The company’s share price has outperformed most of its gold producer peers since August, which can be attributed to a growing recognition of its improved operational stability and a diversified production base.
Canaccord Genuity has increased its target price for Perseus to $1.20 per share (from $1.05 per share) on incorporation of Canaccord’s updated gold price deck and revisions to FY20 forecasts.
Following is an extract from Canaccord’s research update:
SepQ production in line, beat on costs: Group production of 66koz was broadly in line with CGe of 68koz, with AISC of US$922/oz lower than CGe of US$1,022/oz on improved unit costs at both operating assets. The result implies a run rate in line with H1'FY20 guidance which at this stage looks comfortably achievable, in our view. SepQ operational cashflow was strong at US$30m, with cash and bullion at quarter end of A $179m.
Edikan - lower feed grade driven by mining sequence: Edikan produced 44.1koz at AISC of US$1,027/oz, vs CGe of 49.4koz at US$1,031/oz. Production was lower on milled grade (0.91g/t vs CGe 1.03g/t) and slightly lower recovery. The grade performance was a function of mining sequence with grades expected to improve over the remainder of FY20. AISC was slightly higher on lower production offsetting lower mining and processing unit rates.
Sissingue - beat on production and costs: Sissingue produced 21.7koz at AISC of US $709/oz, vs CGe of 18.6koz at US$870/oz. Production was higher on plant throughput (453kt vs CGe 380kt) driven by better than expected mining rates following successful implementation of wet season mitigation controls. AISC was lower on higher production, compounded by lower unit rates.
Outlook: FY20 guidance is unchanged at 260-300koz at AISC of US$800-975/oz, and is weighted with a 54% split in favour of H2. Our FY20 production forecast increases slightly to 280koz at AISC US$955/oz (from CGe 277koz at US$989/oz) on incorporating higher grades at both Edikan and Sissingue in 2HFY20.
Growth - Yaoure progressing in line with forecasts; mine life extension opportunities at Sissingue : Yaoure site earth works were largely unaffected by the wet season and progressed in line with plan. Contractors began mobilising to site late in the SepQ with full construction of the processing plant expected to commence this month. Targeted construction finish and first gold pour remains on schedule for DecQ'20.
At Sissingue, regional exploration at the Zanikan prospect has identified multiple mineralised structures over a strike of 500m. Highlights from drilling include 12m at 4.5 g/t from 60m, 10m at 5 g/t from 136m and 8m at 60 g/t from 80m. While early stage, Zanikan presents as possible new satellite for Sissingue, incrementally adding to the remaining ~4 year reserve life.
Valuation and recommendation
Our target price increases to A$1.20/sh (from A$1.05/sh) on incorporation of our updated price deck (2019-2025 average gold price +5% to US$1,548/oz, LT +5% to US $1,603oz; LT AUD:USD -4% to 0.68) and revisions to our FY20 forecasts.
PRU has outperformed most of its gold producer peers since August, which we attribute to a growing recognition of PRU's improved operational stability and now diversified (i.e. lower risk) production base. We continue to see PRU as undervalued on both an absolute and relative basis, and maintain our BUY rating.