Perseus Mining Limited

Jeffrey Quartermaine - Chief Executive Officer

Cathy Moises - Patersons Securities Dylan Kelly - CLSA Limited

Well thank you very much and welcome to this conference call to run through Perseus Mining's December 2017 Quarterly Report. For this is information, I'm calling this morning from our Edikan mine here in Ghana.

And while telecommunications here are usually reliable, if I did disappear in the middle of the call, I will get back immediately. But if that's not possible, I apologize now in advance.

If it does happen, we will ensure that recording of what I’m intending to say is put up on the website. And so should you miss early reads and you will be able to catch up on things later on.

Now the other thing I should say and I think that it's now about five am in the morning out here. And if I sounded it little flat, that's entirely unintentional and nor the results are being bit tight but anything else.

On the contrary, what Perseus has achieved during the December quarter, and what I have seen the best as to Sissingué and in Edikan operations, where we have been to for the last few days gives you plenty of reasons. We are very bullish and full of optimism about the future.

Now as you all know, that the first three quarters of 2017 showed a strong resurgence in Perseus' operating performance across all fronts, but in particular the Edikan mine here in Ghana. The fourth quarter that ended on 31 December seen a continuation of that improved operating performance with the solid production results at Edikan, strong progress in the development of our second mind that Sissingué, that culminated in the first goal of last Friday.

And also the completion of the technical sand in commercially credit DFS for our third project at Yaouré. So as I said, I have got plenty of reasons seems to be feeling buoyant and full of enthusiasm.

Now, I usually start these teleconference talking about Edikan until a week or so ago Edikan was around the operation, but I'm delighted to say that is a results of an excellent work by our in-house development team and contractors most notably Lycopodium. We have now got two operating mines.

The development of the second mine Sissingué is now complete and as I said before, we poured our first gold on Friday, Friday the 26 now that’s Australia Day. We are now in the process of ramping up production to nameplate and on current indications this will be achieved in February and we will formally get commercial production shortly thereafter.

Now if this happens as we expect, it will be about four to six weeks ahead of schedule and other cost that's right on that budget of about $107 million, which goes to the cost of development and also operational readiness preparations. If you add to this the about $9 million of early works, then the type of cost of the new mine and infrastructure comes at around $116 million, which is exactly what we planned to do.

We almost follow this execution of our development plans confirms our capacity to successfully develop projects here in West Africa and this is particularly relevant in the context of our plans to start development of our third mine Yaouré also in Cote d' Ivoire later this year. We have got a proven and expert development team that's ready and able to transfer the knowledge and experience last seen Sissingué to Yaouré development and this will have the impact of significantly reducing the development risk associated with very important project that more of that later on.

Now development projects such as Sissingué and Yaouré when it happens the product with the huge amount of work in that require a lot of people. And I just like to acknowledge that, as noted first pieces got Yaouré has a similar than excellent in-house development team led by project director Matt Scully and construction manager Ricardo Rodrigues.

And as they benefited from early the shift as well as the important contributions from our contractors such as Lycopodium led by Karl Cicanes who work very hard to deliver this project ahead of time and on budget. We have also been very fortunate to enjoy the full support of Ivorian Department of Mines and Geology led by Minister Jean Claude Brou as well as the senior members of our host community and their constituents.

And hopefully all these relationships will enjoy for the life of the mine. And I would really like to, to really thank all from this table for their respective contribution to what has been a job very well done.

So Sissingué is up and running. It’s very well reserved and milled.

It’s functioning beautifully and we are expecting to have a significant contribution to our overall performance for some time to come. We think that the prospect of the existing - extending the existing mine life is very good.

And to this end, now having finished through the development and given the guide and ore thrust and tend to follow-up on several newer mine exploration targets, that we are very confident we will ultimately yield additional milled feed for the Sissingué plant. So with the completion of Sissingué, we have successfully made a transformation from being a single mine, single country business to a multi-mile multi-jurisdiction operation.

And we are now well underway to achieving that goal of producing in excess of 500,000 odd ounces of gold from three mill separates in operations, Edikan, Sissingué; and the yet to be developed, Yaouré. Soon with Yaouré, we have completed a Definitive Feasibility Study during the quarter, in late October.

And this is related to the market on schedule and in early November and then NI43-101 Compliance Technical Report for the project was also filed shortly before the end of December. And in summary, the DFS confirmed the very high quality of the project and a significant contribution that it can make to Perseus’ short to medium term plans.

For example, the projects demonstrated a number of people. Firstly, Yaouré’s economics are very attractive at a range of gold prices and discount rates.

And at current gold prices around $13.50 an ounce, we generated 33% real un-geared IRR and achieved a payback of probably about 28 months. At a 5% discount rate of these gold prices, the NPV of the project is about $350 million and that equates to a healthy $0.44 a share which is slightly more than what the share price of the entire company closed at today.

So the value that will be unlocked by the development of Yaouré is very, very significant. Second point is that the Yaouré is technically very robust and it’s got very attractive operating metrics based on geo compliant ore reserves of about 27 million tonnes, creating 1.0 drags a tonne, containing about a 1.5 million ounces of gold.

So to put it in perspective, at this stage we look like having an 8.5 year life based on that reserve, the strip ratio is about 5. And we are processing ore at a rate of about 3.3 million tonne per annum.

For the first five years the head grade will be 2.3 grams a tonne averaging 1.8 over the life of the mine. The recoveries will be around 90%.

We will recover about 1.37 million ounces over the life of the mine. But in the first five years, we will produce on average 215,000 ounces a year.

All-in site costs will average about $760 an ounce over the life of the mine. In the first five years it will be a little bit lower than that.

Another strength, at the moment, we have got strong production for about five to six years and then things pale off as we move to the prices of the stockpile of gold. I should point out that we expect a bolt-on and commit to develop the project we will have defined sufficient additional reserves to extend this period of high performance by several years, and that will figure that exploration to never fade pretty shortly.

And the third point that came out [indiscernible] was that the upfront capital cost of $263 million including $11 million of pre-strip is a sum that we believe that this well within inverses this funding capacity, using internally generated cash permitted tenants, combined with some bank finance. And we will see that we have at the moment too.

The growth rate is just come out of this is that Yaouré really has had some excellent great potential, it’s like guided on a very perspective tenant and package, we have got it our 513 square kilometers of land much of which is not been very comprehensively examined. So to this end, what we have done is since finishing the DFS we walked around an exploration program to follow-up on some targets that were identified during the recently completed Sterilization drilling program.

This drilling, we expect we will generate some additional resources and it will be followed up by second small program that’s targeting some in fit mineralization, that’s currently classified as in third resource but that with the additional drilling, it will be converted to a reserve that is pretty low and improved and we do expect to increase the reserve quite rightly. Now outside of these targets, we have also got other drill targets that we will be following up and in fact we have already followed up to have a closer look at.

And I don’t want to speculate too much about that at this stage. But I can say that we have recently identified some mineralization away from this and try and fit area that this certainly got the attention to that geologist, not to mention me as CEO.

So we are very, very encouraged what we are doing there, actually and we see that reserve is going to be extended quite substantially in the years to come. – point demonstrated either DFS is that given the very positive financial and technical parameters that apply the Yaouré, we are lucky to generate some significant value when we develop this project.

And when I say significant value, it is value that its very much in-line with what we expected based on the DFS study that we performed when we quite this property in April 2016, so in other words we are very, very comfortable with that acquisition and we feel very certain that we have got what we paid for and then possibly some more. So looking forward with Yaouré, couple of things, we have applied to the exploitation permit that was most earlier this year, covering our full development area and that’s apparently under active consideration by the minerals commission in fact last Thursday, we had a good talk about that.

Following the ground as the exploitation permit, we will be in position then to finalize compensation to various stakeholders and start some minor early works to securitize facilitate rapid ramp up, so ramp up of construction activities. Front end engineering and design of the project will take place probably sometime in the June quarter, we need to complete that resource drilling, I mentioned earlier, first say that we have a clear picture of where to locate various pieces of infrastructure.

Following on for a matter or at least in conjunction with that we will be developing a comprehensive execution plan, that this got a inclusive in the – rate contracting strategy worked with Spain operational readiness etcetera and we will get on to that pretty much as we are moving through this phase. The other thing that we are doing at the moment is in conjunction with a recently appointed corporate advisor, which would begin evaluating the full range of financing in terms of if it’s are valuable to the company to fund the development of Yaouré.

And we expected a preferred funding package will be identified and selected by the end of this quarter, after which we will move on and implement the financing plans and begin construction as soon as we are confident that the funds are [indiscernible]. So the Yaouré projects heading towards the starters block and our Board has got the starters gun in their hand, so we are very, very excited about this one and we have a team of develop the project as we have demonstrated with this and then as soon as we are confident, the funds through in hand will get underway with the project.

Turning to Edikan which is our sole operating asset until recently. During the December quarter, we produced 56,699 ounces of gold continuing the strong trend of production performances that was achieved in the three prior quarters.

This results about 11% higher than in the September quarter where we may produce about 51,000 ounces and at 76% more than the December quarter in 2016. So you can see that certainly in the 12 months since September 2016 we have certainly turned the corner and have moved on very strongly.

On a full-year basis, the goal production totaled 208,226 ounces in calendar 2017 which is the highest venue production since we started commercial production here at Edikan in 12. And this was about 36% more than what was actually produced in calendar 2016.

The strong results of the quarter were primarily driven by improved length performance so we have run time averaging 94% which was 10% higher than the prior quarter. We had a throughput rate of 911 tonnes per hour which was about 8% higher than the prior quarter and in this case resulted in 19% more of the winning prices spend in the prior period.

A material improvement in that performance can be attributed to range of factors including improved maintenance, practices improved lending of the mill seed, improved fragmentation of the mill feed using increased powder factor and also the deployment of the mobile crusher that we have been using to supplement our primary crusher which needed to be maintained during the quarter. The quarter-on-quarter increase in mill throughput was however partially offset by that 5% lower head grade at 1.1 gram a ton and a 1% decrease bell recovery at 86%.

I just to make a comment or two on grade, I know that this is something that is of interest to some of the listeners. We carried out an exercise during the quarter aimed at checking the reconciliation of tons head grade and contain those estimated by of mineral resource block model relative to the grades control modeling over the last 12 months since we adopted the MIK modeling techniques in January 2017.

Now the results indicated that across the site, reconciliation of tons, grade and contain metal was close to 100%. In fact it was yearly close to 100%.

So that means that in the grade control model we are getting bang on what we expect it to get as predicted by the resource model. Now, I should point out that this is a study of amounting from full pit we are currently being mining from and on an individual pit-by-pit basis, the results vary out over the 12 months.

So some pits were better than others as indeed they varied on a month-by-month basis. But taking over the 12 months, it was back on target.

The conclusion that we can draw from this analysis is that while the reconciliation is the regulatory and extended period, on a short-term horizon positive or negative variances they definitely do occur and so basing judgments on short-term numbers can be a perilous activity, not to mentioned forecasting. Now similar variability occurs in the reconciliation between growth trial model in the mill and that obviously has the direct impact on how much well distribute some amount or amounts were recorded by core basis.

Now when you recording on a quarterly basis, we have two down months out of the three then it qualifies as a disappointing quarter. Even though over the 12 month period, this is absolutely not the case.

Now we have experience to mine coal factor during the quarter. This 12 month period it's a little over 5% of contained metals which is not out of line with industry standards.

On a month-by-month basis though it moves up and down. And as I said, it can make predicting other than the challenging back.

Over the longer term we are delivering the gold to the mill and that's the important thing. Now out of this reconciliation to identify the series of potential improvements in modeling, mining and processing areas all of which are reducing the variability.

And these improvements have been implemented and we are starting to see the benefits coming through now. So I think as we way into the future we will be able to reduce that variability which is much, much better for from applying point of view.

Now with respect to our all insight costs, these are reasonably fluctuating the quarter that made up of course the unit cost of mining processing and G&A. And unit mining plus day increased from about 283 a ton to 349 a ton.

And that reflected lower material movements over which the spread contracted fixed cost. Affected with deeper in the mining elevations and therefore experienced greater hole distances this quarter.

As I said earlier, we also adopted a higher hard affected to improve rough frackage and improved throughput. And we also incurred more running mine stockpile re-handle cost.

Now, we did experienced a crack in the outer shale of crusher during the quarter and so while that was prior to that being able to be repaid. We needed to generate so along, and so we will loading the crusher with a frontend loader rather than direct keeping.

So that will really incur some additional cost. The other thing that's worth noting is that the cost of fuel is increasing too.

So on a quarter-by-quarter basis, we saw a jumping the fuel price both from $0.94 to leading to $1.02. So all those things combined to push up the unit mine and cost.

On the other hand, unit processing cost decreased 5% from $10.51 to $10 a ton, which given the elevated throughput worth and it's greater decreases as we were not expect. The total incur the processing cost base was affected by several factors.

As I mentioned a bit earlier, we used a more temporary metal crusher that supplements the primary crusher while we were getting ready for the overhaul. The cost of the overhaul itself was very expensive.

And we also incurred some additional cost through the additional of peroxide to help the CIL recovery prices. So there are few factors there that influence what we were doing.

G&A costs were pretty flat. I think they were down a little bit on the prior quarter $1.47 million a month compared to $1.53 million so that was pretty good.

Looking on a cost per ounce basis, unit production cost for the quarter. So that includes ore including license stripping processing G&A but excluding royalties.

They decreased by 2% to $998 an ounce. Metals down on the previous prior quarter.

There was a slight decrease in royalty and the slight increase in sustaining capital. So the all-in site cost for the quarter was $1,093 an ounce, about 2% lower than the September result and about 2% in fact lower than the average cost over the preceding or the following three quarters.

So that’s the all-in site cost, that includes all capital space on the site, in fact all cross space on the site and that is the number that should be used working our cash flow. And that the average price of gold that we sold during the quarter was still $60 an ounce that was for the full-year -- sorry for the full-year is $1,275, $1,260 for the quarter.

So we have been generating positive cash margin is $167 an ounce, $166 over the year. We have been generating cash below -- not as much as we’d have liked to at this particular point in time.

So in terms of Edikan, that sole operating mine, we certainly turned the corner some time ago and this quarter combined with the last three quarters is clear proof of that. And as I said last quarter, talked you about that this improvement is not a flip.

It’s part of a long-term trend of strong performance and it’s being averted by some fairly material changes in the way that we go about doing our business. Our confidence in the reach of Edikan remains very strong.

And hence since the last couple of days I saw that that team going through things top to bottom. I’m very comfortable the way this shapes ever at Edikan.

The team is firing on all cylinders and is very committed to achieving our targeted outcomes. And during the last couple of days, we have launched an initiative to reduce our cost base while at the same time continuing to increase our gold production.

And I’m looking forward very much to reporting the results of this initiative in coming months. Looking forward to the second half of 2018, we will continue obviously producing gold from Edikan but we will start producing from Sissingué through the period.

As a result of that, our total production and cost guidance for the fiscal year 2018 and for the second half remain unchanged. So we are talking of 240,000 to 260,000 ounces and all-in site cost of $950 and US$1,050.

And before some of you ask me what the switch between Edikan and Sissingué is? I will tell you that at this point we are not willing disclose that.

We have not yet reached commercial production. And until we do achieve that particular point, there is some uncertainty over the exact split of numbers.

But sufficed to say we are comfortable with this forecast. And based on the performance of Edikan up until today, looking at the latest date that’s come in, we are banging on-track for the delivering.

So another good half year is in the making. Now turning to corporate matters, based on the $1,291 gold price into December and exchange rate of 0.78, since we had cash and bullion on hand of about $45 million which was $3 million short of the $48 million we had at the end of the September quarter.

That sum includes a $22 million of cash and 14,218 ounces of bullion on hand. So that’s fairly similar to where we have been.

As I said it’s about $3 million less than what we had at the end of September. We had positive inflows of cash from Edikan of about $12 million, we had negative working capital movements of $2 million.

We did actually want to reduce our credit very substantially as we are going into end of the year. So we did deploy a quite a lot of cash to dealing with that.

We obviously saved money on the Sissingué development and at the same time drew down cash under the Sissingué facilities, drew some cash under our revolving working capital facility and spent money on exploration and evaluation and corporate costs. So, everything was pretty much tracking according to plan and at the end of the period, we have left with $45 million.

Also at the end of the quarter, we had forward sales in face of that a 150,000 ounces of gold at an average price 1285, that was about 15,000 ounces lower than at the end of September, but the average price was higher. As the prices run up in the last couple of weeks, I should mention that we have added two acquisitions, so as we speak we are about hedged about a 175,000 ounces at an average price of a touch either $1300 an ounce, and that’s well within our hedging policy that served us very well over the last years, and what that done its locked in a acquisition where we can have real confidence that we will generate the cash that we expecting to do in coming periods.

In terms of debt, we a $15 million was drawn under our $40 million project facility, to Sissingué during the quarter, that meant that at the end of the quarter we withdrawn $25 million of the $40 and the remaining $15 million under that facility that’s available will probably withdrawn in the next short period of time, to use to fund the completion of the Sissingué development when all the bills come in. So that’s final that discovered, during the quarter we transformed the $20 million working capital facility that we had into $30 million revolver line of credit.

We did that to give ourselves a little bit more flexibility in terms of managing working capital and then in particular we wanted to be able to fund some of the high potential exploration activity that we are targeting in coming months. That facility was drawn down to that $25 million at the end of the month, so there is still some undrawn capacity there, and that will be paid back and drawn on a come and go basis, as we go forward.

So what all these means is that, not only we are generating cash to mitigate and very short with Sissingué that was also got cash in the bank and we have undrawn credit available, so sufficed to say we are in fairly good shape financially. So in conclusion, I think that the result of this quarter speak to themselves, and its strongly added to our investment pace and that Perseus represents an outstanding value to shareholders, who are looking for opportunities in the Gulf space.

And just in case, just the key points in my quarterly report that we just we [indiscernible]. So firstly, Perseus is now producing Gulf from two operating mines, both of which are performing well.

Edikan is consistently strong in its performance and it’s just produced the highest annual production in its history, registering the 76% increase greater than this time last year. So the performance that dedicated through a strong Sissingué is shaping up extremely well and it will become a meaningful contributor before the end of the quarter, and probably sometime to come beyond that.

We had kicked off some exploration around Sissingué looking to delineate additional reserve and what this means is that we do expect to that excellent pricing facility that just been completed, will be in service for a lot longer than people expect. Following on from the successful development of Sissingué, bringing that project on time, or ahead of time and on budget, it will be very well to do for the next development project at Yaouré and that DFS certainly has a picture of very attractive project based on the currently defined reserves and as I said earlier, as we expect that we will extend as reserves and we expect exploration success and Yaouré will become the flagship of Perseus’ asset portfolio when it comes to the production in the couple of years from now.

We are in good shape financially and for announcing plan that was underpinned by prudent goals, price hedging program of servings as well. Our financial management team is doing an excellent job when it comes to funding the Yaouré, but no doubt that, that will be something that will be delivered in our stride.

So finally, we have got two operating mines now and third financially attractive project nearly rates to move into development and we have made an excellent start to us delivering on our short-term, medium-term growth objectives. We don’t need to find any new reserves really, we don’t need to buy any new projects [indiscernible] deliver that drug in production and earnings from the assets that we currently working on.

And as we have been demonstrating now for four successive quarters we are accumulating a very solid track record of delivering on our promises and presenting a credible case where the investment that we think the market is going to drive increasingly difficult to know. So thank you very much for your attention and I’m now happy to take any questions that you may have.

Happy New Year guys. Just a quick question on the reconciliation, wondering how as well you know the reconciliation is tracking versus the historic peaks that the problems that you pay [indiscernible] and going forward for the second half is it going to be predominantly as you know?

[indiscernible] is very good, it’s been on target actually. Fobinso is slightly ahead, Chirawewa is quite a lot of head and finishes behind.

So as I said it varies and the up and down for various reasons. The main all also going forward for the next six months is going to be Fobinso and Chirawewa.

So the all that’s coming out looks very good in fact in the last couple of days we have seen some very fancy grades indeed. So the reconciliation work is, it’s consistent with what we expected and what we have to do on a day-to-day basis is mainly to and get the right materials into the mill and get the drive at the backend.

Thank you.

Yes , good morning Jeff, congratulations to you and the team on the efforts of Sissingué. Just got some questions here just about gardens.

So you have left the second half unchanged, you must be pretty confident about shaving in. So give us some confidence around that outlook, can you walk us through mine plan over the next six months and break us down the key elements in terms of what is happening and what is moving.

So particular focus on you know you have all sorts and key pits and what the focus are of the operations and what is some major shutdowns over the coming quarters and the maintenance schedule looking like over the coming two quarters.

Okay Dylan, thanks for asking the question. I have just spend the last few days discussing all those issues and I don’t believe and address all of those subjects.

First to say we have very comfortable with that forecast, we have been through top to bottom both here and then compared to and we will be delivering, we are very comfortable that we will be delivering those numbers. The question is to the all sources, coming from the various pits we have couple of schedule shutdowns on the way through.

I think we have shutdown kind of through in February that's going to address some of the issues around the crusher. And we of course, we shutdown I think in May as well.

We have got the runtime at the mill is very good. It's reducing actually, because if you go back 12 months ago, we have come to the site and we have look up very anxiously at that mill and see if that was turning well.

Now we expect that mill to be turning all the time, and the time when it's not are absolutely an exception rather than anything note to say. In terms of the actual performance the physical performance of the mill.

But absolutely no doubt at all that we will be delivering - continuing to deliver very good results in terms of availability throughput rate and recoveries. The variable in the equation at Edikan is great and we believe that the initiatives we put in place to reduce volatility going to be effective, but not back to roughly we feel very strongly that the guidance for Edikan is very attainable.

And as I said, once we reduce I think they are up to about two days get better day ago. And that's certainly indicates that this month some running very nicely.

As far as the Sissingué is concerned. We believe the commissioning is trending along very nicely.

And we have been progressively inching up the throughput rates there as we have been going. We brought first well last Friday, but prior to that we have run 24-hours a day of Sissingué four or five days.

So the new rig is running extremely well over there. The growth in trial practices are going well, so we are well quite also three to four months of growth in hand.

So we are pretty comfortable in the forecast our own grade going into the mill. And the deal what is performing exactly as we predict that it will performed in terms of grade control to block model.

As to grade control at the mill, we work now until we actually get into the work. But at the end where I believes in Sissingué is that while we expect that commissioning process to be very smooth reflecting everything that's quite on that site today.

There is no certainty that that will happen. And when you finishing there is no certainty which you aren't get a wreckage of equipment or something along those lines.

So we are not really in a position to make while predictions about exactly what will come from Sissingué just yet, that will come in due course. But what we are where it come from the back.

It's that we have got enough people in both of the projects to be able to deliver the guidance that was given.

Okay, great. Thanks, Jeff.

Okay, thank you very much. And thank you all for your attendance at this conference.

As I said right from the outset we are feeling very optimistic about our future here as these things are tracking along very nicely. Everything that we are planning to do is coming to fruition.

And we have got a lot of activity stand over the next six months and some quite strong news flow coming through. So I think with that, with the delivery of that news, the market is going to find it fairly difficult to continue to ignore and hopefully we will see that reflected in the share price.

Anyway, thank you very much. And we will speak again in another three months' time.