Edikan mine starts commercial production

Perseus Mining Limited has begun commercial production at its newly acquired Edikan Gold Mine at Ayanfuri in the Ashanti Region, which it hopes will maximise the company’s earning position.

Perseus has planned an initial production rate of between 220,000 to 240,000 ounces of gold per year at an estimated average cash cost of US$650 per oz. The company aims to increase gold production to 400,000 ounces of gold per annum from 2013.

The Managing Director of Perseus, Mark Calderwood in releasing its half year results ending December 2011, said the successful commercialisation of the Edikan Gold Mine, which began gold production in August last year, will now impact greatly on the company’s financial results.

“During the six months to 31 December 2011, the Edikan Gold Mine achieved our planned operational targets and as a consequence we were able to declare “commercial production” with effect from 1st January 2012. This means that future announcements of financial results by Perseus will include disclosure of not only production statistics but also relevant information on costs and earnings from Edikan.

“In terms of guidance, after the expected ramp-up of production at Edikan in the first-half of current year 2012, we expect to be producing gold on target during the second half of 2012. Second-half gold production rates should be in the order of 135,000 to 145,000 ounces at an average cost of US$550 per ounce, which compares favourably with our industry peer group,” he said.

Production ramp-up period for the Edikan Gold Mine, formerly Central Ashanti Gold project, has been longer than anticipated as a result of a number of “teething” problems encountered during the commissioning period, which include water pumping limitations and related issues; fine-tuning of equipment settings, procedures and maintenance programmes; and training and management of the locally recruited and relatively inexperienced workforce.

After 19 weeks of opening the Edikan Gold Mine, Perseus’s management formed the view that the operation is performing substantially as management intended, and beginning this year the Company declared that work on the mine was complete and “Commercial Production” status had been achieved.

As a consequence, the Company ceased capitalising expenditure associated with the Edikan Gold Mine on 31 December 2011.

Consequently, Perseus is now in a position to provide guidance as to likely production performance at the Edikan Gold Mine during the balance of the calendar year 2012. Gold production for the calendar year 2012 is forecast to be in the range of 220,000 to 240,000 ounces at an estimated average cash cost of US$650 per oz.

According to Perseus’ balance sheet, the Group’s net assets increased during the period by US$99.217million to US$311.601million.

Cash and cash equivalents increased by US$34.993million to US$131.455million. In addition, the Group held gold bullion valued at US$5.117million as at 31 December 2011.

The Perseus Mining Group, which is considered one of the aggressive mining exploration firms in West-Africa, owns a 90% interest in the Edikan Gold Mine while the remaining 10% interest in the Mine is a free carried interest owned by the Ghanaian government.

Perseus Mining, which is considered one of the aggressive mining explorative firms in West-Africa, sees the Edikan Mine as one of the two key projects it has embarked on -- the other being the yet-to-be producing Tengrela Gold Project in Côte d’Ivoire.

According to the company’s half year balance sheet, during the period, the Group spent $17.081 million on exploration programmes in Ghana and Côte d'Ivoire aimed at increasing its inventory of Mineral Reserves and Resources.

Perseus in July 2009 completed a definitive feasibility study on developing a mine and associated treatment facility to recover gold from tenements located near Ayanfuri in the country. Based on the positive outcome of that definitive feasibility study, construction of the Edikan Gold Mine and associated processing facility commenced in June 2010.

The first gold pour and the first revenue received from the Mine took place during the period of August 2011 and September 2011 respectively.
During the period, a total of 6,553,000 bcms of material was mined from the Abnabna, AF Gap and Fobinso open pits -- including 3,028,000 tonnes of ore grading 1.02 g/t plus 5,280,000 bcms of waste.

Overall gold recovery of 79.4% resulted in the recovery of 45,832 ounces of gold, of which 43,736 ounces of gold were poured. Of this amount, a total of 35,774 ounces of gold was sold at a weighted average price of US$1,666 per ounce.

Meanwhile, Perseus in its half year results has announced a net profit after tax of US$13.68million for the six months ended 31 December 2011, representing a significant increase relative to the loss of US$42.426 million recorded in the corresponding period in 2010 when a one-off hedge loss was recorded following the adoption of hedge accounting.

The result has particular significance in that it represents Perseus’s final period of reporting as a pure exploration and development company. Future financial results by Perseus will include the revenue and operating costs associated with the Edikan Gold Mine.

Mr. Calderwood explained that profit earnings of the company for the period exclude either the operating costs incurred or the revenue earned by the Edikan mine, as “commercial production” was only declared at the beginning of this year.

“While it’s pleasing to be able to report a net profit for the first-half of fiscal year 2012, we do note that the profit earned in the reporting period doesn’t include the revenue or the operating costs associated with the Edikan Gold Mine that were capitalised during that period,” he said.