Perseus Mining Limited

Webinar and Conference call. [Operator Instructions].

I will now hand over to Perseus Mining Managing Director and CEO, Jeff Quartermaine, who is joined by Chief Financial Officer, Lee-Anne de Bruin. Thank you, Jeff.

Good. Thank you.

And welcome, everybody, to this webinar to run through the December half year financial results that were released to the market earlier today. And looking at these results, I think it's fairly clear on reading that they provide further evidence of the continuing transition of Perseus, from a junior explorer to a multi-mine, multi-jurisdictional business.

And I'm very pleased to welcome my colleague, Lee-Anne de Bruin, our new CFO, here in our Perth office, who is going to make a group presentation, take you through the results. When Lee-Anne is finished, I'll have a few comments, and then we will open the floor to questions.

So without any further ado, Lee-Anne, would you take it away, please?

Thanks so much, Jeff, and thanks, everyone, for joining us today. It's great pleasure that I am able to present these results for the December '20 half year.

I point out, obviously, the normal cautionaries with regards to any forward statements made in this presentation. Overall, we've had a fantastic solid half year performance during what has been a difficult, obviously, period with the global pandemic, and this has been supported by a strong gold price environment.

The -- Perseus has had a solid operational performance during the 6 months, producing 137,386 ounces, and as Jeff said, more than the corresponding 6 months last year. This was comprised of 55,900 ounces from Sissingué, 78,790 ounces from Edikan and then a very exciting step for us, with 2,687 ounces from our newly commissioned Yaouré mine.

The group all-in site costs was selling at USD 1,000 per ounce for the 6 months to December, and this was 6% up on the December '19 half year and achieved during a very challenging year. This achievement, no doubt, positions Perseus as well in relation to our guidance of 6 months and for our full year guidance to June '21.

Our gold price achieved was USD 1,643 per ounce as we focus on leveraging the current high spot prices whilst maintaining a focus on increasing the average cost of the overall hedge book as part of our short- to medium-term risk management. We are also extremely proud of the projects and operational teams at Yaouré.

We succeeded in delivering Perseus' third gold mine during the challenges of a global pandemic, and they did this ahead of schedule and on budget. And we are now positioned for growth in all aspects with the exciting step of a Yaouré ramp-up and which Perseus is excited about in the future.

If I move on to the next slide, these are our financial highlights. If we talk about the revenue, the revenue, we sold 127,085 ounces of those 137-odd ounces we have produced in 6 months.

And this resulted in a 4.5% increase over our previous 6 months in 2019. This sustained revenue was a result of a 15% reduction in the production of Edikan, which was largely due to the lower recovery rate primarily caused by planned feed of ore from the Bokitsi pit.

The reduction in Edikan was offset by an exceptional 31% increase in gold produced at Sissingué, and this was due to an increase in the head grade from 1.57 grams per tonne, to 2.78 grams per tonne of gold. We also obviously were aided by an increased weighted average gold price for the year -- or for the 6 months, should I say, of an 18% increase.

A positive, obviously, was our profit after tax, which we achieved, which has a 61% increase on the same period last year, at AUD 49.1 million. To just give a little bit of color to that, what aided that was we had a period-on-period decrease of $32.5 million in the depreciation and amortization expense relating to gold production, and this is largely due to the decreased ore mined at Sissingué and Edikan in the period and as a consequence, the deferred waste amortization in the period.

We also had a foreign exchange loss of $13.2 million against the previous period, which recorded a $7 million profit. The loss appeared due to an appreciation in the value of the Australian dollar against the U.S.

dollar and obviously, in the impact on the revaluation of all intercompany loans. The taxation expense decreased by $4.5 million, and this is largely due to the decreased profits in Edikan due to the reduced production when compared to the 6 months to December 2019.

And further on that slide, what's probably worth noting, is that, obviously, we are not obviously paying a dividend at this stage, but we are considering future dividend policies now that we are positioned with a strong balance sheet and a broad asset diversification. Moving on to our growth in earnings slide.

If we focus on the EBITDA number, which is obviously in line with December 2019, this is obviously assisted by the revenue number which I have already spoken to. And there was an increase in cost of sales, which was largely due to the all-in site costs or production cost ounces of Edikan increasing due to the decreased recovery.

Our gross profit from operations achieved AUD 80.5 million, an exceptional 68.3% increase on the same period last year. As mentioned previously, this is largely due to a period-on-period decrease of $32.5 million in the depreciation and amortization expense relating to gold production due to the decreased ore tonnes mined in the period.

This has allowed us get down and report a basic earnings per share increase of 18%, and importantly, a focus for us, a strong earnings per ounce, which was up 59%. Obviously, key for us is obviously cash flow generation.

And so this slide sort of sets out our operating cash flow per share was up 36% and is obviously a key focus to ensure good shareholder returns. Perseus has continued to deliver a positive trend in operating cash flow from operations comparing with the last 4 December 6-month reporting periods.

And this has been supported by strong operational performance as well as increasing gold prices. The introduction of Yaouré, Perseus' third gold mine, adds further exponential growth to this trend and further diversification of the asset portfolio and risk of the organization.

Focusing on our growth in net tangible assets. On hand at the end of December, we had USD 118 million or AUD 153 million of cash and bullion.

In terms of the borrowings, Perseus continues its focus on building a strong balance sheet to support its growth aspirations. During the 6 period -- 6-month period, we've made an accelerated payment of USD 20 million on the current Corporate Facility.

And we will focus over the next coming months and years on accelerating this debt reduction. This has left us with a net debt position at the end of the 6 months of AUD 15.7 million.

And with the end of development of our Yaouré, our third gold mine, Perseus is expected to move into a net cash position in the coming months. So overall, that's an exciting set of results, and I'm going to pass on to Jeff Quartermaine to focus on the looking forward.

Okay. Thanks very much, Lee-Anne.

And I think it's fairly evident that the results that we've released today are quite strong, but they are just part of an overall trend of steadily increasing earnings and cash flow that we believe is going to continue very strongly in coming periods, particularly boosted by the material contribution that will be coming from our third mine, Yaouré, starting in this half year. As you're aware, the construction of Yaouré was completed late in December half, and the operations is steadily ramping up to optimal performance levels as we speak.

Now heading into 2021. Perseus is in a very strong financial position to continue the growth of the business through both organic means and also to be positioned to take advantage of any M&A opportunities that may present and offer attractive returns on our investment.

Although I should say that, at this point in time, our focus is very much on organic growth. And given that we will have a significant reduction in capital expenditure going forward, we will be funded well to fund that organic growth as well as to look at and study our balance sheet management initiatives, such as debt reduction that Lee-Anne spoke to few moments ago, and of course, prepare for the implementation of a dividend policy, which we are working on at present time and expect to be in a position at the end of this current half year to look very closely at dividends for shareholders.

So as a result, the results today are quite strong. We are in a very good position.

We're very well-focused for the future. And I have to say that it does reflect the very focused efforts of our teams, both here in our corporate office, and also on each of our sites in West Africa.

All of our people have worked with great dedication and commitment during the period of significant uncertainty and challenge brought about by COVID and with that, of course too, has put a bit of a load on their families. So I think all of our employees and all of their families and their support teams who poured their efforts during the half year in making these results that we've released today possible.

So thanks very much. That ends the presentation.

And if there are any questions relating to the releases or any of the documentation that's in the market, Lee-Anne and I are more than happy to respond. So we'll open the floor to questions now.

Thanks, Jeff. [Operator Instructions].

Your first question comes from Reg Spencer. He asked, are there any further updates on likely timing of commercial production at Yaouré?

Not a specific date on that particular one, but I can say that you'll recall that in our quarterly report, we mentioned that we needed to replace the transformer. And that is actually going in as we speak.

It arrived on-site last Friday night and is being installed now. So the commissioning has gone exceptionally well so far on the SAG mills.

From the end of this month, we'll be running the SAG and Bélé. And I think the acceleration from here is going to be quite rapid.

So we said originally that we were targeting the end of this quarter. And that certainly remains our target.

Whether we're able to achieve it or not will depend on how things go over the next couple of weeks. But if it isn't the end of this quarter, it will be the end of April, I would think.

So we're well and truly on track. Everything is going very well on the site.

Thank you. Your next questions come from Kate McCutcheon at Citi.

So there's 3 accounting questions. The first one is regarding the reduced D&A at Sissingué, can we expect similar dollar per ounce rate going forward?

Or is it a deferred amortization trend here?

No. You can expect that to desist.

It was obviously a function of the reduced mine in Sissingué for the period.

Yes. And bear in mind, we'll be opening up the satellite deposits shortly, so Fimbiasso and the like, and then there is some stripping associated with that.

So over the remaining life, we'll see some fluctuations up and down. But I think this is just part of the ebb and flow.

And for instance, they expect to see the MIK production significantly higher than what it was in the last half year going forward as well. So there will be ups and downs.

But with Sissingué, in particular, we will be moving into that, and there's going to be upside, I'm positive, later this year.

Thank you. Next one.

Trying to reconcile the COGS, which are lower than consensus, are there any inventory you brought up included in that or anything else material?

Is that -- sorry, Nathan, can you repeat the question? Is that around cost of sales?

Our COGS, the COGS.

Yes. So if you go to Note 2 in the financials, there is included in the December 2019.

I think that they were considerable write-ups in that, which obviously haven't occurred in the current financial or the current 6 months. And that answers Kate's question.

And third one, in the payments to noncontrolling -- to the noncontrolling interest, can you talk through that uplift and how we should model that going forward?

Yes. So during the 6-month period, we obviously, as a function of the income at Sissingué, I'm just trying to have a look at the nons that you're referring to.

So yes -- so -- and obviously, during the period, we also had paid a dividend to -- we had obviously paid a dividend to -- out of PMCI, out of Sissingué, where they paid a divided to the PML operation. So yes, we'll obviously consider to -- that noncontrolling just to stay consistent with that number.

Yes. I mean the way we repatriate cash from these operations is switching things, one is through payment of any company debt and the other is through dividends to our minority shareholder.

And there is -- the debt that's from Sissingué is largely repaid. There is a small amount of outstanding, and that will be repaid in due course.

And so that doesn't appear on the accounts. The repayment of that incoming debt has consolidated.

But once that is repaid, then there will be -- we will be using that mechanism to the dividend stream to repatriate money to the parent company. And of course, whether a dividend gets paid, the government of Côte d’Ivoire receives 10% of that, of that dividend.

So I think in terms of modeling, the cash -- part of the cash that does come from Sissingué in future years will be going to the government.

Thanks. And in terms of upcoming news, can we expect updated life of mine plan from Yaouré and feasibility study for Bagoé in early June quarter?

Yes. Look, both of those exercises are underway.

We have been delayed. Originally, we're targeting the end of March for the release of those, but the turnaround of our sales from the lab in Yamoussoukro has been quite slow in the early part of the year.

So we're now thinking that both of those documents will be released into the June quarter. Hopefully, hopefully, end of April, maybe early May, it just depends on how quickly we can get these drill assays back.

But that's all well in hand, and the results from both places are looking reasonably strong. Though certainly, the results coming from Bagoé, which represents the opportunity to extend the life of Sissingué, are very good and certainly confirm everything and then some on what we expected to see when we made that acquisition last year.

So that's particularly encouraging. And we're rooting for very much to getting that feasibility study done and getting an application for a mining lease in front of development.

Your next question is from Adam Sains [ph]. He asked, can you please provide some advice around the company's forward sales hedging policy?

Yes. The hedging policy that we have is fairly clear, and it has been very clear for a very long time.

Our policy provides for us to forward sale up to 30% of our production on a 3-year horizon. That's the upper limit of it.

At the present time, we're hedged to the tune of about 20%. And the thing is that we manage that hedge position quite actively.

We -- as opportunities arrive, we sell it to the lower price hedges that we replace with higher price hedges. We might be going above the 30% level without a change in policy, and that's not something we're contemplating.

We may increase the hedging a little above 20% in coming periods depending on what the opportunity is. But I mean, for instance, if we were to go ahead with the Esuajah South Underground development, which is actually looking more interesting than it was at the end of last year, we may well just take the opportunity there to do a small amount of hedging to ensure that we can lock in that margin of $400 an ounce that we target as part of our overall corporate strategy.

So we sit at about 20% hedged at the present time. As I said a moment ago, now you have 30%.

And I guess if anyone really wonders about the wisdom of it, well, what I would just simply refer to you too is the gold price in the last week. Now the consensus view has been that the gold price is going to stay stronger for longer, and we certainly hope that is the case.

But we can't really start at the fact that, from time to time, the market does retract, and we have seen quite a sharp fall in the last week or so. So if anyone needed any reminding about the fact that gold has its up and down, we have had that reminded quite recently.

This hedging is in place to provide us with certainty in an uncertain environment. And it is something that we have used very carefully over time.

And it certainly put this company in a very good stead when the gold prices haven't been as strong as they are today. And the fact of the matter is that, one, our average hedge prices, I think, is sort of about 15 40, something like that.

We are selling 80% of our production at spot price. So it's not like we're giving away very much on the upside.

So we're very comfortable with the policy. It's done us very well over time, and we'll be continuing to deploy that as we go forward.

Thank you. Your final question comes from Adam Baker, and he asked what type of dividend policy is under consideration, e.g., percentage of revenue or percentage of free cash flow?

Sorry. Could you just repeat that?

I missed it.

It's from Adam Baker, and he asked what type of dividend policy is under consideration, for example, percentage of revenue or percentage of free cash flow?

Look we're considering all possibilities right now. In fact, we had a Board meeting last night, at which we had a sensible discussion around our way forward.

I guess the thing is this. We haven't made a decision as to precisely what the mechanics is going to be.

But what we would say is that when we do pay a dividend, it's going to be paid with the intention of being in a position to sustain that into the future without any concern from fluctuations of gold prices, et cetera, et cetera. So we won't be declaring a super large dividend initially.

I think what we would like to do over a period of time is to grow that dividend stream. But the one thing that we do want to do is to make sure that when investors buy -- if investors buy our stock for that dividend flow, that they will be sure of getting it come what may.

But there is a very careful examination going on right now. We're looking at all possibilities basically in terms of how we can return money to shareholders.

We're looking at conventional dividends. We're also giving thought to whether share buybacks make more sense, et cetera, et cetera.

There are a number of variations on the theme. Bear in mind that our shareholding base is an international base, so at like 40% in the U.S., roughly 30% in Europe and 30% here in Australia.

And the tax implications for each of those shareholding groups are different. So coming up with a policy, we're going to work towards coming up with something that is beneficial to the majority of our shareholders.

And we'll let the market know more details as we are able to do that.

Thank you. There are no further questions at this time.

So I'll hand back to Jeff Quartermaine for closing remarks.

Okay. Well, thanks, Nathan.

Well, thanks once again, ladies and gentlemen, for joining us today. That it is a fairly solid result, and I can assure you that Perseus is in a very, very strong position now to move forward, now that we have the 3 mines up and running.

And we're looking very much forward to bringing further results to the market, not only financial results, but obviously operating results, with the next one of those, of course, will be the March quarter results, which will be published in April. So thank you very much, and I wish you good day.

And we look for to chatting again soon. Thank you.