Production start-up at ASX-listed Perseus Mining’s Côte d’Ivoire-based Sissingué mine in Q1, 2018 will mark the start of the company’s transition from a single gold mine operator into a mid-tier, multi-mine, multi-jurisdictional mining house.
The mine represents the start of a significant increase in gold production as it financially positions Perseus Mining to move its third project, Yaouré into full-scale construction, CEO Jeff Quartermaine tells Laura Cornish.
Perseus Mining has traveled a somewhat arduous road since it started producing gold from its Ghana-based Edikan gold mine in 2012.
But now, five years later Perseus Mining has overcome its operational challenges and is on the brink of elevating its gold status to a new level.
After an intensive year of construction the Sissingué mine, in which the government owns a 10% stake, is on track to produce its first gold early in 2018 which will add another 70 000 ozpa of gold to the company’s production profile.
In combination with Edikan, the company’s total production will climb to just below 300 000 ozpa.
At these volumes Perseus Mining will be well on its way to achieving its ultimate goal, producing 500 000 ozpa at an all-in-sustaining-cost of around US$800/oz across three operating mines in 2020.
“At that point we will generate huge cash flow from the business if the gold price stays around the current $1 250/oz mark,” says Quartermaine.
“Our future looks bright. The performance of the company and its objectives are not based on fiction and open promises. It is based on assets we own and JORC-compliant ore reserves that have been properly delineated. We own these projects and are in the process of executing their delivery. We have the team, we have the know-how and financial capacity to fulfill our goals and are steadily and progressively ticking the boxes to transform into multi gold mine producer.”
Climbing the golden ladder
Construction at the low cost $116 million Sissingué project, situated in northern Cote d’Ivoire, is advancing rapidly. The board of Perseus Mining gave the ‘go-ahead’ in June 2016 and first ground was broken in August.
It was approximately 85% complete in mid-November and remains on track for first gold pour early in the New Year.
The project is in fact on budget and slightly ahead of schedule and thus far has an excellent safety record with only one lost time injury to date after working more than a million and a half man hours.
“Grade control drilling commenced in early September, mining commenced in November and cold commissioning start-up is due to start in December. Our ramp-up period is also expected to be a quick and streamlined process as we expect to declare commercial production by the end of quarter 1 after which we’ll start generating healthy cash flows,” Quartermaine outlines.
The CEO is confident in his timeline commitments, and cites working with Lycopodium as one of the key reasons for this. “Lycopodium is a leading engineering company with an excellent track record of outstanding successes in West Africa.”
Because the 7 MW diesel-fired power station was commissioned in November to provide commissioning power requirements, there are no anticipated hurdles anticipated moving forward.
Sissingué will produce about 80 000 oz in 2018 but will average 70 000 ozpa over its lifespan. The mine’s profile has been designed to follow the grade which will equate to 2.1 g/t over its five and a half year lifespan.
The process plant follows a conventional flow sheet of crushing, grinding and carbon-in-leach (CIL). Material from the main Sissingué pit will feed the plant initially and will be supplemented by the nearby Belé deposit shortly thereafter.
“We have been actively involved in a major recruitment drive over the past months. We want our full team available on site on day one. To ensure a seamless process we will ensure they are completely up to speed on the project beforehand.”
Perseus Mining has also appointed a person as general manager of Sissingué who Quartermaine describes as a “first class general manager who is very experienced in new project start-ups. Merlin Thomas is responsible for motivating the team and establishing a positive culture amongst the workforce. He has been heavily involved in the recruitment process.”
Perseus Mining will directly employ about 200 personnel for the project, which will largely constitute Ivorian residents – as many as possible from nearby communities. Contractors will also employ a lot more Ivorians to perform their work.
Mali-headquartered contractor Société de Forage et de Travaux Public – Mining SA (SFTP) will conduct all mining activities on site. The company is an experienced mining contractor that currently provides contract mining services to Newcrest Mining’s Bonikro gold mine and Randgold Resources’ Tongon gold mine, both located in Côte d’Ivoire.
SFTP was also contracted by Perseus Mining to carry out the bulk earthworks associated with the construction of Sissingué’s tailings storage facility, completing this task on time and on budget.
Realising Sissingué’s full potential
While construction approaches the finish line, this has not been the only focus on site. “Our immediate priority moving through 2018 is extending the mine’s lifespan.” The Perseus Mining exploration team has in fact spent the last six months of 2017 assessing data to better evaluate opportunities to achieve this.
“We have a series of targets to look at and will seek board approval to commit to a drilling programme with the intention of incrementally adding to our reserve base as we identify satellite deposits. I aim to double the mine life from five years to 10 years and take advantage of the excellent work that has been done on this project. I am encouraged by the prospects we have identified and I believe we will be able to extract greater value from the project,” Quartermaine highlights.
Not only has the build-up towards gold production at Sissingué enabled Perseus Mining to accumulate a wealth of knowledge about operating in Cote d’Ivoire, which has different legal structures and methodologies to Ghana, it has enabled the company to feel comfortable in the processes required to operate successfully, including logistics, port operations, community contribution, etc.
This positions the company to bring its third asset Yaouré (also situated in Cote d’Ivoire) to account.
“We have built a relationship with the government and built capacity within our own team which we will transfer to Yaouré when the time comes. Naturally, this de-risks the Yaouré development and confirms to our shareholders and potential investors that we have the ability to deliver a successfully built a mine in the country.”
The golden star
Building and expanding Sissingué is not Perseus’s only priority. Moving Yaouré into construction as quickly as possible is another primary objective at present. The project is located in a rural area on the southern edge of Lake Kossou, 35 km north-west of the capital Yamoussoukro and 25 km east-north-east of the city of Bouaflé in central Côte d’Ivoire.
On 3 November the company announced the results of a definitive feasibility study (DFS). “The project we’ve designed is similar or perhaps marginally better than the project envisaged when due diligence was conducted prior to bringing the project into the portfolio via the acquisition of Amara,” Quartermaine notes.
Yaouré is a financially robust project at today’s +-$1 250/oz gold price. The study confirms a 27% IRR after tax and a 32 month payback period.
It is also “technically robust” and has been designed to feed the plant at a ROM rate of 3 Mtpa from which it will average 215 000 ozpa and 2.3 g/t for an eight and a half year lifespan. The grade and production rate will decline slightly after the first five years. Delivering gold at around $735/oz – the project will also generate significant cash flow.
The total development cost has been forecast at $263 million, including $11 million of pre-stripping costs. “We are particularly excited about this project because not only is the capital cost realistic, we will have the ability to largely finance the project from our own cash flow.”
The next step in the way forward for the project is to finalise all documentation associated with the DFS and NI 43-101 technical report. This work is expected to be complete by the end of December 2017. Once documentation is complete, an application will be made to the Minister for Industry and Mines in Côte d’Ivoire for the granting of an exploitation permit for the development of the project.
In parallel, a mining convention will be negotiated with the Ivorian government setting out the legal framework for development of the project and including a guarantee of fiscal stability from the Ivorian government for the life of the mine.
In parallel to the above process, Perseus Mining will undertake the Front End Engineering and Design (FEED) study to bring the costs to an accuracy of 10%, immediately after which preliminary construction works may commence. The FEED will be completed following the same proven principles as those used at Sissingué.
The FEED is scheduled to be completed by mid-2018 followed by an 18 month construction period, with first gold in 2020. The potential to add further ore reserves at the project has been identified and will be achieved through the conversion of inferred resources to indicated resources and the conversion of near mine targets identified through sterilisation drilling. Identified sources could extend the mine life. Any additions to the ore reserve will be incorporated into the FEED study.
It is envisaged that the funding required to finance the development of the Yaouré project will be sourced from a combination of:
- Internally generated cash flow – Edikan and Sissingué are forecast to generate significant quantities of after tax cash flow at current gold prices that will be available for re-investment in Yaouré’s development
- Bank debt – Perseus Mining has conducted encouraging preliminary discussions with a range of international banks to determine the bank market’s appetite for financing a project with Yaouré’s metrics. Based on these discussions, it is apparent that debt finance based on a 50:50 gearing ratio is available at either the project level or at a corporate level
- Potential exercise of warrants. Perseus Mining currently has on issue a total of 130 554 910 warrants to subscribe for ordinary shares in Perseus at a price of A$0.44 cents per share on or before 19 April 2019. While there is no guarantee that any or all of these warrants will be exercised, if they were exercised in full, at current US$:AU$ exchange rates, this would result in additional cash totalling $44.2 million being available to Perseus to apply to the development of Yaouré
The cash that is potentially available from a combination of the three mechanisms referred to which exceeds the estimated capital cost of development of Yaouré without any requirement for Perseus Mining to raise additional equity finance. In coming months as the capital cost estimate for Yaouré is firmed up through the FEED process, Perseus will engage with the banking community and firm up funding arrangements with a view to having sufficient funding in place to enable, subject to board approval, a commitment to full-scale development of the project in the December half of 2018.
“By mid-2019 we will have generated enough strong cash flow from our two operating mines to get the project started. We do however want to move this project forward with speed, and supplementing the capital cost with a debt package would enable us get started with construction much earlier than this and allow us to meet our 2020, 500 000 ozpa target.”
Yaouré also has good potential for growth, being located on a very prospective tenement package that provides significant potential to incrementally expand mineral resources and ore reserves and rapidly extend expected mine life through further drilling in and around the planned pits as well as systematic exploration of the surrounding 513 km² land holding.
Building a business and a mine in Côte d’Ivoire
Working in Côte d’Ivoire has to date been a first class experience says Quartermaine.
“We have worked hand in glove with the government who have been extremely involved in helping us overcome challenges along the way. They have fulfilled their commitments to us and we have done the same – proof that government and mining houses can work together.”
The country changed its mining code about two years ago which now provides for a mining convention to be negotiated which Perseus concluded in 2016.
“We were the first group apply for a mining convention under the new code. It is regarded as such a success that we understand that the country will use the process and documentation as a template moving forward”.
This article is printed in the December 2017 edition of Mining Review Africa – click here to view the full article
Feature image credit: Perseus Mining