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DAILY NEWS Jan 3, 2013 3:43 PM - 0 comments

Perseus disappoints on production

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Perseus Mining (PRU-T) warned the market that gold production from its Edikan gold mine in Ghana would be less than originally forecasted, but it now says the number will be even lower than its previous downward revision.

The company says gold output for Edikan will likely come in at just 49,000 oz. It had previously said production would be 5-10% below the lower end of its 65,000 to 70,000 oz. guidance range, which using the most conservative numbers would have put production at 58,500 oz. The company's initial production guidance came with estimated cash costs of US$575 per oz.

When Perseus originally adjusted its guidance, it blamed a failure of the coupling on the drive shaft of the mine’s primary crusher. The situation led to lower output until it could be fixed. But the maintenance on the crusher took longer than expected as a liner change and other remedial work also needed to get done.

Exasperating the problem was the fact that during that stoppage there wasn’t enough crushed material on the coarse ore stockpile. That meant it had to mill a higher proportion of oxide ore which led to lower recoveries.

On the brighter side of things, Perseus says the crusher was re-started on Dec. 21 and reached near-record rates. It will provide an update on the status of operations when it releases its quarterly operating results in mid-January.

“After an impressive initial ramp-up Edikan has been beset by crusher mechanical issues requiring operational consistency to be demonstrated and confidence in delivery to be re-established,” Andrew Breichmanas, an analyst with BMO Capital Markets wrote in a research note.

Breichmanas has Perseus rated as ‘outperform’ with a target price of A$3.25.

Perseus expects to produce 127,000 to 143,000 oz. of gold over the first half of 2013 at an operating cost of US$625 per oz.

In Toronto on January 3 the company’s shares were off 2¢ to $2.42 on 152,000 shares traded.

Edikan has measured resources of 49.5 million tonnes grading 1.5 grams gold for 2.4 million oz.; indicated resources of 38.2 million tonnes grading 1.3 grams for 1.8 million oz.; and inferred resource of 24.9 million tonnes grading 1.4 grams for 1.11 million oz. of gold.

The open pit mine sits in the Ashanti gold belt in southern Ghana, roughly 60-km from the 60-million oz. Obuasi gold deposit.

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Perseus Mining Limited

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