CA - Perseus Mining Limited (PMNXF) Q3 2023 Earnings Call Transcript

2023-04-19 02:32:05 ET

Perseus Mining Limited (PMNXF)

Q3 2023 Earnings Conference Call

April 18, 2023 19:00 ET

Company Participants

Jeff Quartermaine - Managing Director & Chief Executive Officer

Lee-Anne de Bruin - Chief Financial Officer

Conference Call Participants

Matt Greene - Credit Suisse

Reg Spencer - Canaccord

David Radcliff - Global Mining Research

Presentation

Operator

All attendees are in a listen-only mode. [Operator Instructions]

I'll now hand over to Perseus CEO and Managing Director, Jeff Quartermaine. Thank you, Jeff.

Jeff Quartermaine

Thank you very much, Nathan and thank you to all of our listeners for joining us today to run through our March 2023 quarterly report. I'm joined on the call by our Chief Financial Officer, Lee-Anne de Bruin, who is available to take any questions later in the course of this webinar.

Now today, we're taking a slightly different track to what we've done in the past. For those of you who are watching this, we'll start with a screen; I'm going to run through a brief presentation that summarizes the report. This was also released to the market this morning. So for those of you who don't have access to a screen, you can follow the conversation on the written version. But look, once again, in summary, it's been a very, very good quarter again for Perseus. This is becoming somewhat repetitive which we like. We've had a very strong period of time and the company in the general statement is in extremely good shape, not only just individually but relative to our peers in the industry.

Just running through the presentation, we have, of course, our normal cautionary statement which you'd be familiar with. But just focusing on the operating and financial results first up. So gold production for the quarter was 130,275 ounces which was very, very close to the previous quarter of 130,900 ounces. The 50% of the production came from our Yaoure mine, about 41% came from Edikan and the remaining 9% came from Sissingue. Now I hasten to point out that 100% of that production came from our West African mines. In other words, we're not at all leveraged to sit down at this stage of the game in terms of our production.

Pleasingly, the all-in site costs were down about 1% on where we were at the end of the December quarter. So at US$971 per ounce, we were below where we ended in December. Individually, Edikan and Yaoure did exceptionally well. Yaoure was $803 per ounce, Edikan was $1,067. Sissingue was slightly higher. It was around $1,458 an ounce but that was expected given that -- and in fact, actually, the Sissingue costs were substantially below what we were expecting. But that was a function of the work that was being done to open up the satellite deposits adjacent to the mine.

As everybody knows, the gold market has been particularly strong in recent times. Our average zinc price was $1,821 per ounce which compared favorably to the $1,748 that we sold during the December quarter. And this led to a cash margin of US$850 per ounce. Now at Perseus, our focus is very much on this statistic. We are in the business of generating or maximizing our cash production. And so the fact that we're generating $850 per ounce for every ounce produced is an extremely pleasing thing for us.

Now I'm also very happy to say that the good performance in the March quarter has continued on into this current quarter. And we have every expectation that come 30 June, we'll be announcing that our production and guidance for the June half year and the full financial year, we'll be -- we're well and truly within the guidance range that we have given to the market. For the half year, it was 230,000, 260,000 ounces at $1,000 to $1,200 an ounce. And you can see from the production this quarter that we're halfway through the top end of the production range and below the bottom end of the cost range. So that's extremely pleasing. All 3 of the operations are running very, very well. And I think the opportunity for continuing to achieve guidance is very much there.

Now the thing about the strong operating performance, of course, is that, that translates into very strong and improving financial metrics. Now I've already referred to the gold price which has gone up 73% -- $73 an ounce or 4% in the current period and the margin that's up 11% to $850. But what was extremely pleasing for us, as I said, we focus on generating cash flow. US$111 million was generated notionally from the operations during the quarter which represents about a 10% increase relative to the December quarter. And this has meant that at the end of March, we had US$471 million of net cash and bouillon on the balance sheet. That was up $66 million or 16% relative to the end of last year. And that for us is an extremely important point, given that we do have ambitions in the -- to continue to grow our company and I'll speak with that in a moment.

Speaking of those ambitions, what we also did during the quarter that was announced was to upsize our corporate debt facility. We have a facility now -- undrawn facility, I should say, with capacity of up to $300 million. And that's an increase from $150 million that was in place previously. So between the cash and bouillon on the balance sheet and the undrawn line of credit, you can see that the company is in a very robust position financially and well and truly on track to be able to fund future growth and at the same time, continue to return capital to our shareholders via the dividend policy that was established some time ago.

Speaking of organic growth, this is something that we feel that organic growth is going to generate the best returns for our shareholders. And so we work fairly hard at trying to deliver growth through these means. Now in terms of the studies that were conducted in this area during the quarter, they primarily focused on the Yaoure mine in Cote d'Ivoire, where we have been working on extending the reserve base inventory and the life of the mine at Yaoure through implementing an underground operation off the side of the CMA pit. That work has gone very well during the quarter and we do expect that during this current half year, we will be releasing information around the updated resource and reserve. Not only that but also putting out an updated life of mine plan for the Yaoure operation.

Simultaneously, we've also been drilling below the Yaoure open pit, trying to convert the inferred resource below that pit into measured and indicated which can then be of course incorporated into life of mine plans once optimization has been done. So a good deal of work has been done around the Yaoure operation and the results of that good work is going to be published in the current half year.

In terms of exploration, our exploration team has been hard at it, as usual, focusing on all 3 countries where we're present. There's a lot of work going on in Sudan around the GSS deposit which is part of the Meyas Sand Gold Project. I will talk about this in a little more detail in a moment but certainly, what we're doing there is quite a lot of work in terms of infill resource, infill drilling and sterilization drilling but also doing the sort of work that's needed to really understand the geological controls that are operating with that ore body and refining the resource model that will then drive the mine plan. I mean, I think the geologists amongst us will know that the Nubian Shield structures are quite complicated and we need to understand them fully before we embark on anything more definitive.

We're also doing some work in a regional sense but not as much as perhaps we would do it later on once the mine gets up and running. But certainly, there is some work going on in that regional sense as well.

I've already spoken about Cote d'Ivoire. There is work going on, quite a lot of drilling work going on, on the site, particularly looking to infill the gap in the drill pattern further down dip on the CMA structure. And that will then -- the results of that will feed into the resource work that we're doing. And pleasingly, the results that we're getting from that drilling down to the 500 meters or so is we're getting the sorts of wits and grades that we had seen previously. So it's consistent with our expectations. And as I said also, too, we've been working at the Yaoure pit and looking to upgrade the resource.

Over in Ghana, we've been working on the -- focusing our efforts on the 3 exploration licenses that we recently picked up. These 3 licenses lie adjacent to the existing plant; and certainly, we believe, have terrific potential to provide us with further reserves to feed into the mill. Certainly, the Nkosuo project -- deposit, rather which was discovered on the DML Agyakusu prospecting license is already into our mine plan but we believe that there are other targets that are certainly worth following up in coming quarters and we've been working on all 3 of those license areas to establish just that.

Now from a project development perspective, we are working very busily up at the Meyas Sand Gold Project which is up in Northern Sudan. The front-end engineering and design exercise is well advanced, working with our engineering partners, Lycopodium. We believe that we will have a revised cost estimate available to us later this quarter which will be, we believe, will be fairly much in line with our expectations. As I mentioned, the resource drill-out and sterilization. Drilling is well and truly in hand.

We have been working on pressure testing and modeling of the offer that's located about 80,000 from the proposed mine site. And that work has given us a good deal of confidence that the life of mine water supply is there and available. And as we've said in previous calls, the licenses associated with that water is tied into the mining license, so we have a guarantee of water for the life of the project which is very, very important when you're operating in that part of the world.

The other things we've been doing during the quarter is looking to find a suitable contractor to supply our hybrid renewable power supply to the mine site. We're getting very good responses from the market there and that most likely will be part of the development plan going forward.

On the site itself, we've also been working on development site preparation work, so building a few of the roads that are going to be necessary putting up the temporary camp, assessing the route of the pipelines to the broad field, etcetera, etcetera. And importantly, we've also been fairly well tied up to -- in procurement of certain construction and site capability assets that will be needed as the project goes forward. And in doing that, we've been thoroughly testing the efficacy of the logistics systems that we have put in place and very pleased to say that they're working very well.

So where we sit at the moment, we would normally be seeking to take a final investment decision on the project later this year. And certainly, all the work that's been done during the March quarter is pushing us towards that target.

Now it would be very remiss of me not to speak further on to that. And those of you with the screen can see a photograph of the Meyas Sand Mine project. And you can see that there's an awful lot of sand there and an awful lot of nothing very much else. Now the relevance of that is that this project, the Meyas Sand Project, is located right in the north of Sudan. It's about 75 kilometers south of the border with Egypt and well over 1,000 kilometers north of Khartoum. The relevance of that, of course, is that on the weekend, military conflict broke out between regular army and a fairly influential militia group and that conflict has been escalating in recent days.

The point is that we are located; all of our assets are located well north. Just to put it in context, that's further -- the 1,000 kilometers is further than the distance from London to Berlin or about 1.5x distance from Sydney to Melbourne for Australian listeners. So we're a long way away from that action. We do have a very small presence in Khartoum in the sense that we have -- we maintain an office there to support the project. That office is staffed by Sudanese citizens and we're in constant touch with all of those people and they're all safe in their homes at the present time, although life is not ideal for them under the current situation. Certainly, all of our people up at the Meyas Sand Project site are safe and there is no report of any damage whatsoever. So we are maintaining a business-as-usual, if I can describe it as that, approach to life at the moment. But quite clearly, we are very actively monitoring the situation in Khartoum and we have a crisis management team under the leadership of Matt Cavite, stood up and we're working very carefully to ensure that the safety of our staff and our contractors remains paramount.

Now just to put the situation in perspective, so up to the end of March, we had invested about $25 million excluding acquisition costs in work preparing for this investment decision that I flagged was due towards the end of this year. Now it isn't a massive investment in the overall scheme of things. It's certainly an investment that we believe was well worthwhile in order to be able to confirm the value of the project. And if anyone wants to be sort of granular around it, it's about the same amount of money as the value of the investment in the Montage Gold Project in Cote d'Ivoire which we also picked up at the same time that we acquired the Meyas Sand Project. So it's roughly in the same order of magnitude. But it isn't a massive part of our portfolio at the present time. We will be pushing on towards the prospective and investment decision. But quite clearly, the sorts of things that are going to come into play in making that decision, are the technical and economic merits of the investment security and geopolitics. In terms of the technical and economic merits, we're pretty comfortable, very comfortable that the project actually is an outstanding opportunity.

Security-wise, we're well positioned. We have good security relationships. But quite clearly, over the weekend, geopolitics raised its ugly head and that has created a level of uncertainty that we'll address as we go forward.

And just finally, in terms of sustainability, ESG, I mean, we are very focused on generating material benefits in all forms for all of our stakeholders in fair number of proportions. And so notwithstanding the very good operating and development activities we've been involved with during the quarter, we've also put a fair amount of effort into aspects of sustainability to try and make sure that we do deliver for our hosts and our employees and all of our other stakeholders, our sorts of outcomes that they expect of us.

In the safety space, we are working very hard there to improve safety right across the company. We've implemented a program called Safely Home Every Day or SHED program, at each of the operations which is involving skills training for supervisors and ongoing field supervision and coaching to make sure that everybody who comes to work at Perseus does go home safely every day. And we are starting to see the benefits of that program coming through where we decreased our TRIFR and our lost time injury rates are steady. The safety side of things is paramount for us and we are working very hard on that particular front.

In terms of community, we're continuing to do what we've always done and that's to support our host's governments and host communities. Around 63% of our revenue finds its way into the economies of our host countries. A lot of that comes through local employment. We're about 96% of our workforce is as it were and of course, through wages and investment in various procurement. A lot of money does go into the host countries.

We are looking at diversity. Of course, we have probably the most diverse workforce you could come across when you take into account race, culture, etcetera, etcetera. I mean, most people tend to focus on gender diversity. It's only 1 measure, of course. Operating in the countries where we do with those cultural settings, it's unlikely that you're going to see the sort of proportion of gender split that you would see in an Australian legal office or an Australian accounting firm or London or New York 1 come to that. However, we are working very much in this area and clearly the statistics that we have in Australia and our corporate office are very different to what they are in Africa. But we are bringing people through the business and doing our best to offer employment to all of those that were capable of delivering the outcomes we need.

Our relationships with our communities are strong. We haven't had any significant events during the quarter. We very pleasingly finally got the trust fund around the Yaoure mine established through the government. That's taken longer than we are particularly happy about. And we have actually just recently committed to invest in a fairly significant community road program to service the villages that host our project at Yaoure.

In Sudan, we've also been working with the traditional -- the landowners there around the Block 14 exploration permit. It is quite interesting because what is proven to us yet again is that working on the African continent is not a one-size-fits-all proposition. The sorts of things that landowners and host communities requiring West Africa is not necessarily the same as what they're seeking in Northeast Africa. But we're working with the traditional owners and I think that we'll have a satisfactory arrangement in place for everybody fairly shortly.

Environmentally, of course, we take -- we do have relatively short live gold mines. Gold mines are much shorter in life, of course, than some of the base metals and the like that other mining companies deal with. So in terms of the environmental impacts around greenhouse gas emissions and etcetera, etcetera, it's not exactly the same conversation. But nevertheless, we do look for opportunities to reduce our emissions and we have been successful in that respect during the period and also similarly in terms of the environment. We're looking after tailings dams and the like. We're working fairly well on that front and have had no issues at all during the quarter.

So in summary, I think right across the board, Perseus has had a very, very strong quarter and is in very good shape to continue to deliver on the promises that we've made to our shareholders. And also to continue to be able to grow the business as we move into the latter part of this year and the end of the current decade. So for investors, the share price has been performing very well. For prospective investors, we rate very, very well relative to a lot of the peers that are out there. Our costs, in particular, are world class. I think on a global measure we're in the bottom 10 cost for producers in the gold industry and managing the headwinds that others are certainly experiencing.

So all in all, it's been a very good quarter for us and we expect that this strong performance will continue into the future.

I'll stop at this point and Lee-Anne and I are very happy to take any questions that you may have.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Matt Greene at Credit Suisse.

Matt Greene

Firstly, I just want to say congratulations on the quarter and to you and the broader Perseus team on a strong performance in recent times. It has been very impressive. My first question is just on the hedge book and I guess your realized price, $18.20 on a group level. This compares to a spot of around $18.90. So I just want to get a bit of an understanding. I see your deferred -- your spot deferred sales have reduced quite a bit. I mean is that being the key driver here to perhaps a slightly lower realized price? I was just wondering if you can give me a sense of what deferred sales, what was in the hedge? What was at spot? Just trying to get a bit of a sense of that.

Jeff Quartermaine

Okay. Well, Lee-Anne can fill in the detail around this. But let me just say as a general concept, what we have set ourselves as a target is producing in excess of $400 an ounce for every ounce that we produce across the company. And we've managed to do that quite successfully. The gold price has helped us a lot to do that. But when you find a situation like Sissingue, where you've got high cost due to construction, etcetera, etcetera, using a hedge book is extremely valuable in order to be able to guarantee that margin. And in fact, if you look at Sissingue this quarter, I did not mention that the costs were up at $14.58 but we also managed to achieve a margin of $419 an ounce, achieving that objective that we set ourselves.

In general terms, our hedge book represents about 24% of our production over the next 3 years. And the weighted average price of that hedge book is $1,968 per ounce which if you compare any historical gold price, that's an extremely healthy position to be in. And what it means is that when Perseus talks about its future cash flows, you know that those cash flows are underpinned by these existing sales. And you may say, well, what happens if the gold price goes to $2,500 an ounce? Well what I would say to you is 76% of our production will be sold at that higher swap price and the balance that we sold at $19.68. And so it will average itself down slightly from the spot price. But what it will also do in a situation where the gold price falls and let's be honest, that's quite possible being old enough to have seen it happen a few times over my career, we will be able to sell at least 24% of our production at near $2,000 an ounce. And I think that's a very healthy and responsible position for professional managers to take because quite clearly, price risk is the biggest risk that a gold company faces.

Matt Greene

But I guess I'm just trying to get a sense in the March quarter. It seems like the deferred and hedged sales was a bit higher than that 24% and at sort of a level -- and look, I'm sort of getting something around the $1,600 mark relative to where your hedge price which is, as you say, north of $1,900 an ounce. So I guess I'm just trying to reconcile how you -- on a group level, the realized price was $18.20?

Jeff Quartermaine

Well, I think we can -- I'm certain Lee-Anne can explain that to you in fairly simple terms but perhaps it might be better done offline, if you don't mind and tie up all the entire missing group.

Matt Greene

Yes, no problem. Okay. Well, look, let's go to Sissingue then. You mentioned you're opening up the sell-out mines. I think I recall, it's sort of March, late March, you were looking to get into the new pit there. How is that tracking? Are you in there feeding the mill?

Jeff Quartermaine

Yes, we are. It's a short term. So we actually opened the pits in January, when I was over there in January. We were mining in Fimbiasso. The thing that impacted our production actually from Sissingue this quarter was the slow mobilization of our haulage contractor but they are finally getting their act together and we have been hauling back to the mill for some time now, albeit not as efficient we would like it to have. And I mean, the situation is in terms of the haulage contractors that we do maintain very, very high standards of safety on our sites and we're using a local contractor or local contractors. And their sense of standard is not the same as ours necessarily. So that has an impact on the availability of equipment because we went with them on the roads carrying out material unless the machines are in good shape. So we're gradually working our way through all that and the haulage operation is going much better now than it was in the early stages.

But as the mining, we are mining and stockpiling that high-grade material. And so what it means is that in the interim period until we can get it through into the mill, we are processing lower-grade material from the stockpiles around Sissingue. But that just simply is a deferral because those low-grade stockpiles would have been processed later on. And we're just pushing it back slightly in terms of the schedule. But it's nothing to be too concerned about. The operations are working very well.

Matt Greene

And just last one, Jeff, just I guess, the facility you've upsized and I appreciate this may be too soon to answer but just given the issues happening in Sudan and I guess how you're looking at funding this project, you've got a number of South African banks on that facility. I've recalled in the past they sometimes look at export credit which often come to political risk insurance that could give the market some comfort on the project level. And generally, it can be quite competitive in terms of interest rates. So how are you thinking in terms of the funding mix of this project, just given some of the dynamics that are going on in Sudan?

Jeff Quartermaine

Well, let me just firstly say that the facility that we have in place is ring-fenced around -- Sudan is not part of it. It's purely tied to the West African operations. So it is specifically earmarked to fund Sudan. I mean we've got US$470 million on the balance sheet right now. So without any future cash flow, so we can more than comfortably fund Sudan from the balance sheet if we are overmined to do that.

In terms of political risk and the like, that is something that we would like to do. We would like to be able to get the support of MIGA, the Multilateral Investment Guarantee Agency, part of the World Bank, to ensure some of the company debt into the country. And if that happens, then that would certainly open up a way for us to perhaps utilize some of that facility. But that's not part of the planning right now. We do have enough cash and future cash flow to fund directly. And of course, still have enough money left to consider other activities. I mean if we do develop Sudan, that won't be the end of the road, there are other opportunities out there that would certainly fit very well into our diversified portfolio.

Lee-Anne, do you want to add anything on to that?

Lee-Anne de Bruin

No, I think you basically covered it, Jeff. In terms of the debt facility, there was strong support from all of our existing banks and I suppose from a mix of how we're going to fund the project. We can fund the project if we wanted to go forward with Sudan from existing balance sheet and the debt facility just gives us more time in terms of looking at other opportunities within the gold space.

Matt Greene

Okay. But I guess is there appetite from these banks or development agencies to put that on a project level as opposed to sort of secure it against the rest of your asset base?

Jeff Quartermaine

Well, we don't explore that because we prefer to do it at a corporate level. We used to do project financing when we were a single asset company. And I think that the banks certainly prefer to do project lending rather than corporate learning because they successfully tie junior companies up in knots with all manner of conditions around the lending and also hedge income to that. Our preference is to work at a corporate level where we have the -- we can guarantee repayment of the debt across the entire portfolio but have the discussion as to how we deploy the capital.

Operator

Your next question comes from Reg Spencer at Canaccord.

Reg Spencer

Jeff and Lee-Anne, first question relates to Sudan and I fully appreciate that it's probably way too early to make a call on this but I'll ask the question. Should we expect some kind of impact to the timelines that FID completion of studies, drilling work given what's going on at the minute, Jeff? You're monitoring that situation daily and I presume when things stabilize, you'll advise the market accordingly.

Jeff Quartermaine

Yes, that's very much the case. I mean, as I said, we're operating on a business-as-usual basis at the moment which means that all of those fronts that I mentioned, talking about the project, we're continuing to work on those. Now what we are uncertain of right now is the geopolitics into the future. And that will determine our appetite for making this significant investment later on in the year. But no, the work that we're doing won't be interrupted because look, I mean countries come and go. I mean, that's the benefit of having a diversified portfolio. At any given time, 1 country might be going through challenges but the others are going exceptionally well, as is the case here. Cote d'Ivoire is going exceptionally well right now, 10 years ago, Cote d'Ivoire had a civil war. And I dare say that the trajectory that Sudan has been on very recently will continue once this current dispute is resolved in some way or another. So we're pushing ahead with our work and we'll make sensible decisions along the way and risk-weighted decisions Clearly, if we believe the risk to our investment is unacceptable, we won't be putting further money in there. But at the present time, we're not in a position to make that call.

Reg Spencer

I understand, Jeff. And look, I don't want to dwell on it too much because as you said, the investment to date is de minimis. So my next question just relates to cost. I was going to ask you guys this question every call but what are you seeing with respect to inflationary pressures? Some things getting better or worse? And directionally over the next 2 to 3 years, how would you see unit costs trending?

Jeff Quartermaine

Look, I mean, we're not isolated from the world. Clearly, we buy our consumables on the global market; we buy fuel in the global market, etcetera, although we do have some concessions in that area. So yes, we certainly see some cost pressure out there. However, we also manage those pressures very well. And I think we also work very hard within our business to try and implement efficiency improvements that can offset some of those cost pressures that are coming through. I mean just as a very general statement and this is -- look, I mean, people have said to me in recent times, oh well, you're better off in West Africa than in Australia which is an interesting statement given what people have said to us in the past. But I would point out that in Africa, the African countries; we do pay higher royalties than in Australia. And our costs are also inflated by the fact that we spend money on security. And clearly, the events in Sudan this week have justified that expenditure. And we also employ a lot of people on the site, probably far more than would be employed on an equivalent size property in Australia. Which means that by our location, there are incremental costs that aren't experienced elsewhere which means that we, as a business, have to be more efficient in the way we run our business in order to be able to offset those and compete with our international peers.

Now as it happens, at the present time, our costs are below those of our international peers which means that we must be doing something right in terms of running our business because we do have a few incremental costs that come along associated with our geographic location.

Reg Spencer

And last question relates to Yaoure with your resource update and updated life of mine plan. I wonder if you're able to comment at this point in time how much we might incremental result growth and loan life extension that we might get from extensional drilling success versus the possibility of any changes to cutoff given changes in the gold price? Or do you expect not to make any revisions to anything?

Jeff Quartermaine

Look, they're all good questions, Reg. They're being addressed by people who really know what they're talking about which is our technical project team. So I don't think it's appropriate for me to go into the details at this stage of the game but you can rest assured that when we have made our determinations around those things, you'll be fully informed. I mean I think that there is a pretty fair opportunity to bring out quite a lot of high-grade material from that underground operation. And what we would like to do, given that the underground -- the volumes coming from the underground operation are obviously lower than what would happen on an open mining operation such as we have at the moment. So what we do need to do is to have material available to us from the open pit to blend with that high-grade material. And that is where we may see a shift in cutoff grades in the Yaoure pit for instance which is where we're drilling at the present time, doing that infill drilling below the pit, etcetera, etcetera.

So look, all of those things are quite possible. But later this year, we will come out with the updated resource reserve and an updated life of mine plan for the entire Yaoure complex. And at that particular time, we'll be able to explain to you in great detail exactly how we've arrived at the mining tonnages and processing tonnages, etcetera, etcetera and the grades that are going to be going through the mill. And you'll be able to see that Yaoure is actually a very, very high-quality mining operation and will be for quite a number of years to come.

Operator

Your next question comes from David Radcliff at Global Mining Research.

David Radcliff

Look, I thought I'd load my hand because I think my question has been answered largely before on Yaoure. I'll just try to get a bit like Reg, push a little bit to get a bit more of an understanding there about how you currently think about the interplay between open pit and underground, what is a prohibitive strip and how the gold prices change that. But I think that was largely just answered.

Jeff Quartermaine

Yes. Okay. No, I think I probably have to the extent I really feel comfortable speaking prior to seeing the full results. But look, if you look at our mine plan, the original mine plan for Yaoure which, I guess, put some context on it. The original mine plan, how does mining in the CMA open pit for I think it was about 4.5, 5 years or so at a fairly high grade. And then moving to the lower grade, Yaoure pit and so what we had was a dip on the production profile.

Now by going into the underground mining and getting that higher grade and then being able to blend that with the lower grade material, we can keep the production levels fairly constant for quite a number of years now. The challenge for us, of course, is to keep the mill fed. And that means that we either need to discover additional open pittable resources which we have done in satellites but also potentially look at the cutoff grade of the Yaoure deposit. And I was actually looking at our feasibility work that we did prior to acquiring this property a couple of months ago and just to put it in context, I think we used the gold price of $1,100 an ounce and we did the original work on it. So I do think there is some room to perhaps adjust the cutoff grade. Perhaps in the current context, that's probably a bit conservative.

David Radcliff

Thank you. Another question has been written in the Q&A panel and it's regarding M&A. With such a large cash position, are you looking at M&A? And if so, are you looking outside of West Africa again?

Jeff Quartermaine

Okay. Well, that's a pretty fair question. And it's one that's come to us on a number of occasions as we've gone around the market in recent times. The answer is that we have a fairly substantial balance sheet available to us to continue to fund growth. We have -- prior to this weekend, we were aiming to deploy a significant amount of that cash on the balance sheet into the development of the Sydney's project. As I said, we're holding judgment on that for the moment and we'll see what happens. But even if we were to do that, we would still have sufficient funds available to fund another project. Now we can either discover that project or acquire it basically. Discovery takes a very long time to bring the projects through. So from our perspective, being able -- if we're able to identify a predevelopment asset that fits with our general strategic plan, can be acquired at a reasonable price to generate the economic returns we want, then we would most certainly look at those opportunities. And we are looking at a range of those opportunities. But I have to say that.

And in terms of the question about West Africa, no, I think Perseus has shifted its orientation to Pan African. And I think the concept of having a diversified asset portfolio has been the value of that diversity is very evident for all to see. So we're not going to restrict ourselves to West Africa. We are, however, restricting ourselves to the African continent. And our decision around acquisitions is going to be based simply on a risk-return basis. So if the price is worthwhile having and they involve some slightly elevated risk, then we're prepared to make that judgment call and to invest along those loans. But that's a fairly long-winded response to the question. Yes, we are considering M&A. It is not in West Africa specifically. However, if we have opportunities in West Africa, we most certainly would be interested in investing there because we know the area fairly well and have operated there before. So have some competitive advantage in it.

But look, it's one of those things that comes and goes. And getting all of the stars to align is not easy. We have done it in the past with the acquisition of Amara and more recently, Orca. So we are capable of executing M&A. But I think that our primary growth focus will come from the organic side, supplemented by judicious M&A as the opportunities present.

Operator

Thank you. There are no further questions at this time. So I'll now hand back to Jeff for closing remarks.

Jeff Quartermaine

Okay. Well, thanks, Nathan. I think as been said, we don't need to continue any further. We are in very good shape and we expect to continue in this vein going forward. So I look forward to bringing you further news at the end of the current quarter. Thank you.

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