Perseus Mining Limited

Thank you very much. Good morning and thank you all for joining this webinar to discuss Perseus financial results for the financial year ending 30th of June which were approved by our Board last night and released to the market earlier today.

I'm joined on the call by Elissa Brown, our Chief Financial Officer. After I've provided an overview of the results, Elissa will be on hand to provide some more color on specific details of the financial report and then also be available to respond to any questions that you may wish to pose to either of us after her comments.

So, highlighting our trends, the successful transition to a multi-mine multi-jurisdictional gold producer in fiscal 2020. We've recorded earnings before interest tax depreciation and amortization EBITDA from our operations of about $274 million -- $273.8 million in fact, which represents about a 67% increase compared to the previous financial year.

This translated into a net profit after-tax of $94.4 million or $0.081 per share compared to net profit after-tax last year of $7.6 million or $0.07 per share. So, that's a very substantial increase 1,146% increase in net profit after-tax.

And that is quite a large jump in anybody's language. As has been previously reported the Perseus Group produced a total of 257,639 ounces of gold in the 12 months to 30 June.

The weighted average all-in site costs were $972 per ounce of gold produced. That was 1% more than the previous financial year.

The average price of gold sold during the year was US$1,457 per ounce which was about $200 an ounce more than the previous financial year. Now, our materially improved financial results were a function of several factors including the higher gold price.

The factors I guess included a 16% increase in revenue overall to $591 million. And that -- I mean that reflected higher gold sales at Sissingué compared to the previous year as well as that higher gold price that I mentioned.

We also saw an 8% decrease in the cost of sales during the year due mainly to decreased mining costs at Edikan where we have successfully implemented a revised mining strategy involving changing from being a two-contractor operation to a single-contractor operation from -- effect from 1 January. So, we had a full year impact of that change in strategy.

Our depreciation and amortization expense for the year was $134.1 million which was a decrease of about 13% on the prior year due to amongst other things lower rates of binding at Edikan as called for by the revised mining strategy. The result also includes a write-down and impairment expense of about $4.5 million and this was up on the previous year, an increase of about $4.4 million on the previous year.

This relates to -- mainly to written-off exploration expenditure around the Sissingué and Edikan mines. We also included in the results a foreign exchange gain of $13.8 million.

Last year, in fact, the gain was $15.5 million. So, there is in fact a reduction in the FX gain of about $1.7 million.

Now, this FX gain arises as a result of devaluation of the Aussie dollar against the U.S. dollar and revaluation of intercompany loans.

Also a note on the result of the thing is that the fact that it includes income tax expense of $32.2 million. Now, this is $34 million more than the prior year when we recorded a benefit of $1.8 million.

The increase in tax reflects the commencement of the payment of Ghanaian income tax installments in the current financial year after having applied accelerated depreciation for tax purposes in prior years, as is permitted by tax laws in Ghana. In terms of cash flow, our operating cash flows increased by 46% or $67 million in fiscal 2020 to $213 million or $0.182 per share and as I've already mentioned, largely contributed to by the increase in revenue and reduced costs.

A total of $270 million of cash was invested during the period. The majority of that went into the development of the Yaouré Gold Mine about $215 million within the Yaouré.

And there was also investment in exploration about AUD 19 million in exploration as well. Net proceeds of $181 million were received from borrowing during the year and $15.3 million in borrowing costs were paid to lenders.

So at the end of June, the total value of cash and bullion on hand was $237.5 million, about $69 million more than in the previous year. So that's about a 41% increase in cash and bullion on hand, which is a quite a job.

The company's net assets at 30th of June were $876 million, or about $0.75 per share, after accounting for that cash and bullion on hand of $237.5 million, as I mentioned, and also bringing into account interest-bearing liabilities of $217 million -- $217.7 million. Now looking to the future.

Perseus' financial performance is expected to remain very strong, with continuing solid gold production and improving cost structures at each of our mines. We've previously released guidance for the December half year, which is as follows: that we're expecting to produce something in the range of 125,500 to 139,000 ounces.

And that should occur at an all-in site cost somewhere in the range of US$ 940 to US$ 1025. At this point, we haven't given guidance for the second half of the year, principally because towards the end of this year, we expect to bring the Yaouré Gold Mine online, so produced our first gold from Yaouré at the -- late in December this year.

And I guess we'll need to wait and see how that goes and the speed of ramp-up before making any bold predictions around the second half of next year. However, I will point out that the June half will involve production from three operating mines rather than two, as it has been this -- in the current six months.

So we would be looking to see a significant increase. Now one of the things, of course, is also that this year having released the results that we have, we have not declared a dividend.

However, as I previously said, with Perseus becoming a three-mine operator with steady cash flows and reliable line of site on cash, payment of dividends is something that we as a company are very keen to implement. And we'll be looking very closely at the situation once the Yaouré investment is completed and once we're into a sustainable position with our third mine.

So this is the 2020 financial result in a nutshell. And I should say, before handing over to Elissa for further comment, that today we published a report of about 95 pages or so, that is comprehensive in all respects.

So following this call, if there are any issues that you would like to understand better, I would first direct you to that document. But failing that, don't hesitate to contact either us in the room or self-preferably by e-mail.

And we'll do our best to clarify anything that's not immediately obvious. So, Elissa, over to you, to clarify anything that I've said that might help our investors understand what we've released today, please.

Thanks, Jeff. I'll just elaborate on a few points before we take questions.

The net profit after tax result of $94 million was a very good result and a significant increase on the prior year. Contributing to this was the increase in gold price received, which had a material impact on revenue.

The average price received this year of $1,457 an ounce was a 16% increase on the prior year. And this represented deliveries of gold into both spot at about 70% and forward sale contracts of 30%.

Perseus does maintain an active hedge program and at 30th of June 2020 had 323,000 ounces of gold sold forward at an average sale price of $1,442 an ounce, which represents 22% of anticipated gold production over the next three years. In terms of the depreciation and amortization, that's reduced from the prior year due to lower mining rates at Edikan as Jeff mentioned.

But in addition because the reserve at Edikan was increased substantially during the second half of the year, the remaining written-down value of mine properties is spread over more tons, therefore, resulting in lower fund amortization rate. Edikan commenced paying tax this year following utilization of all carry-forward capital allowances.

Now that resulted from accelerated depreciation, which as Jeff mentioned is in accordance with the Ghanaian income tax laws. And we obviously expect to be -- continue to pay tax from here on out at Edikan.

The finance costs in the statement of comprehensive income relate to costs on the debt facilities Perseus had prior to arranging the new corporate facility. Most of the costs related to the new facility have been capitalized.

And you can see the cash paid for borrowings this year was $15.3 million. Working capital for the year increased $70 million from the prior year largely due to increase in cash as a result of the full drawdown of the corporate facility.

So we put in place this corporate facility during the year to retire the previous Edikan and Sissingué debt facilities and to provide funding for the Yaouré development project and other corporate needs. In light of the COVID-19 pandemic, the full facility was drawn down in line with the strategy to ensure stability in the business through the uncertainty of COVID.

It is envisaged that once the Yaouré construction is complete and the mine is operating that a large amount of the facility will be repaid early in the next year. The last comment that I will make relates to the remuneration report.

This is a transition year for us. In the past our reported STI payments have reflected the prior years of award, and therefore, it didn’t really match up with what we were reporting in this current year.

This year we brought forward our performance review process to allow for the current year STI to be recorded in this year. As a result both the 2019 and 2020 STI are reflected in the remuneration report.

In future years only the current year STI will be recorded and reported on so that it lines up with the results that we put forward in terms of production and costs. I'm happy to take any questions now on the financial report that you might have.

Good. Please.

Hi, guys. Are you able to hear me okay?

Yes, clearly yes.

Great. Hi, Jeff.

Thanks for the update. Just a couple of guidance point questions for me if that's okay.

Starting with Yaouré, could you just remind us if there's any special tax concessions accelerated D&A anything like that we should be mindful of for our accounting next year? And also just confirming that revenue OpEx will all be capitalized until you get to a point of commercial production.

So presumably that's at least the first half of Yaouré that will all be capitalized.

Yes. Okay, let's just respond to that.

So we have entered into a mining convention with the state in Côte d'Ivoire, which does provide for a final year tax holiday. So that will apply from the commencement of operations.

So there won't be corporate tax paid in that period of time. However, there will be a good deal of indirect tax paid on…

Royalties.

…to various people involved in the project. So it's nothing like we're not paying tax in the country but it's just the way the corporate tax is being paid.

Now in terms of the ramp-up, what you said is absolutely right. We'll declare the commercial production at a point when we are comfortable that we're in cash positive territory now.

How long that takes is something that remains to be seen. We were surprised by how rapidly Sissingué ramped up.

And it's very, very quick. And we expect that – we're looking forward to a trouble-free ramp-up of Yaouré as well.

So I don't want to make a bold prediction as to exactly how long that will take. But I will be very surprised if we have not declared commercial production by the end of the first quarter in fact.

But that is something that remains to be seen. Now during that first three-month period of course, we will be producing and there will be costs involved in the thing.

And we'll do our best to be transparent around all of that. But for accounting purposes it won't come through until after we've actually made that declaration.

I think in terms of the ramp-up that I should mention so that people understand precisely what is going to happen at Yaouré is that in the first six or nine months or so of the production from Yaouré, we will be doing two things. One will be busily removing waste material from the CMA pit, which is the major oil source for most of the life of the mines that's currently defined.

Now while we're doing that, we're going to be processing low-grade material, some of which will come from the Yaouré pit and some of which will come from the Heap Leach pad. So the first year or nine months of production won't be at the elevated rates.

We've said 215,000 ounces average over the first five years. We would expect year two, three, four et cetera to be well above that.

But in the first period of time the production will be lower, reflecting the lower-grade material that we're processing while we're entering into the mining pit. So I just want to make that point because I think that it will be disappointing if at this time next year people are saying "Oh gee, Yaouré isn't producing what we expected."

There is a ramp-up period relating to grade for the first sort of six to nine months or so of the life of the mine. How quickly we get in the Yaouré is a function of several things.

I mean we're actually expecting to be starting work on taking material out of the pit very, very shortly. But we'll see how that goes.

And that's another reason why we didn't want to make bold predictions in terms of guidance for the second half of the year before we had a proper handle on how that would all play out.

And Nick you are correct that until we hit commercial production those costs and revenue will be capitalized.

Okay. Great.

That's really helpful. Just a couple of guidance points at the group level.

Are you able to provide D&A expectation or range for next year and also an effective tax rate?

I would expect that the D&A is probably going to be around this level. But obviously, once we hit commercial production and Yaouré comes online, there's going to be a very large asset on the balance sheet that is going to be depreciated and amortized.

So I think that that will probably as Jeff said, come in in the last quarter of the year I suspect. So I don't think that's going to make a huge difference to our depreciation and amortization.

And the effective tax rate I think is going to be close to where it currently is. So this year I think will be reflective of where the effective tax rate is going forward because both Sissingué and Yaouré, as Jeff mentioned will benefit from a five-year tax holiday.

It's really just reflecting Edikan's tax rate.

Yes got it. Okay.

And then finally maybe just sort of another sort of operational one on the Yaouré, Jeff if that's okay. Just interested in what the – I guess what the exploration or the drilling conversion plan there is just with respect to obviously what you have in resource and that opportunity for conversion?

Just interested in sort of the timing around when we could potentially see that work coming through to boost that reserve or whether it's just getting into the reserve for now and down the track that work will come just – yes sort of just understanding that bigger picture opportunity.

Okay. No thanks for asking that question.

That's a good question and it's a very topical manner with us at the present moment. We're looking at the – clearly, we're looking into the future as a company.

We've got four-and-a-bit years of production at around 500,000 ounce per year level already locked in in the existing reserves from fiscal 2020 to 2022 onwards. But as a company, we're looking to ensure that that 500-odd thousand ounce per year extends well beyond that initial 4.5-year period.

So as a company, we've committed very strongly to an organic growth strategy, which means spending money on exploration and optimization of assets around -- in each of our three operating areas. At Sissingué it actually -- there is a huge amount of opportunity for conversion of -- not only conversion of resource to reserve, but also the introduction of additional resources into the picture.

Now we have been drilling to the south of the CMA pit. We've been getting very encouraging results down there.

And it does appear that there's a very reasonable chance that that CMA ore body continues for some distance along the strike. And that is an area that we'll be focusing on very heavily to bring into the resource return over the next year or so.

We should also mention that we're currently doing grade and trial drilling on a couple of targets very adjacent to the existing pit. And this is one of the things if we can convert that into reserves before we start mining it may well be that some of that material is actually headed for milling in the first 12 months rather than the material that's currently in my port.

But I think where the real prize at Yaouré is comes from the underground opportunities that we've had and we have there. Now we delineated 600,000 ounces of material that could be mined from underground previously.

And that we expect would be converted into resource -- into reserves and brought into the mine plan somewhere in year probably end of year three and year four that's the current thinking. However, what we have just completed or we completed in the last half year was a three-dimensional seismic survey over the area to see what happens to that structure that we believe can be mined from underground.

Now it is very early days as far as the processing of that data is concerned. But our team has seen some of the early results of that.

And I'm going to say they are exceptionally excited by -- not only we're exciting but HiSeis, the group that have done the work they're also very, very excited about what they're seeing because it's very, very clear that there's a continuation of the structures. But quite some distance it's also very, very clear that there's a repetition of structures and it's also very clear that there are other structures that we weren't even aware of in that area.

And most importantly there's a very, very large heat source, a very large granite sitting below the -- quite some way below the bottom of the current pit. So all of the things that are necessary to produce gold appear to be in evidence in that area.

So the challenge for us over the next couple of years is to finish the processing of that data to really identify a sensible set of targets. And then it's to commit to drilling those out and bringing them into the reserve.

Now the fact that the gold price is high at the moment and the fact that we're generating a lot of cash does provide us with the wherewithal to fund that organic growth strategy. And so that is something that we'll be seeking to do in the coming year and years beyond that.

And from my point of view that creates or provides us with the best opportunity for value creation for shareholders far more -- a far better opportunity for value creation than paying very high prices that would be demanded through any kind of M&A transaction in the current gold environment. So we're very, very excited by the exploration potential around Yaouré.

We've also got some really good targets at the other two properties as well. And so we will be seeing a -- it's going to be a key part of our business going forward to not only replace what we mine each year, but to substantially increase that reserve inventory.

Great. Thanks very much.

Hello?

Hi. It's Reg Spencer here from Canaccord.

Morning Jeff and guys. I'd just like to follow-up on the Yaouré underground.

You guys, obviously, completed a scoping study in 2018. As you do a little bit more work there, can we expect some more detail around the possible parameters of what that might look like in the near-term, or is that something that we're going to have to wait for once you guys are into full production at Yaouré?

Well, look I think we won't be putting updated reserves out or resource reserves out until we move into the operating phase. I mean we would -- at this stage of the game, we don't have a firm date for that but I mean -- for the release of that data.

But I would imagine it would be in the first quarter of next year and that will presumably include more information around the underground opportunity. I mean one of the results that we get from our drilling over the next six months is going to be influential on our thinking there as well.

So, I think it's tempting to rush this sort of information into the market, but we would prefer to be a little more thorough in that approach and to make sure that what we say is actually deliverable. And so we'll get something out as soon as we practically can, but it is pretty interesting I do have to say.

I don't disagree with it Jeff. And just one other question on other opportunities outside your existing resources.

The Exore transaction should be scheduled to close soon. How long do you think we might have to wait until we can start thinking about what the resources within those properties might do for either a longer mine life of Sissingué or an alternative development plan where you might even think about shifting the mill?

That's also a very topical question in here right now Reg. I can't give you a precise answer.

But what I can tell you with this is that we've been working with the Exore employees and our own guys on deciding the drilling programs that we want to do not only on the Bagoe property where Exore had previously announced a resource, but also on some of the other areas as well. So, our intention is to get into that work straight away and to be in a position where we can define a mine reserve -- or mine a resource reserve do our feasibility study and get that in front of the government for licensing purposes all with the intention of being able to start mining down there in a couple of years from now.

So, I think there'll be a fairly steady stream of news coming from the Exore properties once the transaction -- or assuming the transaction is completed in September. I mean I know we get ahead of ourselves on that one because as you're well aware, it's subject to shareholder approval and also subject to the courts signing off on that.

And I don't want to preempt either of those things. But certainly we are very excited by that and we can see some real opportunity to add materially to the life of the Sissingué project.

Is there any risk Jeff that for whatever reason be it permitting access even exploration success that there could be a gap if that work isn't completed within a sufficient timeframe and that's obviously driving your desire to get in there and get started as soon as you can?

Look to say there is no risk would be completely ignoring the facts of life. We are working -- we have worked very well with the Ivorian government in the past.

And if our relationship continues in the manner that it is going right now we don't envisage a delay. But to say that there's no possibility that is denying facts.

Whenever you're dealing with the bureaucracy whether it's in Western Australia, New South Wales, or Côte d'Ivoire things don't always run strictly according to plan. So, we have to be prepared for that.

And in that regard what we're also doing is -- as a contingency measure is looking at what's plan B and plan C in the event that any delays do come in as a result of licensing. And the sort of things that might fill a gap under such a scenario would be maybe looking at a further cutback of the Sissingué pit or exploiting some of the near-mine resources that we have identified in the past but deemed to be not really large enough to warrant further investments.

So, there are opportunities should the delay come onto the horizon but that's not certainly something that we consider to be a high probability event. It would be foolish to not consider it to be a possibility.

But we're going to be working very, very hard from day one to make sure that everything that's needed for licensing and for us to be able to turn on a mining operation will be done in a very timely manner.

Okay, all right. Excellent.

Thank you guys.

Yes. No, thank you very much.

And as I said thanks very much for joining us on the webinar. As you can tell, we're very pleased with the result that's been delivered this year.

We see this as a reflection of the strategy that we implemented some time ago in terms of turning Perseus into a reliable multi-mine multi-jurisdictional gold producer. As you also determined from the commentary there's a lot more to come as well.

And certainly Yaouré is going to be a very important addition to us as this year unfolds and we also have other opportunities beyond that. So, I think that this result this year, as good as it is, is the beginning of a strong trend of financial performance by Perseus Mining.

We share -- we're looking forward very much to sharing that with you in years to come. So, thanks very much and we will speak again shortly.