Perseus Mining (ASX:PRU) - Disciplined Value Creation in African Gold

Interview with Jeff Quartermaine, Chairman & CEO of Perseus Mining Ltd.

Previous interview: https://www.cruxinvestor.com/posts/pe...

Recording date: 12th April 2024

Perseus Mining, an Australian-listed company focused solely on gold production in Africa, offers investors a compelling proposition: exposure to growing production and cash flow from a portfolio of operating mines and development projects, managed by a team with a proven track record of disciplined capital allocation and operational execution.

The company currently operates three mines - two in Côte d'Ivoire and one in Ghana - which form a solid foundation for its near-term growth plans. Perseus recently made a takeover bid to acquire OreCorp and its Nyanzaga project in Tanzania, highlighting its ability to patiently capitalize on accretive opportunities. As CEO Jeff Quartermaine explains, Perseus had evaluated OreCorp several times in the past but had the discipline to wait until the timing and terms were right.

This disciplined approach is a key tenet of Perseus' strategy. Rather than chasing production growth for its own sake, the company is firmly focused on margin expansion and cash generation on a per-ounce basis. "Really it's about making cash - cash per share, cash per ounce - and that's the focus of our attention," emphasizes Quartermaine. This mindset has allowed Perseus to deliver strong financial results, with consistent profitability and a rock-solid balance sheet featuring zero debt and ample cash reserves.

Perseus' strong financial position gives it flexibility to continue growing its production base, both through organic project development and opportunistic M&A. Importantly though, the company will stay true to its value-focused approach. Quartermaine notes that in the gold industry, many companies have destroyed shareholder value through undisciplined deals and poor capital allocation - mistakes that Perseus is determined to avoid. The company's all-cash offer for OreCorp, for example, allows it to maintain a strong balance sheet and avoid dilution for existing shareholders.

In addition to its disciplined growth strategy, Perseus also stands out for its expertise in operating successfully in Africa. While the continent is sometimes painted with a broad brush, Quartermaine emphasizes that each country is unique, with distinct cultural, religious, and historical nuances that must be navigated. Perseus' approach is to maintain a clear, uncompromising set of core values - teamwork, integrity, commitment, and achievement - while still having the flexibility to adapt its model to local circumstances when needed. This has allowed the company to build strong government and community relationships in its operating jurisdictions.

While Perseus is benefiting from the current high gold price environment and the associated margin expansion, the company is also taking steps to protect itself should prices decline. Perseus maintains a hedge book covering 25% of its production over a three-year period, using a disciplined approach of selling into its lowest-priced hedges and replacing them with higher prices as the opportunity arises. This downside protection, combined with Perseus' low operating costs and diversification across three mines, helps to derisk the investment case.

For investors, Perseus offers a unique value proposition in the gold sector. The company's focus on disciplined growth, cost control, and cash generation, combined with its proven expertise in operating in Africa, makes it well-positioned to deliver strong shareholder returns across the gold price cycle. With a solid foundation of producing assets, a pipeline of growth projects, and a management team aligned with shareholder interests, Perseus is an attractive option for investors seeking exposure to African gold production without excessive risk. As the company continues to execute on its strategy, it is poised to generate significant value for its stakeholders in the years ahead.

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