Perseus Mining boss says gold price weakness hasn’t made M&A market easier to navigate

Jeff Quartermaine, MD and CEO

A CORRECTION in gold company valuations did not make it easier to conclude acquisitions, said Perseus CEO Jeff Quartermaine whose company wants to bring more mines into its 500,000 ounces a year gold portfolio.

“The management teams of the companies whose shares prices are struggling are not any more motivated to transact than they were before,” said Quartermaine responding to questions during the firm’s September quarter results announcement.

The gold price has been under pressure this year set against a resurgent dollar which is responding positively to Federal Reserve rate hikes. It’s 9.5% decline year to date has seen a weakening in gold equities. The Van Eck Gold Miners ETF is 27% weaker year to date.

By comparison, shares in Perseus Mining had “held up well in some pretty stiff headwinds”, said Quartermaine. It was trading at 1.5% weaker this year, but Quartermaine said there was also a shortage of high quality assets available.

“The other thing I would say is that from the outside, a lot of situations look very good because the people who are promoting them make sure that all of the good things are not in the market. What they don’t always share with the market is some of the things that are not so good,” he said.

In the last two years, Perseus bought Exore Côte d’Ivoire for A$60m in shares and completed the A$230m all-share takeover of Toronto-listed Orca Gold which is developing the Block 14 gold prospect in Sudan.

Quartermaine said the company was looking for three to four mines with a ten year operating life, equal to an estimated ten to 12 million in gold reserves. There was potential to expand existing operations but merger and acquisitions remains a strategic goal.

“We have the financial and human capacity to execute opportunities as they come through. But we will maintain very strict financial discipline,” he said.

Commenting on the acquisition of Orca Gold, Quartermaine said “a small number of people” had expressed “reservations” given Sudan’s disrupted political history.

“I could genuinely say that we’ve received excellent support from the government,” said Quartermaine. Perseus and the Sudanese were “joined at the hip” on the project.

However Quartermaine said the decision to invest incremental capital in Sudan “will be strictly related to progress that we make in country”. He added: “We’ll hold fire on those commitments until we are absolutely certain that this project is going forward.

“If we’ve learned nothing else over the last ten years is that once you make a commitment and start spending money you certainly lose any leverage that you might have in terms of negotiating with local communities and governments”.

Despite years of political upheavel, Sudan ranks as Africa’s third largest gold producer by dint of a thriving artisanal sector. It produced 90 tons last year.

Perseus reported record quarterly gold production of 137,460 ounces putting in target to meet full year guidance of between 492,850 to 517,850 oz.

The company operates from three mines from three mines in West Africa: Edikan in Ghana and Côte d’Ivoire mines Sissingué and the newly commissioned Yaouré mine.