Ann: March Quarterly Activities Report, page-27

UBS Global Research
16 April 2018
Perseus Mining Limited
Can the market match PRU's confidence in Yaouré?

A funding plan for Yaouré this quarter & a development decision by year end
Perseus appears confident in Sissingué & Edikan and is pushing ahead with Yaouré, its
next mine development in Côte d’Ivoire. PRU has applied for an Exploitation permit,
which will then follow with a Mining Convention that looks to guarantee fiscal terms.
PRU has also finalised an internal evaluation of funding alternatives with a decision
expected this quarter. Details are unknown, but we take comfort that PRU is taking into
account "risk of execution" in its evaluation. We think the market is weighing up a
debt & equity mix, as capex of US$260m is met with FCF over the next 2 years of
A$170m, leaving a reasonable shortfall. We think gold investors preference operational
stability before growth, and PRU's investors could get jittery towards Yaouré advancing
as Sissingué is still yet to prove itself and as confidence in Edikan has only just returned.
But with a development decision not until year end, Sissingué has time to prove itself.
PRU looks good value at 0.8x P/NPV vs the sector at 1.2x, but if the market cannot find
comfort in the funding strategy or timing, this could lead to a stalled re-rating.

A soft quarter, but guidance unchanged; net debt lifts A$10m to A$51m q/q
Edikan reported a soft quarterly result with production down 4% q/q, costs were flat.
MQ18: 54.6koz vs 61.4koz UBS-e, AISC US$1,104/oz vs UBS-e US$985/oz, total costs
US$60.3m vs UBS-e US$60.5m. The soft result was led by grade, with 1.14g/t milled vs
1.21g/t UBS-e. Perseus notes that selection of the highest grade was not a priority
during the quarter as other factors, such as ore hardness, impacted blending between
the 4 pits. Sissingué declared commercial production on April 1 and reported MQ
output of 9.4koz vs UBS-e 12koz, no cost details yet. While output from Edikan was
soft, we take comfort that with 2.5 months left of the financial year, guidance of
268koz at US$1,025/oz AISC is unchanged, pointing to a strong June-Q.

Buy – Operational discipline should lead to a 1.0x P/NPV
In 2018 we continue to expect operational stability at Edikan & Sissingué. Ongoing
operational discipline, which translates into a building cash position, is needed for the
market to pay up for Perseus. We think this is a position that could be earned in 2018.

Valuation: A$0.60/sh (DCF, 12% discount rate)
We update for the quarterly result. Our target price is set at 0.9x P/NPV.

Earnings change summary
We update for the quarterly result.
We think the market is not pricing in a near term go-ahead at Yaouré, instead we
think the market is perhaps considering that it could be delayed in favor of a go
slow approach to build up cash on the balance sheet. Subsequently, we do not
think the market is pricing in a capital raising.
Perseus is unfunded for Yaouré, with capex of ~US$260m and FCF from Edikan
and Sissingué over the next years of ~A$170m (UBS-e), this leaves a sizeable short
fall for a funding package to fill.