West Africa-focused gold mining company Perseus Mining (Perseus) has appointed former CFO Jeff Quartermaine as the company’s new MD and CEO, which forms part of the company’s ongoing transition into an integrated gold exploration, development and production company.

As of February 1, Quartermaine replaced Mark Calderwood, who has decided to take on a part-time technical role with the company to focus on his strengths in project generation, recognition and discovery after a nine-year tenure as MD and CEO.

As the new company head, Quartermaine aims to make Perseus the gold mining company of choice for gold equity investors worldwide.

“To achieve this lofty position, we will need to develop a compelling investment proposition, which requires wise deployment of our capital and other resources,” he says, adding that, in the short term, Perseus needs to ensure that its existing asset base is performing to its potential.

“This means producing gold at forecast levels and targeted costs – namely site-cost production – which includes direct production costs, royalties, development and sustaining capital of no more than
$1 000/oz.”

Perseus currently has a share price of $2, with a market capitalisation of $916-million.

Projects in Progress

Quartermaine tells Mining Weekly that the company faced some production difficulties in the latter half of 2012 at its Edikan gold mine, in Ghana.

Consequently, Perseus is unlikely to achieve its original production guidance of between 127 000 oz and 143 000 oz for the first half of this year.

Nevertheless, the Edikan plant reported record highs in October, which shows how robust the operation can be, says Quarter-maine.

He assures stakeholders that Perseus has a significant remediation programme in place to ensure that the plant runs at the expected rate.

“We are also working towards upgrading the throughput capacity of the plant from its current nameplate capacity of between 5.5-million tons and 8-million tons a year,” he says.

Quartermaine concedes that the recent underproduction at Edikan has tarnished Perseus’ reputation and says that the company has had to work hard to re-earn the trust and confidence of its shareholders. “My challenge as MD and CEO is to restore our corporate reputation,” he says.

Perseus started commercial production at its Edikan gold mine on January 1, 2012, producing 195 166 oz gold for the calendar year.

Moreover, while the year-end’s mechanical challenges affected production for the 2013 financial year, the company expects that 2014 production will meet or exceed previously forecast levels.

Quartermaine tells Mining Weekly that Perseus has contained its costs at Edikan, having consistently met cost guidance. He adds that a monthly production record of about 22 500 oz was achieved in October, owing to ramped-up gold production at the Ghana-based mine.

Looking ahead, Perseus aims to have another gold producing mine in West Africa capable of generating a second income stream.

Meanwhile, development at the company’s Sissingué gold project, in Côte d’Ivoire, is currently on hold, pending clarification on the country’s fiscal regime, though Perseus has already attained environmental and mining licences for the project, which is located 150 km south-east of Randgold Resources’ Morila gold mine and 65 km from Randgold’s Tongon deposit.

The Sissingué gold project forms part of Perseus’ 876 km2 Tengrela gold project.

“While we have made positive progress with government, it would be irresponsible for us to commit capital to a project without knowing all the details that will affect its cost structure,” he explains.

Once Perseus has clarification on the fiscal terms that will apply for the duration of the project, it will put together a comprehensive proposal for the board to seek approval for project funding.

When this is in place, the company will proceed with full-scale development at Sissingué, which Quartermaine expects to take place in mid-2013, with commissioning to start in the second half of 2014.

In the longer term, he hopes to further diversify the company’s risk by generating a third income stream, which is likely to be drawn from a third operating mine, possibly located in a different country of operation.

“How this strategy evolves will depend on many unknown variables, but if we can achieve this, we should produce between 400 000 oz/y and 500 000 oz/y of gold, generating strong cash flow capable of sustaining a material dividend stream for our share- holders,” says Quartermaine.

Outlook

Quartermaine believes that the gold indus- try in Africa shows significant promise and that it should remain in shape, provided that projects are developed as soon as discoveries are made and that they operate at costs less than the prevailing gold price.

He acknowledges, however, that this is easier said than done.

“There are limits on skilled and experienced human resources, which are critical to the success of any gold mining business.

“In addition, a growing sense of resource nationalism has become prevalent worldwide, not just in Africa. “In recent times, this has meant that, after meeting the requirements of host governments, there is less money available for companies to develop and operate mines, let alone provide a healthy investment return for the shareholders and banks that provide the risk capital needed for development.”

Quartermaine believes that, should this trend continue, the outlook for the gold industry might not be as attractive.

However, he says the amount of gold to be found in Africa – especially West Africa – and the reasonably strong gold price encour- age companies to invest in the continent.