CA - Perseus Mining Limited (PMNXF) Q4 2022 Earnings Call Transcript

Perseus Mining Limited (PMNXF)

Q4 2022 Earnings Conference Call

August 30, 2022 07:00 PM ET

Company Participants

Nathan Ryan - Media Relations

Jeff Quartermaine - Managing Director and Chief Executive Officer

Lee-Anne de Bruin - Chief Financial Officer

Conference Call Participants

Presentation

Nathan Ryan

Good morning and welcome to the Perseus Mining Investor Webinar and Conference Call. All attendees are in a listen-only mode. [Operator Instructions]

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

Jeff Quartermaine

Thanks very much, Nathan, and welcome to Perseus Mining's webinar to discuss our full financial year 2022 results. I am joined on the call today by my colleagues, Lee-Anne de Bruin, our Chief Financial Officer, who will take us through the details of the financial report that was released this morning to the market, and she will also be available later in the call to answer any detailed questions that you have about either the financial results or indeed our very comprehensive financial report. I'm also joined on the call by Paul Thompson, our Head of Organic Growth. Paul will be available later in the call as well, should there be any questions about the releases that we put out yesterday concerning our resources and reserves and the CMA underground particularly.

Before passing to Lee-Anne, let me just say that fiscal 2022 has been an excellent year for Perseus, as we have consolidated our transition to now being a highly profitable multi-mine, multi-jurisdictional company that consistently delivers on our promises. Our production during the year of 494,014 ounces of gold and all-in site cost of US$952 an ounce ranks very favorably when compared to our peers both here in Australia and internationally.

We acquired our next multi-million ounce gold development projects through the acquisition of Orca Gold during the year. And as Lee-Anne will tell you, we have just delivered a record financial performance as measured by both cash flow and earnings, placing Perseus in a strong position to continue what has become one of the better stories in the Australian gold space.

But enough of this, let me now pass over to Lee-Anne to tell you exactly what has been achieved in fiscal 2022. Lee-Anne, please.

Lee-Anne de Bruin

Thanks, Jeff. And as you can see, the operational production has delivered a record performance in Perseus' key financial metrics, which I will talk to in a little bit more bit. But in summary, Perseus for FY2022 has delivered a milestone revenue of AU$1.1 billion, up 66% on the financial year 2021. And this has delivered a profit after tax of $280 million, up 101% on last year. Operating cash flow is up 73% from last year at $523 million, positioning the group well or repayment of debt, delivery of our growth strategies and returning to shareholders by a declaration of a final dividend of $0.0164 per share.

As mentioned earlier, the revenue is up 66% to AU$1.1 billion and this has resulted in an EBITDA of $564 million, up 86%. This was a result of the higher gold prices combined with higher production due to full-year contribution on the Yaouré Gold Mine. The Yaouré contribution was offset by an expected reduced production at the Sissingué gold mine and the underperformance at Edikan. The revenue increase translated into excellent growth in all Perseus' earnings metrics with growth profit from operations up 75% at $350 million.

A slightly deeper dive into these strong growth earnings metrics, namely profit after tax of $280 million, which is up 101%, it's worth noting the following material inclusion. Cost of sales increased by 49%, proportionately less than the 66% increase in revenue. And this was due to the increased production coming from Yaouré, which achieved an all-in site cost of US$668 per ounce during the FY2022 financial year.

Income tax decreased by $23 million due to lower profits from Edikan. Depreciation and amortization increased by $214 million, 107% up. And this was predominantly due to the amortization of the Yaouré Gold Mine for a full financial year-end when compared to over three months in FY2021. And that was obviously due to the declaration of commercial reduction in March 2021.

The increase of profit after tax was achieved after recording impairments of $43.4 million as well and in 2022 compared to the FY2021 impairments of $6.8 million. An impairment assessment was prepared in relation to the Bagoé project due to the finalization of the related feasibility study and its inclusion in the Sissingué Life of Mine Plan during the year and impairments of $33 million was processed in relation to the Bagoé project with the balance of the carrying value being transferred to assets under construction as part of the Sissingué Gold Mine project moving forward. The remaining $10 million of impairment relates to write-offs in relation to unsuccessful exploration of near-mine targets at Sissingué and Edikan.

The earnings per share has increased up by 96% to $0.1877 per share, and this is taking into account the weighted average impact of additional 125 million shares issued as part of the Orca transaction. And our earnings per ounce was up 34% at $582 per ounce or 50% increase in ounces produced on last year.

The growth in cash flow, similar to our strong earnings metrics, the operational performance has delivered excellent growth in Perseus cash flow metrics. Operating cash flow from operation was up 73% at $523 million generating operating cash flow per share of $0.42 per share and $1,058 per ounce. The growth in cash flow has positioned Perseus well to invest in growth strategies as exploration in growth strategies, such as exploration and Orca during 2022.

Moving on to our balance sheet. The group ended the financial year with a strong balance sheet, including cash and bullion balances of $476 million and interest-bearing debt of US$50 million. This cash and bullion balance [is after] investing cash flow of $166 million, including the initial Orca acquisition and up AU$30 million and exploration of $55 million.

It's worth noting that we have made a subsequent payment on our up US$25 million in August 2022 on the corporate revolving facility, leaving a drawdown balance of US$25 million and an available drawdown of US$125 million. Net tangible assets are at $1.2 billion, up 28% on previous financial year and reducing a net tangible assets per share of $0.87 per share.

Looking forward to financial year 2023, Perseus guidance for the six months to December 2022 remains unchanged with the focus remaining on the corporate objective of delivering 500,000 ounces per annum at a cash margin of not less than US$400 per ounce. Perseus is guiding for the six months to December 2022, 240,000 to 265,000 ounces produced at an average all-in site cost of US$1,000 to US$1,100 per ounce.

Our continued focus at FY2023 will be driven by the strong contribution from the Yaouré Gold Mine, significant reduction in capital expenditure and balance sheet management initiative. We will continue with fiscal discipline in what is an ever-changing fiscal and cost environments. And our dividend policy will remain focused on disciplined return to shareholders, while maintaining a balanced capital structure and capacity to fund our corporate growth objectives.

So that then brings me to the Perseus dividend declaration on final dividend for FY2022. Giving consideration to Perseus’ strong performance in FY2022, the Board of Perseus has declared a final dividend of $0.0164 per share, which is accumulative of $22 million return to shareholders. This is in addition to the FY2022 interim dividend paid in March of $0.0081 per share, accumulative of AU$10 million and an annual yield of 1.5%. The final dividend of $0.0164 includes a bonus dividend of $0.0079 per share or a 0.5% yield over the 1% sustainable dividend policy. The cumulative return to shareholders since August 2021 last year is AU$50 million, which includes the capital reduction, the FY2022 interim dividend and the FY2022 final dividend declaration.

That brings to the end of the presentation of our financial results. So I'll now hand back to our CEO, Jeff Quartermaine.

Jeff Quartermaine

Well, thanks very much, Lee-Anne. That was a very comprehensive summary. Now before opening the floor to your questions, can I please take this opportunity to give you a bit of an update on what we have actually achieved at Perseus since the end of the financial year. I am aware that following the release of our last quarterly report, a few of our investors raised concerns about the challenges that we reported at Edikan last quarter. Now I am delighted to tell you that since we restarted our mill at Edikan following the maintenance shutdown in June, everything has gone exceptionally well.

And in fact, in July, Edikan recorded the best month of gold production since December 2018. And the way August is shaping up, I expect that August will be better than July. By around the middle of August, Edikan had actually passed its total June quarter production. So the operation is very well placed to achieve if not exceed guidance throughout this quarter and in the December 2022 half that Lee-Anne just mentioned.

Now not to be out done, Yaouré continue to outperform all of our expectations as is the Sissingué. It just keeps flooding away, beating budget month-in, month-out. So production wise, and in terms of all-in site cost, we are in very good shape, having started the quarter very strongly, and we are looking forward to reporting another excellent quarter in October in [indiscernible] say in our new home in Sudan.

On the organic growth side of things, the CMA underground is shaping up very well. Now we released details of an initial ore reserve for CMA underground yesterday. I should stress that these results relate only to the first 200 meters down-dip. We have a bit of infill drilling to be done to extend the reserve, but from suck out holes that we have drilled, we have confirmed that the continuity of the CMA structure for at least about a kilometer down-dip and have noted that mineralization also continues, so that's pretty exciting.

Our deep drilling program at CMA, which is investigating what lies depth beneath the structure, is in its infancy, but the first couple of holes that we have completed have returned some really interesting results. And you will certainly be hearing more of this before we are done.

In terms of our next development project in Sudan, this is also looking very good, where we have been doing a lot of preparatory work before step does striking out on the ground. We are ready to sign a drilling contract with a very highly reputable drilling company with significant global experience, including across Africa, and they should be mobilizing the site within weeks. Their job will be to perform an infill drilling program aimed at materially increasing the mineral resources and ore reserve, and also doing sterilization drilling ahead of construction of mine infrastructure.

We have been working very closely with the Sudanese government to put in place all of the structures and mechanisms needed to cost efficiently import equipment necessary to start preparing the [indiscernible] infrastructure ahead of an influx of drillers and later on construction workers. We couldn't be more pleased with the level of support that we are receiving in Sudan from the very highest levels of government and we are very, very excited about what allows ahead of us on that project.

So not only of the financial results for fiscal 2022 that Lee-Anne has described been excellent, but we are very pleased to say that the strong performance that delivered those results is continuing into the new year and our shareholders can certainly look forward to the continuing strong results in the periods ahead.

So – but thank you very much indeed for your attention today. This brings our presentation to a close. And now Lee-Anne, Paul and I are happy to take any questions that you may have in relation to either these results or any other aspect of Perseus’ business. Thank you very much.

Question-and-Answer Session

A - Nathan Ryan

[Operator Instructions] Your first question comes from Reg Spencer at Canaccord. Congratulations on a good year. My question relates to the Yaouré CMA underground. You know, it's in yesterday's announcement – yesterday's announcement included a maiden reserve for the underground. Can you help us understand what development timelines and productions scheduling might look like?

Jeff Quartermaine

Look, we have a good deal of work to be done. We would like to think that we would be bringing this into the mine plan around – in fiscal 2024. There is some work to be done yet and particularly in regards, regulatory approvals, et cetera, et cetera. But certainly, we think that's definitely achievable and we'll be issuing a comprehensive Life of Mine Plan that includes that underground work as soon as it's available.

Nathan Ryan

Thank you. Your next question comes from Patrick Collier at Credit Suisse. Could you please elaborate on your thinking around the FY2023 balance sheet initiatives mentioned in the presentation?

Jeff Quartermaine

Well look, in terms of FY2023, we've paid down subsequent to year end, I think $25 million. So we're down to 25. With an eye to the future that in terms of development of the Sudanese project and various other initiatives, we may look at upsizing our corporate debt facility, which I think starts to step down at the end of this calendar year. And so that's something that we'll be working on going forward. That will give us the capacity to spend money on growth, et cetera, et cetera. But that'll be the main initiative at this point. I think, I mean, as Lee-Anne made the point, fiscal discipline is a key part of what we do. So we won't be getting carried away in any of these legendary things. But I think that we would like to have a level of leverage in the business as we go forward.

End of Q&A

Nathan Ryan

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

Jeff Quartermaine

Okay. Well, thanks, Nathan, and thank you very much listeners for your attendance to the call this morning. As I said, it's been a very good year for Perseus and we are looking forward to delivering more of these excellent results in future periods and confirming our position as one of the better gold stories in the Australian market. So thanks very much.

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