 million in operating cash flow or AUD 375 million. Net tangible assets ended the calendar year at USD 1.3 billion or AUD 2.1 billion, and this was largely attributable to an increase in amortization and depreciation for the year, which was then offset by our increase in cash and bullion on hand. Importantly, the Board also resolved to declare an interim dividend of AUD 0.025, which is up 100% on the interim dividend in 2024. Once again, Perseus has then delivered a strong growth in earnings, as you can see from the chart on the right-hand side. EBITDA up at USD 353 million or AUD 533 million due to the increased average sales price I mentioned earlier, offset incrementally by increase in cost of sales for the period. Our gross profit from operations up 26% despite the 27% increase in depreciation and amortization, which was attributable largely to an increase in mining of ore reserve tonnes at Yaoure during the 6 months. Basic earnings per share up 22% at USD 0.1296 or AUD 0.196, and the earnings per ounce, importantly a key focus for us, up 25% at USD 819 or AUD 1,239 per ounce. So cash flow, as you can see, continued to grow. You've seen that there's consistent growth from us since way back in 2021. And as I mentioned, we've delivered USD 248 million in our cash flow from operations for the period. And this gave us USD 0.18 per share in operating cash flow, up 17%. Operating cash flow per ounce of $976 per ounce, as I mentioned previously. So a strong operational cash delivery from Perseus. Shifting our focus to the balance sheet. We ended, as I mentioned, with cash and bullion of USD 704 million or AUD 1.1 billion, with no drawn debt at the end of December. Our net tangible asset per share sitting at USD 0.97 per share or AUD 156. This is our favorite graph, which shows how we've delivered increasing margins over the last couple of years. All 3 mines have performed consistently following temporary setbacks early in H1 2025. This elevated gold price and falling unit costs contributed to our USD 700 million cash bullion on hand at the end of the period, with strong operating cash flows. As communicated in our most recent quarterly, guidance is maintained for FY '24 at between 470,000 to 504,000 ounces at an all-in site cost of USD 1,250 to USD 1,280 for the period ended June 2025. As I referred to up at the front, off the back of these strong cash flow performance, the Perseus Board has resolved to declare AUD 0.025 per share dividend, and this will equate to an interim dividend payout of about USD 21.3 million or about AUD 32 million. You'll recall, we announced our share buyback in August '24 and the intention was to invest up to AUD 100 million in an on market share performance buyback. As at 10th of February, we have purchased back 4.7 million shares at an average price of AUD 2.59. To date, we're about 12% of our target, having spent AUD 12.2 million. And we point out that we do have interruptions to this program through the buyback period -- through blackout periods related to market announcements. With that, I'll hand over to Jeff to talk about the way forward.

Okay. Thanks very much, Lee-Anne. And I think people would agree that they are a pretty decent set of financial results. Of course, what that then does is it throws the spotlight onto the future and what can shareholders expect from the company going forward. Now, as Lee-Anne has already pointed out, our market guidance remains unchanged at around the 470,000 to 505,000 ounces for the financial year at USD 1,250 to USD 1,280. The results for December are obviously set, and we're now nearly 2 months through the next 6-month period. I can say at this particular point that if we remain on the current path that we're on, we're going to finish our period towards the top end of the production guidance range. And as far as costs are concerned, it does appear from 1 month -- and I'll stress this is only 1 month, not 6 months -- but certainly from the first month of the period, we have been a little conservative in our cost estimation, and our costs are running below the bottom end of the range. But there is time for that to change before we finalize those results. The bottom line is, is that our production and financial performance going forward looks as strong as it has been in the past. In terms of sustainability, as people know that Perseus places a very high emphasis on the maintenance of our social license to operate in all of its forms. And that is something that we are continuing to focus on to continue to look for ways of generating maximum benefits for all of our stakeholders, including, of course, shareholders, but also including, very importantly, our host governments, host communities, employees and suppliers of goods and services. Now speaking of shareholder returns, capital management is something that takes a lot of our attention, that and growth of the company. And you know quite clearly here what we're seeking to do is to maintain a balanced capital structure so that we can provide benefits to our shareholders, but at the same time return -- retain capacity to continue to fund our future growth. Now we -- as Lee-Anne has mentioned, we have embarked on our first share buyback program. The first 6 months of that program have been a little slower than one might have anticipated. As we've come to -- become familiar with how to use the buyback process in order to benefit shareholders, I think that we've learned a lot from that. And when we get beyond the current blackout period, we will be a little bit more aggressive in the way we use that function. Now speaking of growth, this is something that does tend to dominate discussion when we meet with shareholders. "What are you going to do with all of that cash that you've accumulated?" is the question. Now what we're doing is we're working on at several levels. We're working very hard at the present time to determine whether in fact our existing mine lives are able to be extended. To put this in perspective, when we originally designed our mines at Edikan and Sissingue, we used very low gold prices compared to today's spot prices. And so we're going back and taking a look to see whether an elevated gold price in the design is going to generate further ounces and life extensions and costs that are acceptable to the company. At the end of the day, we will need to study the results of this work and work out is Perseus better off extending mine lives producing more ounces even if it comes at higher costs, or should we retain our focus on absolutely minimizing cash costs at all -- by all measures. The difference between the 2 really is one's outlook on the gold price going forward, are we in a stronger for longer environment or not? But that's a body of work that's going on at the present time. Results of that will be released to the market in due course later this -- in the June quarter, and people will be able to see precisely what the life expectancy of our properties are going forward. And I'm sure that you won't be dissatisfied with what comes out of that. The other activity that we're busily involved in is preparing for the commencement of the underground mine at our Yaoure project in Cote d'Ivoire. Now this is the first underground mine for Cote d'Ivoire. We appointed the contractor some time ago, and they will be appearing on the site very, very shortly. And in the interim period, operational readiness is the focus. And we look like -- we look very keen to hit the ground running when the contractor assembles on site and that he starts bringing in the first equipment. The other piece of work that's very -- keeping us very busy at the moment is working towards the commencement of the Nyanzaga gold project development in Tanzania. Physically we are ready to go. There are a few issues that we want to finally resolve with the government of Tanzania before we press the go button. We've actually reached reasonable agreement on the specific issues. What we're looking at now is the best method of implementing change such that these altered positions have the full force of law going forward. As we've said to our host government, we're going to be partners for a very long time, so it makes a lot of sense to get this right before we start. So that's something that's coming along very quickly, and we'll be very, very keen to get into work there shortly and be in a position to deliver first gold from that project in January 2027. Now the other area of work that we're busily engaged upon, of course, is on looking for new opportunities for growth. And these opportunities will come from 1 of 4 areas. They'll either be near mine resources that we can acquire and put through our processing -- existing processing facilities. We're looking at pre-development projects that we can put through our engineering pipeline and deliver value for shareholders by engineering, building and operating these properties. We're also looking at existing production, bolt-on opportunities, where perhaps existing operations may be able to be improved through our stewardship. And we're looking at possible transformational transactions. Now all of these opportunities that we're looking at are things that are based on the African continent as we are. And of course, it's fair to say that the number of opportunities available is reasonably limited. However, we are working on several of these, and we will push forward if and when they merit further work. Now it will be remiss of me not to mention our shareholding in Predictive. This is something that's been a topic of conversation among a lot of shareholders in recent weeks. The situation with Predictive is we do have a shareholding. I think it's about $0.178, $0.179 following the issue of some shares about a week ago. Where we stand at the moment is that we need to evaluate that opportunity thoroughly. And if it makes sense for Perseus, then we would move forward. However, I stress the point if it does not make sense, then we will not be moving forward and we'll look to liquidate the position. The thing is that, that company in our view is very expensive right now. Not particularly helped by the share placement last week, but nevertheless it's an expensive proposition, particularly when you look at the acquisition price of the company, the cost to develop the project and any taxes related to the transaction. And so given that Perseus' role is to be a good steward of the shareholders money, we need to be entirely certain that we can generate a very satisfactory return on your money before we move forward. So yes, we are looking at Predictive, but I have to say we are quite some distance away from activating that situation. So that about brings it to an end. As we've said earlier, we're very happy with the operating and financial performance from the December half year, and we're looking forward very much to the next 6 months and being able to continue bringing you results of this type as we go forward. So thank you very much, and very happy now to take any questions that you may have.

[Operator Instructions] Your first question comes from Andrew Bowler at Macquarie.

First one from me is probably for Lee-Anne. Just looking at the restructuring costs of $18.2 million, and again just wondering if there's any carryover into the second half or whether that was all completed within the half? And what was the reason behind those changes to the staffing contracts?

Yes. Sure, Andrew. No problem. No, they've been -- that was a completion of a program that we've been running, and there'll be no run over into next financial year. And generally what it's related to is moving a number of our staff at Edikan onto fixed term contracts, which is a very common practice in Ghana at the moment. But that required a triggers of their -- a number of their redundancy and retrenchment payments. So that's what that related to. But there's no hangover for next year. That's the end of it.

No worries. And last one from me. Jeff, I was wondering if you could just elaborate on your comments earlier about the first month, you're running under guidance for cost. If you could just elaborate on why that is. Is it softer material? Is it lower movement costs, lower diesel prices? Or just everything seems to be heading in the right direction at the moment through productivities?

Yes. No, that was -- it was -- I think there are a couple of specific issues that gave rise to that. One was a slower rate of expenditure on sustaining capital. We've got a number of projects earmarked around the Yaoure site that have just taken a little bit longer than we might otherwise have liked to get fully mobilized on that. And also to, in the mining at Yaoure, the haul distances during the month were shorter than what we had originally budgeted. So we've been able to cut down on mining costs. That's why I say that over time, it may even out a little. But I do think we've perhaps been -- we have been fairly consistently conservative in our cost estimation over time because, I guess, we look at the market and we see that a lot of our peers are experiencing pretty heavy cost inflationary forces and we anticipate that we won't be isolated from that forever, notwithstanding the business improvement initiatives that we're constantly seeking to accommodate those inflationary forces. But we're moving along. I think it's a little bit early to be conclusive about anything. But we're on the right track at least anyway.

No worries.

Your next question comes from Levi Spry at UBS.

Maybe Jeff, could you please just expand, where you can, on Nyanzaga? What are the elements that you're waiting for? What are the updates we're going to see here before you can commence FID?

Well, the only things that you'll see is that we've signed the agreements with the government. I mean, what we're looking at -- there's a couple of elements in an existing framework agreement that are unclear as written. Just to put this in perspective, there was a change to mining regulations in Tanzania in 2020. The framework agreement was signed in 2021. And then there were further amendments made in 2022. Now what we're very keen to ensure is that there is no ambiguity as to what the prevailing law is that governs some of the clauses in the framework agreement. And they're not things of massive -- well, they are things of importance. They're all -- it's all important. But there are things that we need to have certainty on going forward. I mean, for instance, repayment of VAT during construction is a critical item. We are looking for that refund to occur. The corporate structure of the holding in Nyanzaga is a little clumsy and needs to be refined, and we need to do that in a fairly simplistic way. So there are things like that, that -- they're not -- there's also another one that's a little bit silly in a sense that we're funding the -- we will be funding the project through intercompany loans that don't carry any debt, so, i.e., no interest rate. And the way things are written, the tax department might feel inclined to deem an interest rate and then charge withholding tax on a deemed interest rate. Now clearly that makes no sense. If they want to do things like that, then we will charge interest, which not in their -- not in their best interest in any event. So none of these things are tremendously earth shattering. However, if we are going to have an enduring relationship, we need to remove any ambiguity up front, even if it takes a month or 2 to put these in and give them the full force of law. So that's what we're talking about there.

Okay. And just your comments around higher prices and looking at mine life extensions, and I'm actually -- particularly thinking about Nyanzaga, how it could be optimized in a high price environment. But can you just -- and I assume that can't happen until...

Well, now, Nyanzaga is not actually one that's on the table for this. I mean, what we actually are doing with Nyanzaga is we did a confirmatory drill out on the -- over the last -- or since we acquired the property, and have confirmed that the resource and reserve as it stands is very solid based on the numbers that we're using. What we will be doing there in the next 12 months, however, is doing a further drill out program. And we believe that with that further drill out program, we'll be able to convert a lot of inferred material into measured or indicated, which will then go to the reserve. So that's the exercise, and that'll substantially increase the reserve. That's the exercise at Nyanzaga. On Sissingue and Edikan, for instance -- I mean we've used different numbers for designing pit shells, typically around $1,500 an ounce. Now one can question whether that's the right number when you're receiving 2,900-odd dollars an ounce for your gold. And as I say -- what it means is that if you use a higher gold price for your pit designs, the incremental ounce will come out at a higher cost. And then we need to consider is that what Perseus wants to do. Do we want to lift our weighted average all-in site costs or do we want to keep our costs down and focus on maximizing that cash flow? As I said earlier on, the decision really does come down to your view on gold prices, whether they're going to be stronger for longer. But what we wouldn't like to do is to embark on a cut back of a pit at a higher price, have the gold price fall, and then find out that we've actually wasted capital doing the stripping because we can't make money off the incremental ounces. So it's quite an exercise to do. And whatever decision we reach will be founded in hardcore facts.

Yes. Okay. And just the timing around that piece of work, is it a 6-month job, a 12-month job?

We've been working on it for a while. So we're looking forward to releasing that in the -- early in the June quarter actually.

Your next question comes from Richard Knights at Barrenjoey.

Just a quick one from me just following up Nyanzaga. Just keen to understand at what point we sort of get into -- hit critical path in terms of delivering a January 27th commissioning on that project?

Yes, a good question. I mean, if we were to extend the startup date well into the June quarter, I think we'd be under -- that date would be under pressure. But we're hopeful of getting away much sooner than that.

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

Okay. Well, thanks very much, Nathan, and thanks everybody for attending today's call. As I said, we're fairly comfortable with these results, and we're looking forward to continuing to be able to bring such results to you in future periods. Thank you very much.