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Perseus Mining Ltd. (ASX/TSX: PRU): Producing about 200,000 Ounces of Gold per Year, Path to Produce 500,000 Ounces, Interview with Jeff Quartermaine, Managing Director and CEO

on 1/29/2018
Perseus Mining Limited (ASX/TSX: PRU) is a strong, diversified West African-focused gold production, development and exploration company. With a solid project portfolio, Perseus is implementing a growth strategy designed to transform the company into a 500,000-ounce per year gold producer, with three operating mines in West Africa by 2020. We learned from Jeff Quartermaine, Managing Director and CEO of Perseus Mining, that today they have one operating mine and two projects in the development phase with a second mine coming on stream very early in 2018.


Perseus Mining Limited

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Jeff Quartermaine, who is Managing Director and CEO of Perseus Mining Limited. Could you give our readers/investors an overview of your company, your focus and current activities, Jeff?

Mr. Jeff Quartermaine: Certainly, Allen. Perseus is a West African focused gold miner. As we speak today, we have one operating mine and two projects in the development phase. However, that will change very shortly with our second mine coming on-stream very early in the new year. Early in 2018 we will transform ourselves, having two operating mines and one development project. This year has been very transformational for us. We're well and truly on the path of converting from a single mine producer, producing around 200,000 ounces a year, to a producer with multiple mines, in multiple jurisdictions, producing around a half million ounces of gold per year by 2021, 2022. We expect to produce a good deal of cash and gold in years to come.



Dr. Allen Alper: Well that sounds excellent. Could you tell our readers/investors a bit more about your operation, your deposits and how you mine them?

Mr. Jeff Quartermaine: All of the operations we have or will have are different from each other. The Edikan mine, in Ghana, is a set of large scale, relatively low grade ore bodies. We have about six different pit sites there and we mine through various sequences. The average grade of the ore we process there is about 1.1 grams per ton. This is a large scale operation where efficiency is absolutely key. Every day, all day we have to be at our best. If we are at our best, we can produce significant amounts of cash and profitability.

We had some challenges at Edikan in 2016. But those challenges seem to be behind us. For the last three quarters, we've turned in significantly better results and those strong results will continue in the current quarter and beyond. It is a challenging operation, but it does appear that we are on top of it and things are looking very promising as we move forward.



Now, there's our Sissingué mine, which is in Côte d'Ivoire, which is the country next to Ghana, is a different proposition from Edikan. It's much smaller than Edikan. However, it's much higher grade. It'll be producing, on average, about 70 thousand ounces of gold per year over its life, although that is weighted towards the front end of the life and it'll be producing at a fairly low cost, so we're expecting something in the range of $650 to $700 an ounce all-in site costs for the average over the life of the mine of this particular project. Now it's a higher grade project compared to Edikan and that's beneficial on several fronts. It is lower cost and it also gives us a margin for error.



The other exciting development during the year has been the completion of a definitive feasibility study for our third project, which is called the Yaouré project, and that's also located in Côte d'Ivoire. We completed that feasibility study in November and published it. What we've demonstrated is a very good, very financially attractive, technically robust project. It's going to be a significant part of our business for a very long time to come. Now just to put the Yaouré project in perspective, at a $1250 gold price, it generates enough to take internal rate of return for about 27% and a 32 month payback period for the capital that we'll need to invest. It's a relatively small plant compared to Edikan. It's about 3.3 million ton per annum plant. And over the first five years, it'll average production of about 215,000 ounces of gold and an all-in site cost of about $734, $735 dollars per ounce. The investment required to build this project is about US$263 million and we believe that's a realistic capital cost and one that is readily financeable because of the very strong cash flows that will be available to service any external funding that we need to bring into the picture.



However, as it stands at the moment, it's an 8 and a half year life project, but we have a very strong belief that the potential to extend that is very good. We have a surrounding tenement package of about 500 square kilometers and the occurrences of mineralization in this area is very very common. We have very little doubt that we will be extending the life of this mine continuously as we continue to drill going forward. This project is a very valuable asset and will deliver significant value to Perseus’s shareholders going forward.

Dr. Allen Alper: Well that sounds excellent. Could you tell me a bit about your background and also the background of your team and your board?

Mr. Jeff Quartermaine: I've been the CEO at Perseus since early 2013, having previously been the CFO for a couple of years. I had many long years of experience in the resource sector. I'm an engineer and an accountant by profession. I have a bachelor of engineering and FCPA, also an MBA, so my qualifications span a few areas. That helps me manage a very first class team. Over the last couple of years, we've been able to recruit very carefully. We used the downturn in the industry to bring onboard a first class team of people to work in each of our areas. So we have a really high quality Chief Operating Officer, Head of Technical Services, Exploration and Project Development, not to mention Finance. And those people have extremely good people on their teams. One of the strengths of Perseus going forward is the team of people we have to deliver the outcomes for which we're striving.

The intellectual capacity of the group, as a whole, is a very valuable asset that never appears on the balance sheet. It is intellectual property, not only related to technical issues, but also the ability to operate in the part of the world, in which we operate. West Africa has its own characteristics, which are different from Australia and different from North America. But through many years of experience operating in that part of the world, we are able to get our work done and get it done very efficiently. That's a tribute to the skills and experience of the people on our team.



We've had some changes to the board this year. Our long standing Chairman, Mr. Reg Gillard resigned in about April, after about 13 years on the board. Reg had guided the company from its formation up until now, and felt that it was time for him to move on. He was succeeded in the role of Chairman by Sean Harvey. Sean's a long standing director, on the board for 9 years and he slotted into that role very seamlessly. We've also added a new director to the board, Sally-Anne Layman, who joined us late this year. Sally-Anne has both mining and accounting qualifications. She's worked in the investment banking industry for Macquarie for 15 years and brings a wonderful breadth and depth of skill and experience to the board. We are in the process of renewing the talent on the board. I think the combination of a very strong board and very strong management teams augurs well in terms of our ability to deliver the plans that we've set out for the years to come.

Dr. Allen Alper: That sounds excellent. Could you tell our readers/investors a bit about your shares and capital structure?

Mr. Jeff Quartermaine: Yes, at present time we have about a billion shares on issue. I know that most North American companies tend to have fewer shares on issue at higher prices. I guess our Australian origin has led us to have more shares on issue at a lower price. However, those shares are owned internationally. While we originated in Australia, about 40% of our shares are currently owned by shareholders based in the United States. About 32, 33% are owned by shareholders located in the United Kingdom and Europe. And about 20% of our shares are held in Australia and the rest are spread around the world. So it's very much an internationally owned company. I would describe the share register we have as blue chip. We have a number of excellent institutional investors, who have been strong supporters of the company over a quite a period of time. In fact, during the last 12 months or so, 9 of the top 10 shareholders have been buying stock in the company, which shows their confidence in the deep value of our company and the progress we're making in unlocking that value.

As far as the balance sheet is concerned, we have a fairly modest amount of debt onboard at the time. We do have a $40 million project loan facility to fund the Sissingué project, which is drawn to the extent of $20 million at the present time. We also have a small working capital facility, which is drawn to $10 million at the present time. So that's $30 million debt at the present time. At the end of September I think we had about $40 million of cash and bullion on hand, so we have a slightly positive situation.

Dr. Allen Alper: Well that sounds excellent. I hear you recently were awarded a prestigious award for health, safety and environment at Edikan, is that correct?

Mr. Jeff Quartermaine: Yes, that's correct. I was very pleased about that actually. Because this is an award that's been given by the mining industry in Ghana and by the Chamber of Mines, with the Minerals Commission involved. It is recognition, by the people of Ghana, the host country and the host communities that we're doing a good job. In terms of a social license to operate in the country, I think this speaks volumes. They are appreciative of our efforts. This is an excellent achievement by our team at Edikan to be recognized in this way.



Dr. Allen Alper: I think that's outstanding. That's really something of which to be very proud. Perseus Mining has clearly earned the trust and confidence of the community.

Mr. Jeff Quartermaine: Well, that’s true, Allen. I often say, you can have the best deposit in the world and the best team of people in the world, but unless you have a strong social license, unless you're welcome in the countries in which you're operating, then you really have nothing. From Perseus' point of view, while we place a lot of emphasis on getting our physical assets right and ensuring our human resources are functioning effectively, we've also put an equal amount of effort into ensuring that our social license is intact and is working properly. I think that approach has helped us to work well in Ghana, but it's also been very instrumental in our expansion into Côte d'Ivoire, where we have employed a similar style in the places we've gone. We have very good relationships with the host community around the Sissingué mine, where we're about to start producing early next year. And I expect a similar result will occur when we get more involved with the Yaouré mine in Côte d'Ivoire in the next year or so, as well. We do pay attention to and we take our host communities very seriously.

Dr. Allen Alper: That's excellent. That's really something you and your team could be very proud of. Could you tell our readers/high-net-worth investors why you think they should consider investing in your company?

Mr. Jeff Quartermaine: That's a very good question and I'm delighted to have the opportunity to answer it. We've heard of Perseus sometimes as the accidental miner. I don't think we ever really envisaged, when we first came into being, where we would be today. We were very successful in the early days. We had exploration success, which coincided with a very strong run in the market place. Before too long, Perseus found itself, having developed a mine and not really being fully equipped to run it properly, but with a huge level of expectation from the marketplace that we were going to be doing all sorts of things that we could never deliver on. Now, of course, that became reality, the market became very disenchanted with the company, and in ice hockey terms, they sent us to the penalty box for a number of years. That's where we've been and that's been reflected in our share price.



We've recognized the fact that we had to improve the business and that's exactly what we've done over the last couple of years. We've turned the business around from being a single mine operation, with some challenges, to now approaching a multi-mine situation, where things are working very well. I think we're on the cusp of being recognized by the broader marketplace that we have achieved a turn-around. I think the whole attitude toward gold at the moment is one of indifference. There's interest in cryptocurrencies and all sorts of other special things, but for investors in gold, I think they'll certainly be back in the not too distant future. When they are back, they'll be looking for companies, with very substantial growth potential. In our case, it's not just potential, it's happening. We have a growth strategy that we're aggressively implementing. We own the assets that we're going to be working. They're all based on JORC compliant reserves. They're not reliant on exploration or acquisition. We will deliver very material growth over the next few years. I think that as the market comes to appreciate what we're doing, that will be reflected in our share price.

Earlier in the year, people said to us, "Well, you know, we really like the story but we want to see some evidence that you're actually going to deliver this plan." So progressively, quarter on quarter, we've been producing very good results. Our Edikan mine proves we can operate. Early in the new year, we're going to be completing the development of the Sissingué project. We expect that will be slightly ahead of schedule and on budget. People will be able to gain confidence from the fact that Perseus can discover, operate and also build. I think that confidence will flow over into the third project. The thinking will be, if they can do that on Sissingué they can do that on Yaouré. I don’t think it will be very long before we'll be viewed in a different way by the broader market.

From an investor's perspective, the question is always about timing. Investors have to weigh their risk reward equation. By investing now you are assuming slightly more risk than you might assume if you invest later. But invest later, you'll be paying an awful lot more money for the opportunity. Investors need to take a very close look at the company and make an informed decision. I’m very confident that when they look at the facts, they will find that this is an outstanding opportunity and one that is very difficult to ignore based on hard numbers.

Dr. Allen Alper: Those sound like excellent reasons for our high-net-worth investors to consider investing in Perseus.

http://www.perseusmining.com/

Jeff Quartermaine
Managing Director
+61 8 6144 1700
jeff.quartermaine@perseusmining.com




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