Perseus Mining Ltd. - Swiss Resource Capital AG · Perseus shares closed at 1.63x our P/NAV at spot...

Please see Disclosures and Disclaimers on the last two pages of this report.

Perseus Mining Ltd. (PRU-T: C$1.06)

BUY, High Risk* Dundee target: C$1.50

May 21, 2013 Josh Wolfson, CFA / (416) 350-5045

[email protected] Jon French / (416) 350-3311

[email protected]

Edikan Site Visit; Heavy Lifting Complete, Not Quite At Easy Street

Recommendation Previous CurrentRating: -- BUYTarget: C$2.50 C$1.50 Risk: -- High2013 EPS (CY) 0.13 2014 EPS (CY) 0.17Company DataPrice (05/17/13): C$1.0652-Week Range: C$1.06-3.07Market Capitalization ($MM): US$472Enterprise Value ($MM): US$434Shares Outstanding - Basic (MM):Shares Outstanding - Diluted (MM):2013E Dividend Yield:Avg Daily Volume (3 Mos) (000s):Cash ($MM): A$39Debt ($MM): A$0Working Capital ($MM): A$16

NAV LT Gold Price:Price Deck:Spot Gold:EPS (CY) 2012 A 2013 E 2014 EQ1 0.05 A 0.01 A 0.04 EQ2 0.03 A 0.02 E 0.04 EQ3 0.04 A 0.03 E 0.04 EQ4 0.04 A 0.04 E 0.05 E

CY 0.16 A 0.11 E 0.17 EP/E 6.8x 9.5x 6.3xCFPS (CY) 2012 A 2013 E 2014 ECY 0.24 A 0.15 E 0.25 E

P/CF 4.4x 6.9x 4.2xAll Figures in A$ Unless Otherwise NotedSource: Bloomberg, Company reports, DCM

0.78x1.63x

$1,525/oz$1,360/oz

A$/sh1.360.65

P/NAV

458.0460.70.0%1,761

0.110.17

On May 7, we visited Perseus' Edikan Gold Mine in Ghana (81% of NAV). Following crusher issues identified in January, the company has made progress with its remediation plan. We believe the company is on track to achieve near term operating targets as well as its expansion to 8 MMtpa in CY 2H13. However, longer term, we expect Edikan to face a more challenging outlook than the mine's historical performance. Shares have recently come under substantial selling pressure, in our view reflecting reasonable valuation compression from previous elevated levels, higher leverage to gold in a declining price environment, and external funding requirements for Sissingue development at current gold prices. Perseus shares closed at 1.63x our P/NAV at spot gold, a 12% premium to the producer group average.

Edikan Crusher Remediation Issues Appear To Be Resolved Based on feedback from the team on site, prior crusher issues have been resolved. A new and modified design of the crusher core and mantle has been fabricated and installed. The team remains comfortable with CY 1H13 guidance for 105-125 koz, while in our view it is unlikely the company outperforms expectations. Production results in CY 2Q13 are expected to be impacted by scheduled crusher maintenance downtime in mid-May as well as brownouts, due to regional upgrades to power transmission lines.

Mine Plan Optimization To Be Key Milestone in CY 3Q13 In light of historical challenges at Edikan since commissioning (recoveries, crusher downtime), the impact of substantial stockpiling, and a recent write-down, Edikan's steady state cost of production is uncertain. An updated and optimized mine plan, scheduled for CY 3Q13, has the potential to be an important milestone. We believe operating efficiency has not been a major focus for the mine, given transient operating challenges, thereby providing an opportunity for cost improvement. However, we reiterate our perspective that Edikan will face increasing per ounce cost pressures over the next 12-24 months in response to changing ore blends, deeper/longer haulage distances, mining inflation, lower recovery targets, and declining processed grades.

Free Cash Flow May Challenge Sissingue Timing In conjunction with relocation objectives for eastern pits at Edikan, capital expenditure of $35MM is expected to be incurred primarily in FY 2014, beyond expansion and sustaining capital. While we still believe Sissingue (8% of NAV) represents an economic project for development, given lower cash flow in today's gold price environment and higher capital spending, should the company continue with its plan to commence development in CY 2H13, we forecast that additional external funding will be required.

Target Price Valuation Methodology We have made various changes to our forecasts, detailed on Page 8. The net impact has decreased our NAV by 29% and has changed CY 2013/2014 CFPS by (27%)/4%. We are lowering our 12-month target price to $1.50 (prev. C$2.50) based on 1.0x (prev. 1.3x) our target NAV at a long term gold price of $1,525/oz and 11x (prev. 13x) 2013E/2014E CFPS. We maintain our BUY rating due to an attractive return to target at our $1,525/oz long term gold forecast.

PRU: Price/Volume Chart

Jul-11 Jan-12 Jul-12 Jan-131

1.5

2

2.5

33.5

4

04

Perseus Mining Ltd. (PRU-CA)

Volume (Millions) Price (CAD)Volume Perseus Mining Ltd.

Source: FactSet

Company Description Perseus is an Australian based exploration and development company focused on the acquisition and development of gold projects in West Africa. The company's two core assets are its Edikan Gold Mine in Ghana, and its Tengrela development project in Cote d'Ivoire.

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Perseus Mining Ltd. May 21, 2013

Edikan Site Tour On May 7, we attended a site visit to Perseus’ Edikan mine in Ghana (81% of NAV), hosted by COO Jon Yelland and General Manager Wayne Nicoletto. 6 sell side analysts were in attendance.

Key takeaways:

• Based on feedback from the team on site, prior crusher issues have been resolved. The prior crusher failure had been associated with core and mantle slippage, while a new core and mantle has already been fabricated and installed by FLSmidth. To prevent another occurrence, the design has been modified. The existing core and mantle will be used as a spare unit, thereby lowering future maintenance downtime requirements.

• Production is on track to achieve CY 1H13 105-125 koz guidance. Management and operators remain comfortable with production volume targets in CY 2Q13. Crusher uptime has improved, thereby providing sufficient feed for the processing plant. In anticipation of a 6-day shut-down in mid-May related to the crusher, a target stockpile level of 70 kt of crushed ore had been planned to minimize the impact to milling. In April, lower throughput was experienced, associated with grid power downtime due to regional high voltage power line upgrades. Based on these factors, we believe it is unlikely the company outperforms expectations.

• Recent cost increases have been incurred from an increase in pit mining depth, fresh rock mining, and increasing Ghanaian power costs. Eastern pits mined may provide partial relief. Fresh rock has a substantially higher work index of 15, compared to the oxides of 7. The company has the ability to offset these ongoing challenges with the mining of nearer-surface mining on the eastern portion of the concession, expected in late 2014, but will incur longer haulage costs. As a result of a December energy price increase, grid power costs have increased to 15 c/kWh, from 13 c/kWh.

• To access the eastern pits, substantial relocation costs will be realized in FY 2014. Of a total project budget of $46MM, compensation and non-physical resettlement costs are $11MM, of which 80% has already been spent. The remaining $35MM is associated with resettlement design and construction, largely scheduled to be spent in FY 2014. The amount of the spending is higher than our estimates, while the timing of spending is also sooner.

Fobinso Pit Overview

Source: Dundee Capital Markets (May 2013)


• Processed grades are expected to remain above reserve grade, but have a declining profile near term. Reserve grade today at Edikan is 1.12 g/t, compared to processed grades to date of 1.48 g/t. Sequencing high grade zones (evident from the photos on page 4) and stockpiling of lower grade material have been major contributors to achieving this. Ore stockpiling is expected to continue for >5 years, while processed grade is expected to decline substantially over the next 12 months to a more sustainable ~1.20 g/t. To date, reconciliation from the mine plan has been acceptable. For tonnage, reconciliation has been +15%, while for grade, it has been -3%. Planned mining dilution has been about 10%.

• To achieve the planned 8 MMtpa expansion in CY 2H13 (vs. design of 5.5 MMtpa), modest upgrades are required. The existing crusher circuit can accommodate throughput of 8 MMtpa, and spare capacity remains with the SAG mill, flotation cells, and CIL tanks. In our view, focus at the mine has largely been centred upon improving production rates via maintaining plant uptime, stability, and advancing the expansion. The opportunity to focus upon processing optimization has the potential to improve operating economics.

• Mining opportunities and risks to be clarified with updated optimization study, scheduled for CY 3Q13 release. Compared to the last released 43-101, dated May 2011, mining costs have increased 23% and admin costs per tonne have increased by 202% (as of CY 1Q13). Compared to recent processing costs, we believe it is unlikely Perseus will be able to reduce costs by an amount that would offset anticipated grade decreases and we expected rising costs at Edikan. Planned gold prices for reserve calculation may increase to $1,300/oz from $1,200/oz today. For the optimization study, the Bokitsi and Chirawewa pits are planned to be converted to reserves. Overall, these pits feature grades in line with the mine plan of ~1.2 g/t and a modestly lower strip ratio.

• Long term targets for recoveries are 88%, lower than prior targets for >90% and feasibility estimates for 90%. Ore blending and grind size are expected to be major factors to achieving ultimate recoveries. While oxide and sulphide recoveries have been performing in line with expectations, uncertainty with recoverability of the transition ore has been a challenge due to a variable and higher than anticipated proportion of oxidization within transition ore. Slightly offsetting this has been the lower grinding requirement for the transition ore which has a higher proportion of oxidization.

• Underground mining potential at Edikan is being evaluated, but progress remains early stage. Structures continue beneath the planned pit depth at Esujah north and south and are being evaluated to be accessed underground.

Crushed Ore Stockpile



Fobinso Pit Mining


Abnabna Pit Mining



Edikan Gold Mine Background Edikan is located in southern Ghana approximately 16km west of Dunkwa and 195 kilometres north of the capital, Accra. Access is by sealed road from Ghana's second largest city Kumasi, located 107 km by road to the north and the port of Takoradi located 185km to the south. The Dunkwa-Awaso railway line passes to 2 km northeast of the project. The project area is connected to the national electrical grid and is serviced by land and mobile telephone networks.

The region has a tropical climate characterized by warm temperatures and a monsoon season. Annual rainfall is around 1,500mm but during the wet months of June and October, transport can become challenging. The surface is gently rolling, at an elevation ranging from 120m to 240m above sea level.

The deposit hosts free milling granite hosted gold mineralization and occurs in narrow quartz veining associated with 3% pyrite and lesser arsenopyrite. Gold occurs as very fine grains often along sulphide grain boundaries, with coarse visible gold occasionally observed within the quartz. Currently, the project hosts reserves of 3.4 MMoz grading 1.12g/t.

Mining and Processing Edikan poured its first gold in August 2011, in line with expectations, and achieved commercial production on January 1, 2013. Current mining occurs in the Abnabna and Fobinso open pits and is flowed through processing plant that includes a primary jaw crusher, a single stage SAG mill, gravity circuit, flotation circuit, regrind ball mill, concentrate CIL circuit and elution circuit.

Edikan Simplified Flow Sheet

Source: Company reports


Crusher Remediation In July 2012, the company began incurring unplanned shutdowns as a result of faulty parts on its primary crusher. Initial problems were linked to an incorrectly sized head nut, which required replacement and reparation of the subsequently damaged shaft sleeve. A subsequent review was conduction by the original equipment manufacturer, FLSmidth.

Following the investigation, problems were traced to the initial installation and commissioning as well as sub-optimal ongoing operation and maintenance practices. A number of items required overhaul in addition to further training of operations and maintenance staff. Temporary repairs to the crusher shaft assembly were made in December and January until permanent repairs could be implemented. With replacement parts delivered to site in February, all remediation work on the primary crusher shaft and core was successfully completed during CY 1Q13.

The company's expects to achieve utilization rates of ~80% at its primary crusher and >90% at its SAG mill. At this rate, sufficient crushed ore would be available to feed the mill even at the expanded rate of 8 MMtpa. Progress has been made over the past several months as the company continues to strive for its nameplate capacity. At current utilization rates, the company believes it can achieve its targeted throughput rate of 8.0 MMtpa by mid-2013.

Crusher and Mill Utilization Rates

0%

20%

40%

60%

80%

100%Crusher Utilization Rate

0%

20%

40%

60%

80%

100%Mill Utilization Rate

Source: Company reports

Regrind Ball Mill and CIL Tank Overview



CY 1Q13 Operating Results

(unit) (%)Production Summary

Consolidated Gold Production koz 57.2 52.8 4.3 8%Consolidated Gold Sales koz 53.6 52.8 0.8 1%Total Cash Costs (Co-product) $/oz 951 859 92 11%Realized Price $/oz 1,494 1,455 39 3%

Key Operations

Edikan (90%)Throughput t 1,493,961 1,368,000 125,961 9%Strip Ratio x 3.6 3.5 0.1 4%Grade g/t 1.5 1.4 0.1 5%Recovery % 81.2% 84.0% (0.0) (3%)Gold Produced oz 57,179 52,832 4,347 8%

Operating Cost $/t 28.4 30.7 (2.3) (8%)Total Cash Cost (Co-product) $/oz 951 859 91.5 11%

1Q13 Actual Dundee Estimate

Variance

Includes a ROM stockpile value adjustment of US$122/oz.

Lower than expected recoveries due to coarser grind size at elevated throughput levels.

23,000 oz were sold through its hedging contract at an average gold price of $1,239/oz.

Higher production due to increased throughput and higher processed grades.

Costs were higher due to a one-time ROM stockpile write-down.

Source: Company reports, Dundee Capital Markets estimates

CY 1Q13 Financial Results • Perseus reported a loss of $1.1MM, or $0.00 per share. Adjusting for a $7.0MM impairment for ROM stockpile

adjustment, and other one-time items, we derive adjusted earnings of $6.8MM, $2.4MM below our estimate of $9.3MM. Major variances in our estimates were attributable to weaker operating results (net -$13.9MM variance), and higher G&A (-$2.1MM variance), partially offset by lower taxes (+$6.2MM variance).

• As of March quarter end, PRU had $38.4MM in cash and $25.1MM in bullion (16,200 oz) and undrawn credit line of $100MM

Variance from Estimates - CY 1Q13

(unit) (%)Financials

EPS Reported ($/share) (0.00) 0.02 (0.02) -112%EPS Adjusted ($/share) 0.01 0.02 (0.00) -24%CFPS Adjusted ($/share) (0.01) 0.03 (0.04) -117%

Revenue $MM 77.2 74.0 3.3 4%Operating Costs $MM (60.9) (43.7) (17.2) 39%Depreciation $MM (5.0) (5.4) 0.5 -8%Administration $MM (7.4) (5.3) (2.1) 40%Exploration $MM 0.0 0.0 0.0 -Net Interest $MM (0.8) (0.5) (0.3) 49%Tax $MM (1.4) (7.6) 6.2 -81%Equity Income/(Loss) $MM 0.0 0.0 0.0 -Minority Interest $MM (0.2) (2.2) 2.0 -92%

Earnings Reported $MM (1.1) 9.3 (10.3) -111%Earnings Adjusted $MM 6.8 9.3 (2.4) -26%

Operating Cash Flow $MM (2.4) 14.6 (17.0) -116%Capex Reported $MM 15.6 15.4 0.2 1%

1Q13 Actual Dundee Estimate

Variance

Taxes were significantly lower than estimate due to marginal pre-tax profit.

Operating costs were largelyaffected by a ROM stockpile adjustment of A$7.0MM.

Source: Company reports, Dundee Capital Markets estimate


Changes to Forecasts We have made the following changes to our forecasts:

• Incorporated CY 1Q13 actual financial results.

• Increased our capital assumptions in FY 2014 to account for higher relocation costs than anticipated.

• Lowered our long term recovery assumptions to 88%, in line with guidance. Revised our grade profile to reflect a continuation of stockpiling, and processing of material above reserve grade.

• Increased our per tonne mining and processing costs, which continue to remain lower than recent quarterly results.

• Accelerated the implementation of the 8 MMtpa expansion.

The net impact has decreased our NAV by 29% and has changed CY 2013/2014 CFPS by (27%)/4%.

Changes to Forecasts - At Price Deck

New Forecast Original Forecast Change % Change

NAV@ Target Discount Rate ($/share) 1.36 1.91 (0.55) -29%

@ 0% Discount rate ($/share) 1.87 2.89 (1.02) -35%@ 5% Discount rate ($/share) 1.36 1.91 (0.55) -29%@ 10% Discount rate ($/share) 1.04 1.37 (0.33) -24%

2013 EstimatesEPS Adjusted ($/share) 0.11 0.13 (0.02) -15%CFPS Adjusted ($/share) 0.15 0.21 (0.06) -27%

Consolidated Gold Production (koz) 244 246 (3) -1%Equity Gold Production (koz) 219 222 (3) -1%Equity Silver Production (koz) 0 0 0 N.A.Total Cash Costs (Co-product) ($/oz) 876 828 48 6%Realized Price ($/oz) 1,525 1,539 (14) -1%

Capex ($MM) 83 98 (15) -15%Free Cash Flow ($MM) (13) 4 (17) -479%

2014 Interest ExpenseEPS Adjusted ($/share) 0.17 0.17 (0.00) -1%CFPS Adjusted ($/share) 0.25 0.24 0.01 4%

Consolidated Gold Production (koz) 276 275 1 0%Equity Gold Production (koz) 248 248 0 0%Total Cash Costs (Co-product) ($/oz) 891 885 6 1%Realized Price ($/oz) 1,617 1,619 (2) 0%

Capex ($MM) 174 150 24 16%Free Cash Flow ($MM) (55) (32) (22) -69%

2015 Interest ExpenseEPS Adjusted ($/share) 0.29 0.36 (0.06) -18%CFPS Adjusted ($/share) 0.41 0.49 (0.08) -16%

Consolidated Gold Production (koz) 385 424 (39) -9%Equity Gold Production (koz) 352 389 (37) -10%Total Cash Costs (Co-product) ($/oz) 845 782 63 8%Realized Price ($/oz) 1,621 1,590 31 2%

Capex ($MM) 65 45 20 45%Free Cash Flow ($MM) 132 192 (59) -31%

Source: Dundee Capital Markets estimates


Perseus Mining - All-In Costs at Spot Gold

Units 1Q11A 1Q11A 3Q11A 4Q11A 1Q12A 2Q12A 3Q12A 4Q12A 1Q13A 2Q13E 3Q13E 4Q13E

Consolidated Sales (1) oz - - - - 45,490 53,279 50,785 48,080 53,618 58,181 60,119 68,160

Percent of Revenue Attributable to Gold % 0% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Realized Price US$/oz - - - - 1,513 1,504 1,463 1,581 1,494 1,382 1,450 1,453

All-In Costs (By-Product) (2)

Total Cash Costs US$/oz - - 859 677 830 782 569 698 951 837 843 849

Exploration (3) US$/oz - - - - - - - - - - - -Administration (3) US$/oz - - - - 55 82 101 121 143 97 93 82Interest (3) US$/oz - - - - 19 21 16 17 15 10 9 8Taxes (3) US$/oz - - - - 1 314 284 211 28 130 155 165Sustaining Capital (4) US$/oz - - - - 174 89 93 96 168 155 120 106Secondary Costs US$/oz - - - - 250 506 494 445 354 392 377 361

All-In Costs (By-Product) US$/oz - - 859 677 1,080 1,288 1,063 1,143 1,305 1,229 1,220 1,210All-In Margin (By-Product) % 0% 0% 0% 0% 29% 14% 27% 28% 13% 11% 16% 17%

Project Capital (5) US$/oz - - - - 369 104 150 201 174 141 181 298

All-In Costs Incl. Project (By-Product) US$/oz - - 859 677 1,448 1,392 1,213 1,344 1,479 1,370 1,401 1,508All-In Margin Incl. Project (By-Product) % 0% 0% 0% 0% 4% 7% 17% 15% 1% 1% 3% -4%

(1) Consolidated sales are based on reported ounces sold. (2) By-product costs per ounce are calculated based on total reported costs less amounts associated with production of non-gold revenues divided by consolidated gold sales.(3) Costs based on reported income statement items.(4) Sustaining capex defined as the allocated capital expenditures to maintain existing operations that do not generate additional revenues.(5) Project capex defined as the allocated capital expenditures to expand current operations or development costs of new operations.

- -

859

677

830 782

569698

951837 843 849

- -

-

-

250

506

494445

354392 377 361

- -

-

-

369 104

150201

174 141 181298

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1Q11A 1Q11A 3Q11A 4Q11A 1Q12A 2Q12A 3Q12A 4Q12A 1Q13A 2Q13E 3Q13E 4Q13E

By-

Prod

uct C

osts

(US$

/oz

sold

)

Total Cash Costs Secondary Costs Project Capital Realized Price

Source: Company reports, Dundee Capital Market estimates


Upcoming Milestones and Potential Catalysts

PerseusPe 2Q13 Tengrela reserve updatePe 2Q13 Edikan reserve updatePe 2Q13 Edikan FY 2014 operating guidancePe 2Q13 Edikan optimization study results Pe 1H13 Cote d'Ivoire windfall tax resolutionPe 1H13 Tengrela board approval and updated capital costsPe 1H13 Cote d'Ivoire windfall tax resolutionPe 2014 Edikan 8 MMtpa processing expansion and debottlenecking Source: Company reports, Dundee Capital Markets

Comparison to peers Spot gold priced at US$1,360/oz as of May 17, 2013.Company Ticker Price

17-May-13Rating

(1)Target Price

Basic MktCap

(MM US$)

P/NAVat Spot

(2) (3) (4)

% NAV in Develop.

(5)

EV/EBITDA (CY)at Spot (6)

TAC (US$/oz)

(7) (8)

2013E 2014E 2013E 2014E 2013E 2014E

Agnico-Eagle Mines Ltd. AEM CN C$28.75 N $45.50 $4,834 $5,399 2.32x 16% 10.0x 9.8x -3% 0% 11.9x 10.6x $1,258 3.0%Alamos Gold Inc. AGI CN C$13.44 B $16.50 $1,667 $1,293 1.31x 34% 14.7x 21.7x 0% -7% 8.4x 12.5x $1,173 1.5%Dundee Precious Metals Inc. DPM CN C$4.21 NR N/A $599 $601 0.68x 16% 5.7x 4.9x -26% -16% 5.6x 4.3x $1,310 -Eldorado Gold Corp. ELD CN C$6.91 N $10.50 $4,803 $4,747 1.03x 47% 13.2x 14.6x -7% -12% 9.4x 9.8x $1,185 2.0%IAMGOLD Corp. IMG CN C$4.81 N $9.50 $1,762 $1,641 0.95x 49% 5.1x 4.8x -20% -8% 3.6x 3.5x $1,297 5.4%Perseus Mining Ltd. PRU CN C$1.06 B $1.50 $472 $434 1.63x 9% 8.5x 6.2x -6% -21% 5.2x 3.9x $1,280 -Randgold Resources Ltd. GOLD US US$71.47 B $100.00 $6,589 $6,353 1.51x 25% 14.3x 14.1x -3% -1% 12.3x 10.3x $1,268 0.7%Yamana Gold Inc. YRI CN C$10.71 N $17.00 $7,836 $8,364 1.87x 22% 12.4x 8.6x -3% 2% 10.1x 7.2x $1,313 2.5%

TOTAL AVERAGE 1.46x 11.2x 10.0x -5% -3% 9.3x 8.0x $1,258

(1) B - Buy, N - Neutral, S - Sell, NR - Not Rated, NC - Not Covered, R - Restricted. Refer to disclosures for more information(2) Discount rate varies by company. Generally 5% for gold assets, higher for base metal assets or high technical/political risk(3) NAVPS at spot calculated at spot gold prices, spot silver prices, and base metal forward curves. P/NAV adjusted at spot FX rates. (4) Average weighted according to market capitalization(5) Percent of NAV attributed to mining assets/investments that are not currently in production(6) Average weighted according to enterprise value(7) Adjusted free cash flow = operating cash flow before working capital changes, less capital spending and preferred dividends(8) Average weighted according to ounces of production. Total Acquisition Cost = Breakeven cost of acquisition per oz = (EV + LOM capital spending - Other Assets)/(LOM production) + LOM co-product total cash costs

2013E (CY) Dividend

Yield(%)

EnterpriseValue

(MM US$)

P/CF at Spot (CY)(4)

FCF Yield at Spot (CY) (6) (7)



Perseus Mining Ltd.: Forecasts at Dundee Price DeckRating BUY Basic Shares (MM) 458.0 Dundee Capital MarketsRisk High Diluted Shares (ITM / FD) (MM) 458.0 / 460.7 Josh Wolfson, CFATarget Price C$1.50 Basic Mkt Cap (US$MM) $637 416-350-5045Share Price C$1.43 Enterprise Value (US$MM) $599 [email protected]

OPERATING STATISTICS BALANCE SHEETYear-end Dec. 2011A 2012A 2013E 2014E 2015E A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015EConsol. Gold Production (koz) 44.8 195.2 243.6 275.8 385.3 Assets

Edikan 44.8 195.2 243.6 275.8 275.8 Cash 131.5 39.7 143.1 100.8 173.3 Sissingué - - - - 109.5 Other Current Assets 45.5 81.3 72.5 72.5 72.5

Equity Gold Production (koz) 40.3 175.6 219.3 248.2 351.6 Current Assets 177.0 121.0 215.6 173.4 245.8 Edikan 40.3 175.6 219.3 248.2 248.2 Non-current Assets 330.7 398.7 449.4 552.9 554.7 Sissingué - - - - 103.5 Total Assets 507.7 519.7 665.0 726.3 800.6

Cash Operating Costs (US$/oz) 599 609 772 777 743 LiabilitiesEdikan 599 609 772 777 812 Current Liabilities 100.0 93.3 135.6 155.6 95.6 Sissingué - - - - 577 Long Term Debt 42.9 - 60.0 - -

Total Cash Costs (Co-Prod) (US$/oz) 713 712 876 891 845 Other non-current Liabilities 47.3 38.7 27.2 23.3 16.1 Edikan 713 712 876 891 922 Total Liabilities 190.2 132.0 222.8 178.9 111.7 Sissingué - - - - 659 Total Shareholder Equity 317.6 387.6 442.2 547.4 688.8

GOLD RESERVES AND RESOURCES INCOME STATEMENTCategory 2007A 2008A 2009A 2010A 2011A A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015EProven and Probable Total Revenue - 291.8 357.7 439.6 657.3 Tonnes (MM) 0.0 0.0 49.9 49.9 86.5 % Gold 100% 100% 100% 100% 100%Grade (g/t) 0.0 0.0 1.2 1.2 1.3 % Silver 0% 0% 0% 0% 0%Oz (MM) 0.0 0.0 1.9 1.9 3.5 % Copper 0% 0% 0% 0% 0%Assumed reserve additions (MMoz) 1.0 % Other 0% 0% 0% 0% 0%LOM Production (Mmoz) 3.9 Operating Costs - 123.0 216.9 242.3 343.6 Measured, Indicated, & Inferred (excl.) G&A 8.6 17.2 23.9 22.0 28.9 Oz (MM) 1.2 4.3 2.9 2.9 1.0 Exploration - - - - 19.3 Reserve and Resource Statistics Depreciation 0.3 20.2 25.3 30.6 62.9 Reserves/sh (x1,000) 0.0 0.0 7.1 4.9 8.2 Other 3.3 3.9 1.5 - - Reserves & resources/sh (x1,000) 10.0 25.9 17.9 12.2 10.6 EBITDA (11.9) 147.6 115.5 175.3 265.5 Current Per Ounce Statistics EBIT (12.1) 127.4 90.2 144.7 202.6 Adj. EV / LOM Prod (US$/oz) 303 EV/Resource (US$/oz) 76 Net Interest Expense (1.3) 3.0 2.2 3.4 1.1 Total Acquisition Cost (US$/oz) 1323 EV/Reserve (US$/oz) 173 Unusual/Other Items 9.2 (18.4) (5.5) (6.8) (2.2)

EBT (4.2) 112.0 86.9 141.3 201.5 NET ASSET VALUE (A$) Taxes (8.9) 40.3 36.0 49.2 44.7 Asset NAV /Share % NAV % Resrv Minority Interest 0.6 8.8 7.8 11.9 15.3 Edikan (90.0%), Ghana 714 1.48 85% 84% Other 0.2 (0.5) - - - Sissingué (85.0%), Cote d'Ivoire 121 0.25 14% 16% Net Income (Reported) 4.4 62.5 43.0 80.2 141.5 Gold Exploration Properties 29 0.06 3% 0% Net Income (Adjusted) (17.3) 71.8 50.9 80.2 141.5 Gold Hedge Book -37 -0.08 -4% 0%Investments 12 0.02 1% 0% EPS (Reported) ($/sh) 0.01 0.14 0.09 0.17 0.29 Other 0 0.00 0% 0% EPS (Adjusted) ($/sh) (0.04) 0.16 0.11 0.17 0.29 Total Mining and Investment Assets 838 1.74 100% 100% Average shares (MM) 428.9 457.7 458.0 473.6 483.0 Balance Sheet Items & Expenditures -182 -0.38Total 656 1.36 CASH FLOW STATEMENT

A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015ENAV BY ASSET GOLD RESERVES BY ASSET Net Income (Reported) 4.4 62.5 43.0 80.2 141.5

Depreciation 0.3 20.2 25.3 30.6 62.9 Other (18.2) 28.0 1.6 8.2 (7.2) Operating Cash Flow (13.6) 110.7 69.9 118.9 197.2 Operating Cash Flow ($/sh) (0.0) 0.2 0.2 0.3 0.4 Working Capital Changes 8.7 (30.1) 17.5 - - Cash from Operations (4.9) 80.6 87.4 118.9 197.2 Capital Expenditure (165.1) (82.7) (83.2) (173.9) (64.8) Net Investments 37.9 0.1 - 27.7 - Investing Cash Flow (127.2) (82.7) (83.2) (146.1) (64.8) Common Share Dividends - - - - - Debt Additions 80.2 - 100.0 - - Debt Repayments - 39.5 - (40.0) (60.0) Equity Financing - - - 25.0 - Other Net Financing 89.6 (119.1) (0.1) - - Financing Cash Flow 169.8 (79.6) 99.9 (15.0) (60.0) Foreign Exchange 1.8 (7.0) (0.6) - - Change In Cash 39.5 (88.6) 103.4 (42.2) 72.4 Cash Balance 131.5 39.7 143.1 100.8 173.3

GOLD PRODUCTION PROFILE Free Cash Flow (98.5) 67.5 86.7 (94.9) 72.4 Adj. Free Cash Flow (1) (170.0) (2.1) 4.1 (54.9) 132.4

VALUATION DATA2011A 2012A 2013E 2014E 2015E

P/E NM 9.1x 12.9x 8.4x 4.9xP/CF NM 5.9x 9.4x 5.7x 3.5xEV/EBITDA NM 4.2x 5.3x 3.5x 2.3xAdj. FCF Yield (1) (29%) 5% (2%) (9%) 22%

INPUT PRICES2011A 2012A 2013E 2014E 2015E

Key CommoditiesGold (US$/oz) 1,570 1,668 1,625 1,691 1,625 Silver (US$/oz) 35.24 31.13 30.02 30.50 29.50 Copper (US$/lb) 4.00 3.61 3.46 3.50 3.75 Zinc (US$/lb) 0.99 0.88 0.92 1.00 1.10 Oil (US$/bbl) - - - - - Key CurrenciesCAD/USD 1.01 1.00 0.97 0.95 0.96 AUD/USD 1.03 1.04 1.03 1.01 0.95 EUR/USD 1.39 1.29 1.29 1.25 1.25

(1) Adj FCF = Operating Cash Flow - CapexSource: Company reports, Bloomberg, Dundee Capital Markets estimates

84%

16%

EdikanSissingué

85%

14%

3%-4%1%0%

EdikanSissinguéGold Exploration PropertiesGold Hedge BookInvestments

-

300

600

900

1,200

0

100

200

300

400

2011A 2013E 2015E 2017E 2019E 2021E

Tota

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Equi

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Edikan Sissingué Total Cash Costs (Co-product)


Perseus Mining Ltd.: Forecasts at Spot GoldRating BUY Basic Shares (MM) 458.0 Dundee Capital MarketsRisk High Diluted Shares (ITM / FD) (MM) 458.0 / 460.7 Josh Wolfson, CFATarget Price C$1.50 Basic Mkt Cap (US$MM) $472 416-350-5045Share Price C$1.06 Enterprise Value (US$MM) $438 [email protected]

OPERATING STATISTICS BALANCE SHEETYear-end Dec. 2011A 2012A 2013E 2014E 2015E A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015EConsol. Gold Production (koz) 44.8 195.2 243.6 275.8 385.3 Assets

Edikan 44.8 195.2 243.6 275.8 275.8 Cash 131.5 39.7 125.7 40.0 69.9 Sissingué - - - - 109.5 Other Current Assets 45.5 81.3 72.5 72.5 72.5

Equity Gold Production (koz) 40.3 175.6 219.3 248.2 351.6 Current Assets 177.0 121.0 198.3 112.5 142.4 Edikan 40.3 175.6 219.3 248.2 248.2 Non-current Assets 330.7 398.7 452.4 567.1 564.3 Sissingué - - - - 103.5 Total Assets 507.7 519.7 650.7 679.5 706.7

Cash Operating Costs (US$/oz) 599 609 772 777 743 LiabilitiesEdikan 599 609 772 777 812 Current Liabilities 100.0 93.3 135.6 155.6 95.6 Sissingué - - - - 577 Long Term Debt 42.9 - 60.0 - -

Total Cash Costs (Co-Prod) (US$/oz) 713 712 863 869 828 Other non-current Liabilities 47.3 38.7 28.2 27.1 31.2 Edikan 713 712 863 869 904 Total Liabilities 190.2 132.0 223.8 182.7 126.8 Sissingué - - - - 645 Total Shareholder Equity 317.6 387.6 426.9 496.9 579.9

GOLD RESERVES AND RESOURCES INCOME STATEMENTCategory 2007A 2008A 2009A 2010A 2011A A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015EProven and Probable Total Revenue - 291.8 324.1 371.5 568.3 Tonnes (MM) 0.0 0.0 49.9 49.9 86.5 % Gold 100% 100% 100% 100% 100%Grade (g/t) 0.0 0.0 1.2 1.2 1.3 % Silver 0% 0% 0% 0% 0%Oz (MM) 0.0 0.0 1.9 1.9 3.5 % Copper 0% 0% 0% 0% 0%Assumed reserve additions (MMoz) 1.0 % Other 0% 0% 0% 0% 0%LOM Production (Mmoz) 3.9 Operating Costs - 123.0 213.6 236.2 336.9 Measured, Indicated, & Inferred (excl.) G&A 8.6 17.2 23.9 22.0 28.9 Oz (MM) 1.2 4.3 2.9 2.9 1.0 Exploration - - - - 19.3 Reserve and Resource Statistics Depreciation 0.3 20.2 25.3 30.6 62.9 Reserves/sh (x1,000) 0.0 0.0 7.1 4.9 8.2 Other 3.3 3.9 1.5 - - Reserves & resources/sh (x1,000) 10.0 25.9 17.9 12.2 10.6 EBITDA (11.9) 147.6 85.1 113.3 183.2 Current Per Ounce Statistics EBIT (12.1) 127.4 59.8 82.7 120.3 Adj. EV / LOM Prod (US$/oz) 262 EV/Resource (US$/oz) 56 Net Interest Expense (1.3) 3.0 2.2 3.6 1.8 Total Acquisition Cost (US$/oz) 1268 EV/Reserve (US$/oz) 127 Unusual/Other Items 9.2 (18.4) (5.5) (7.2) (3.7)

EBT (4.2) 112.0 56.5 79.1 118.4 NET ASSET VALUE (A$) Taxes (8.9) 40.3 23.8 27.7 26.3 Asset NAV /Share % NAV % Resrv Minority Interest 0.6 8.8 4.9 6.5 9.1 Edikan (90.0%), Ghana 403 0.84 81% 84% Other 0.2 (0.5) - - - Sissingué (85.0%), Cote d'Ivoire 40 0.08 8% 16% Net Income (Reported) 4.4 62.5 27.7 44.9 83.1 Gold Exploration Properties 29 0.06 6% 0% Net Income (Adjusted) (17.3) 71.8 35.6 44.9 83.1 Gold Hedge Book 16 0.03 3% 0%Investments 12 0.02 2% 0% EPS (Reported) ($/sh) 0.01 0.14 0.06 0.10 0.17 Other 0 0.00 0% 0% EPS (Adjusted) ($/sh) (0.04) 0.16 0.08 0.10 0.17 Total Mining and Investment Assets 500 1.04 100% 100% Average shares (MM) 428.9 457.7 458.0 473.5 482.8 Balance Sheet Items & Expenditures -186 -0.39Total 314 0.65 CASH FLOW STATEMENT

A$MM, Year-end Dec. 2011A 2012A 2013E 2014E 2015ENAV BY ASSET GOLD RESERVES BY ASSET Net Income (Reported) 4.4 62.5 27.7 44.9 83.1

Depreciation 0.3 20.2 25.3 30.6 62.9 Other (18.2) 28.0 4.0 5.5 8.7 Operating Cash Flow (13.6) 110.7 57.0 81.0 154.7 Operating Cash Flow ($/sh) (0.0) 0.2 0.1 0.2 0.3 Working Capital Changes 8.7 (30.1) 13.0 - - Cash from Operations (4.9) 80.6 70.0 81.0 154.7 Capital Expenditure (165.1) (82.7) (83.2) (173.9) (64.8) Net Investments 37.9 0.1 - 22.1 - Investing Cash Flow (127.2) (82.7) (83.2) (151.8) (64.8) Common Share Dividends - - - - - Debt Additions 80.2 - 100.0 - - Debt Repayments - 39.5 - (40.0) (60.0) Equity Financing - - - 25.0 - Other Net Financing 89.6 (119.1) (0.1) - - Financing Cash Flow 169.8 (79.6) 99.9 (15.0) (60.0) Foreign Exchange 1.8 (7.0) (0.6) - - Change In Cash 39.5 (88.6) 86.1 (85.8) 29.9 Cash Balance 131.5 39.7 125.7 40.0 69.9

GOLD PRODUCTION PROFILE Free Cash Flow (98.5) 67.5 73.8 (132.8) 29.9 Adj. Free Cash Flow (1) (170.0) (2.1) (13.2) (92.8) 89.9

VALUATION DATA2011A 2012A 2013E 2014E 2015E

P/E NM 6.8x 13.6x 11.2x 6.2xP/CF NM 4.4x 8.5x 6.2x 3.3xEV/EBITDA NM 3.0x 5.3x 4.0x 2.5xAdj. FCF Yield (1) (40%) 6% (6%) (21%) 20%

INPUT PRICES2011A 2012A 2013E 2014E 2015E

Key CommoditiesGold (US$/oz) 1,570 1,668 1,360 1,360 1,360 Silver (US$/oz) 35.24 31.13 22.25 22.25 22.25 Copper (US$/lb) 4.00 3.61 3.38 3.33 3.37 Zinc (US$/lb) 0.99 0.88 0.86 0.86 0.89 Oil (US$/bbl) - - - - - Key CurrenciesCAD/USD 1.01 1.00 0.97 0.95 0.96 AUD/USD 1.03 1.04 1.03 1.01 0.95 EUR/USD 1.39 1.29 1.29 1.25 1.25

(1) Adj FCF = Operating Cash Flow - CapexSource: Company reports, Bloomberg, Dundee Capital Markets estimates

84%

16%

EdikanSissingué

81%

8%6%

3%2%0%

EdikanSissinguéGold Exploration PropertiesGold Hedge BookInvestments

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300

600

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Perseus Mining Ltd.Net Asset Valuation at Spot Gold (A$)Shares (FD, FF, ITM) (MM) 482.79 FF, FD Market Capitalization ($MM) $512

NAV at Various Discount Rates

($MM) (/Share) ($MM) (/Share) ($MM) (/Share) ($MM) (/Share)Gold AssetsEdikan (90.0%), Ghana 5% $403.4 $0.84 $572.4 $1.19 $403.4 $0.84 $302.1 $0.63Sissingué (85.0%), Cote d'Ivoire 5% $40.5 $0.08 $64.8 $0.13 $40.5 $0.08 $21.8 $0.05Gold Exploration Properties $28.7 $0.06 $28.7 $0.06 $28.7 $0.06 $28.7 $0.06Gold Hedge Book 5% $15.6 $0.03 $17.6 $0.04 $15.6 $0.03 $13.9 $0.03Total Gold Assets $488.2 $1.01 $683.6 $1.42 $488.2 $1.01 $366.6 $0.76

Other AssetsInvestments $11.6 $0.02 $11.6 $0.02 $11.6 $0.02 $11.6 $0.02Total Other Assets $11.6 $0.02 $11.6 $0.02 $11.6 $0.02 $11.6 $0.02

Balance Sheet & ExpensesBasic Working Capital $12.3 $0.03 $12.3 $0.03 $12.3 $0.03 $12.3 $0.03Value of ITM Instruments $0.0 $0.00 $0.0 $0.00 $0.0 $0.00 $0.0 $0.00Estimated Working Capital Additions $125.0 $0.26 $125.0 $0.26 $125.0 $0.26 $125.0 $0.26Long-term Debt $0.0 $0.00 $0.0 $0.00 $0.0 $0.00 $0.0 $0.00Estimated Debt Additions ($100.0) -$0.21 ($100.0) -$0.21 ($100.0) -$0.21 ($100.0) -$0.21General & Administrative Expense 5% ($157.4) -$0.33 ($218.3) -$0.45 ($157.4) -$0.33 ($119.9) -$0.25Exploration Expense 5% ($66.1) -$0.14 ($86.3) -$0.18 ($66.1) -$0.14 ($51.9) -$0.11Net Financial Assets ($186.2) -$0.39 ($267.2) -$0.55 ($186.2) -$0.39 ($134.5) -$0.28

Net Asset Value (A$) $313.6 $0.65 $428.1 $0.89 $313.6 $0.65 $243.7 $0.50Share Price (C$) $1.06 $1.06 $1.06 $1.06NAV Multiple (P/NAV) 1.63x 1.20x 1.63x 2.10x

Commodity Prices 2013E 2014E 2015E Long TermGold Price ($/oz) 1,360 1,360 1360 1,360

Target Setting NAVDiscount

Rate5% 10%0%

Financial Forecasts at Spot Gold (MM A$)Cash and Debt Operating Cash Flow and Capital Spending

Changes in Debt and Equity Free Cash Flow and Common Share Dividends


(200)

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2008A 2010A 2012A 2014E 2016E 2018E

Cash Short Term Debt Long Term Debt Net Cash

(80)

(60)

(40)

(20)

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120

2008A 2010A 2012A 2014E 2016E 2018E

Equity Additions Debt Borrowing Debt Repayment

(200)

(100)

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2008A 2010A 2012A 2014E 2016E 2018E

Adjusted Free Cash Flow (OCF - Capex) Common Share Dividends

(200)

(100)

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100

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2008A 2010A 2012A 2014E 2016E 2018E

Operating Cash Flow (Before Working Capital) Capex


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Presentations do not include disclosures that are specific to analysts and specific to companies under coverage. Please refer to formal published research reports for company specific disclosures and analyst specific disclosures for companies under coverage. Please refer to formal published research reports for valuation methodologies used in determining target prices for companies under coverage. Ideas of Interest: Dundee Capital Markets from time to time publishes reports on securities for which it does not and may not choose to provide continuous research coverage. Such reports are published as Ideas of Interest. IIROC Rule 3400 Disclosures and/or FSA COBS 12.4.10 Disclosures: Disclosures required under Rule 3400 for sector research reports covering six or more issuers can be found on the Dundee Capital Markets website at www.dundeecapitalmarkets.com in the Research Section. Other Services means the participation of Dundee in any institutional non-brokered private placement exceeding $5 million. A Research Analyst/Associate involved in the preparation of this research report has visited certain material operations of the following issuer(s): Perseus Mining Ltd. Josh Wolfson visited Perseus’ Edikan Gold Mine in Ghana. The Research Analyst/Associate and/or Dundee Capital Markets has been partially reimbursed for expenses or partial expenses were paid for by the following issuer(s) for travel to material operations of the issuer(s): Perseus Mining Ltd.


Explanation of Recommendations and Risk Ratings Dundee target: represents the price target as required under IIROC Rule 3400. Valuation methodologies used in determining the price target(s) for the issuer(s) mentioned in this research report are contained in current and/or prior research. Dundee target N/A: a price target and/or NAV is not available if the analyst deems there are limited financial metrics upon which to base a reasonable valuation. Recommendations: BUY: Total returns expected to be materially better than the overall market with higher return expectations needed for more risky securities. NEUTRAL: Total returns expected to be in line with the overall market. SELL: Total returns expected to be materially lower than the overall market. TENDER: The analyst recommends tendering shares to a formal tender offer. UNDER REVIEW: The analyst will place the rating and/or target price Under Review when there is a significant material event with further information pending; and/or when the analyst determines it is necessary to await adequate information that could potentially lead to a re-evaluation of the rating, target price or forecast; and/or when coverage of a particular security is transferred from one analyst to another to give the new analyst time to reconfirm the rating, target price or forecast. *Risk Ratings: risk assessment is defined as Medium, High, Speculative or Venture. Medium: securities with reasonable liquidity and volatility similar to the market. High: securities with poor liquidity or high volatility. Speculative: where the company's business and/or financial risk is high and is difficult to value. Venture: an early stage company where the business and/or financial risk is high, and there are limited financial metrics upon which to base a reasonable valuation. Investors should not deem the risk ratings to be a comprehensive account of all of the risks of a security. Investors are directed to read Dundee Capital Markets. Research reports that contain a discussion of risks which is not meant to be a comprehensive account of all the risks. Investors are directed to read issuer filings which contain a discussion of risk factors specific to the company’s business. Medium and High Risk Ratings Methodology: Medium and High risk ratings are derived using a predetermined methodology based on liquidity and volatility. Analysts will have the discretion to raise but not lower the risk rating if it is deemed a higher risk rating is warranted. Risk in relation to forecasted price volatility is only one method of assessing the risk of a security and actual risk ratings could differ. Securities with poor liquidity or high volatility are considered to be High risk. Liquidity and volatility are measured using the following methodology: a) Price Test: All securities with a price <= $3.00 per share are considered high risk for the purpose of this test. b) Liquidity Test: This is a two-tiered calculation that looks at the market capitalization and trading volumes of a company. Smaller capitalization stocks (<$300MM) are assumed to have less liquidity, and are, therefore, more subject to price volatility. In order to avoid discriminating against smaller cap equities that have higher trading volumes, the risk rating will consider 12 month average trading volumes and if a company has traded >70% of its total shares outstanding it will be considered a liquid stock for the purpose of this test. c) Volatility Test: In this two step process, a stock’s volatility and beta are compared against the diversified equity benchmark. Canadian equities are compared against the TSX while U.S. equities are compared against the S&P 500. Generally, if the volatility of a stock is 20% greater than its benchmark and the beta of the stock is higher than its sector beta, then the security will be considered a high risk security. Otherwise, the security will be deemed to be a medium risk security. Periodically, the equity risk ratings will be compared to downside risk metrics such as Value at Risk and Semi-Variance and appropriate adjustments may be made. All models used for assessing risk incorporate some element of subjectivity. SECURITY ABBREVIATIONS: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS (subordinate voting shares). Dundee Capital Markets Equity Research Ratings

86%

13%

1%

31%

22%

0%0%

11%

22%

33%

44%

55%

66%

77%

88%

99%

Buy Neutral Sell

% of companies covered by Dundee Capital Markets in each rating category

% of companies within each rating category for which Dundee Capital Markets has provided investment banking services for a fee in the past 12 months.

As at March 31, 2013 Source: Dundee Capital Market

Perseus Mining Ltd. - Swiss Resource Capital AG · Perseus shares closed at 1.63x our P/NAV at spot...

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Transcript of Perseus Mining Ltd. - Swiss Resource Capital AG · Perseus shares closed at 1.63x our P/NAV at spot...