Perseus bullish on $265m Yaouré as Côte d’Ivoire re-opens borders, raising Covid-19 risks

Jeff Quartermaine, MD and CEO

FIRST gold from Perseus Mining’s $265m Yaouré project in Côte d’Ivoire was set for end-December despite higher Covid-19 infection risks after the West African country reopened its borders this month, said MD and CEO, Jeff Quartermaine.

“Côte d’Ivoire is focused on encouraging investment; rather than close down borders, it is opening up,” said Quartermaine. “This does increase the risk of infection, but it is something that we think we can manage.”

There had been some infections on site at Yaouré, described by Quartermaine as “a salutory lesson”. The outbreak “would not happen again”. Pre-production capital costs had been increased a marginal $1.1m as a result of Covid-19, he said.

Contractors were currently on site at Yaouré installing the plant’s mills whilst commissioning experts were due in the coming months. The mine is contracted to be commissioned in mid-January – a deadline the company would meet.

“It would put our December target in doubt if Côte d’Ivoire were now to close its border again. If we miss that date, it will be some weeks after that and well before our contracted date in mid-January,” he said.

Once commissioned Perseus’ Yaouré will ramp up to nameplate capacity of about 215,000 ounces a year, enough to take total company gold production to 500,000 oz a year. Perseus currently mines at Edikan in Ghana and Sissingué, also in Côte d’Ivoire.

Yaouré was about 60% complete with some $156m of its budget so far spent. Given that cash on hand was at $164m as of the June quarter end means financing of the project is in the bag, said Quartermaine.

The gold price recently surged to fresh five-year high of more than $1,800/oz. Joni Teves, a precious metals strategist for UBS Investment Bank told Bloomberg News on Monday that consolidation of positions would be on investors’ minds in the coming weeks.

For Perseus, however, the improved gold price would continue to pad out its cash reserves, especially as Yaouré was effectively paid for. “We could finish the year in a strong financial position which is very positive for the future,” said Quartermaine.

Perseus has some 78% of production exposed to the gold price, but the balance is locked into hedge structures well below spot. Quartermaine said the company had delivered a total of 78,000 oz into contracts at an average weighted price of $1,442/oz. This was some $5,700/oz higher than hedged gold delivered in the previous quarter as the company sought to limit its opportunity costs. There was, however, some 323,000 oz in hedged gold still to be delivered over the next three years.

Six month production totalled 122,659 oz at an all-in sustaining cost (AISC) of $1,005/oz, which was slightly lower than the six months in the 2019 financial year. This took full year output for Perseus’ 2020 financial year to 257,639 oz, 5% lower than in 2019. Full year financial and operational results will be announced in August.

Half year gold production guidance ended December has been set at 139,000 oz to 125,500 oz at an AISC of $940 to $1,205/oz. This guidance assumes operations are largely unaffected by the Covid-19 crisis.