Perseus turns 1M oz. gold project into 7M oz. gold mine in Ghana

Perth-based Perseus Mining (PRU-T, PRU-A) has brought its first West African gold mine to commercial production, pouring 35,801 oz. gold in the fourth calendar quarter of 2011 from the Edikan gold mine in Ghana.

With an average grade of 1.26 grams gold per tonne and mill throughput currently around 12,000 tonnes per day, Perseus says it is on track to produce roughly 265,000 oz. gold each year from the mine once full ramp-up is complete. It expects cash operating costs to eventually settle around US$550 per oz, leaving ample room for the company to deliver 170,000 oz. gold required under a hedging agreement with lender Macquarie Bank at US$1,240 per oz.

Located some 25 to 65 km away from the 60-million-oz. Obuasi gold deposit on Ghana’s Ashanti gold belt, Perseus acquired the Edikan tenure in 2006, when prospective gold projects could still occasionally be acquired on the cheap. It paid just US$75,000 for the rights to the property, as well as issuing 4.5 million shares and granting 4.5 million options exercisable between 40¢ and 60¢ to Australian vendor Nicholas Charles Taylor. 

Perseus has since drilled off 5.3 million oz. of measured and indicated gold resources (roughly 82 million tonnes grading 1.5 grams gold and 60 million tonnes grading 0.65 gram gold) at Edikan, as well as 1.7 million oz. of inferred resources (25 million tonnes at 1.4 grams gold and 29 million tonnes at 0.7 gram gold) as at December 2011. At the time of the acquisition, Edikan, then called Ayanfuri, had 268,000 oz. gold in indicated resources and 726,000 oz. gold in inferred resources. Perseus later changed the project’s name to the Central Ashanti gold project before finally settling on Edikan.

With more than 650 sq. km of tenements in and around the Ashanti belt, the company is looking to add a further 500,000 oz. of gold reserves each year “for the foreseeable future,” and will have up to seven drill rigs operating on site during 2012.

Perseus will also look to transfer a considerable portion of its mine-building team over to its advanced-stage Tengrela gold project in neighbouring Ivory Coast. While the Tengrela project suffered eight months of delays in 2011 as a result of political unrest in the West African country, Perseus still hopes to put the 200,000-oz.-per-year gold project into production by 2013.

Gold reserves at Tengrela may be considerably lower at 657,000 oz. gold (9.7 million tonnes grading 2.1 grams gold), but so are initial capital costs at just $109 million. The project also hosts about 1 million oz. in indicated and inferred gold resources, with 706,000 oz. coming from 9.1 million indicated tonnes grading 2.5 grams gold.

Perseus lodged an environmental and social impact assessment for the project with Ivorian authorities in September 2011, anticipates environmental approval shortly. A contract for design and engineering has already been awarded. 

A feasibility study for Tengrela released in November 2010 estimated earnings of around US$220 million before taxes from the mine using a US$1,100 gold price. Operating costs are expected to come in around US$500 per oz. over a preliminary six-year mine life.

Perseus aims to complete 200,000 metres of drilling across several targets at Tengrela in 2012 using the six drill rigs currently on site.

It will also continue to advance the earlier-stage Grumesa and Kayeya gold projects, located on the eastern side up to 35 km from the Edikan mine area in Ghana.

As of December 2011, Perseus had A$131.5 million in cash stemming from a $93-million financing at $3.25 a share in November, in addition to 7,859 oz. of gold holdings. The company has 457 million shares outstanding and a 52-week share price range of $2.37-$4.21. At presstime on Jan. 31, it last traded for $3.09.