Perseus on brink of developing Ghanaian gold mine

VANCOUVER — The last year has been a busy one for Perseus Mining (PRU-T, PRU-A) — in those 12 months, the Australian-based explorer has raised more than $125 million in three financings, completed a feasibility study on its Central Ashanti gold project in Ghana, initiated another feasibility study, this one on its Tengrela gold project in the Ivory Coast and listed itself on the TSX. Now it’s working to bring in another $79 million on the back of gold-rich intercepts from drill programs at both projects.

And the company will have to keep up the rapid pace for at least another year to accomplish its goals. Perseus has its sights set on building and commissioning a mine at Central Ashanti within the next year while also advancing Tengrela to a development decision.

The goals are lofty but another big financing just brought the company one step closer to one of those goals. To develop the 15,000-tonne-per-day operation at Central Ashanti, it’s expected to cost US$147.9 million. In the first week

of April, Perseus announced a bought-deal financing that will bring in half of that amount: the company is raising $79 million by selling 44 million shares at $1.80 apiece. The financing underwriters also have the option to buy another 6.6 million shares; if exercised in full, the overallotment would increase the financing proceeds to $91.1 million.

Perseus already has A$67 million in the bank, thanks to three recent raises. In June 2009, the company raised A$75 million, in October another A$23.4 million flowed into Perseus’ coffers, and in November the company issued subscription receipts for another $34.2 million as part of its initial public offering in Toronto. When the company’s listing went public in February those subscription receipts converted to shares.

The company also aligned a banking syndicate mandated to arrange a US$85-million debt facility to fund development at Central Ashanti. Due diligence for that loan is reportedly well advanced. The facility will incorporate gold hedg-ing requirements for at least 150,000 oz. gold, in addition to the gold put options Perseus has already purchased for the project.

Central Ashanti comprises a group of eight gold deposits in Ghana’s Ashanti gold belt. Together, five of those deposits host 55.4 million proven and probable tonnes grading 1.2 grams gold per tonne, for 2.15 million contained ounces. The overall measured, indicated and inferred resource count in all eight deposits is considerably higher, totaling more than 140 million tonnes grading better than 1 gram gold.

Perseus has already spent US$30 million on initial designs and long lead-time equipment for the Central Ashanti mine. The company is now waiting for its environmental permits before starting full construction.

The open-pit mine will work through a strip ratio of 2.5 to 1 to tap into a 2.14-million-oz. gold reserve and produce 192,000 oz. gold annually for 10 years. To produce an ounce of gold at Central Ashanti, it’s expected to cost US$494, allowing the project to generate a 50% pre tax internal rate of return based on a gold price of US$850 per oz.

While it awaits the final permits for construction at Central Ashanti, Perseus is drilling as quickly as it can on both of its West African projects — in February alone the company completed 26,400 metres of drilling. At Central Ashanti, Perseus has recently focused its infill and extensional drilling on the western deposits, which are known as Abnabna, Fobinso and the AF-Gap.

Some of the better results of late from those deposits include 63.5 metres grading 3 grams gold in hole 119, 85 metres of 2.3 grams gold in hole 396, 117 metres of 1.8 grams gold in hole 404, and 93 metres of 1.9 grams gold in hole 403.

Perseus is also drilling at its Tengrela project, in north-central Cte d’Ivore on the border with Mali. The 876-sq.-km project is home to nine gold anomalies, of which only five have been drill tested. The only defined deposit at Tengrela is Sissingue, which has been traced along 960 metres of strike.

At Sissingue, gold is associated with narrow quartz stringers in altered felsic and granitic intrusives and metasediments. An updated estimate in October pegged the Sissingue gold resource at 9.3 million indicated tonnes grading 1.8 grams gold and 5.5 million inferred tonnes averaging 1.7 grams gold. Most of the resource is hosted in primary sulphide or transitional rock, though some 15% is within oxidized rock; metallurgical studies have indicated both rock types return 95% gold recovery because much of the gold is coarse.

A preliminary economic assessment of Sissingue, completed in early 2009, concluded a 5,500-tonne-per-day operation could produce just over 100,000 oz. gold annually for 8.3 years. To produce an ounce of gold would cost US$452. To build the operation is only expected to cost US$89 million.

As is, a mine tapping into the Sissingue deposit would generate a 57% pretax internal rate of return, based on a gold price of US$850 per oz. The project carries a net present value of US$130 million, using a 10% discount rate.

Since completing the scopinglevel study, Perseus has continued to drill around and below Sissingue and the effort has returned multiple gold-rich intercepts that will certainly impact the mine’s longevity and economics. For example, the company pulled an 18-metre intercept from 62 metres depth, which is below the planned pit, that carried 10.1 grams gold.

More recently, the company has focused on resource drilling and the results are confirming the presence of higher-grade zones within the deposit. The latest set of results included hole 228, which returned 325 grams gold over 8 metres, starting 96 metres downhole and including 2 metres of 1,216 grams gold. Other good hits included 110 metres grading 4 grams gold in hole 226, 84 metres of 3.6 grams gold in hole 224, 60 metres of 3.3 grams gold in hole 875, and 4 metres of 20.3 grams gold in hole 939.

Perseus plans to release an updated Sissingue resource and a project feasibility study later in the year. The company is also confident the Tengrela property has much gold yet to unveil, as many of the targets are not yet tested.

Perseus’ share price spent the first half of April moving between $1.85 and $1.95.

The company debuted on the Toronto exchange in early February, listing at $1.75, and has since reached a high of $2.10. Perseus has 344 million shares outstanding (355 million fully diluted).