Perseus Mining Limited

Transcription

1 Precious Metals - Producer Australian Equity Research 29 February 2016 SPECULATIVE BUY unchanged PRICE TARGET unchanged Price (1-Mar) Ticker A$0.65 A$0.37 PRU-ASX; PRU-TSX 52-Week Range (A$): Avg Daily Vol (M) : 5.4 Market Cap (A$M): 302 Shares Out. (M) : Enterprise Value (A$M): 212 Cash (A$M): Long-Term Debt (A$): 0.0 Major Shareholders: Van Eck 7% FYE Jun 2015A 2016E 2017E Gold Production (000oz) All in Sustaining Cost (Gold) (US $ /oz) ,298 1,319 EBITDA (A$M) Previous EV/EBITDA (x) P/E (x) (6.9) Apr-15 PRU May-15 Source:FactSet Jun-15 Jul-15 Aug-15 Sep-15 Perseus Mining Ltd (PRU:ASX; PRU:TSX) is a gold mining and development company Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Reg Spencer Analyst Canaccord Genuity (Australia) Ltd. reg.spencer@canaccord.com.au Tim McCormack Analyst Canaccord Genuity (Australia) Ltd. tim.mccormack@canaccord.com.au Proposed acquisition of Amara Mining plc PRU has announced that it plans to acquire AIM listed West African gold company Amara Mining (AMA:GB Not rated) by way of a Scheme of Arrangement. The proposed merger would see PRU holders with 65% of the merged entity. AMA have advanced several projects within the region and, on initial analysis, we view these as complementary to PRU's stated objectives of production growth and asset diversification. More specifically, we view AMA's Yaoure project as offering a merged company critical scale to offset single asset risk and a declining mine life at Edikan. On this basis, we view the proposed transaction as positive for PRU holders. With mutual benefits to both set of shareholders leveraging off regional synergies, and our view that a competing bid is unlikely, we view the merger as likely to proceed. We maintain our SPECULATIVE BUY recommendation. Transaction details: Key terms of the proposed transaction include: 0.68 PRU shares per AMA share, plus 0.34 new PRU warrants per AMA share with an exercise price of A$0.44/share, valid for a period of 36 months. The consideration represents a 42% premium to AMA holders (based on 26 Feb'16 closing price) and remains subject to 75% AMA shareholder approval and other regulatory closing conditions. Overall, PRU expects final court approval and closing early Q2'16. On a pro-forma basis, the merged company is expected to have a market cap of US$242m. Yaoure offers PRU an attractive growth project: AMA's key asset is the Yaoure development project, located in central Cote d'ivoire. An optimised PFS was completed in Feb'16 which indicated a 4.5mpta open pit, CIL+ gravity project producing an average 203kozpa at AISC of US$667/oz over 15 years. Total capex of US$334m is expected to be optimised with further studies focusing on contract mining, a staged plant expansion and verifying advantageous hydro-power energy costs. Given PRU's current experience in-country through its smaller Sissingue project, we view that PRU will likely prioritise development activities at Yaoure contingent upon other capital obligations from extending mine life at Edikan. Maintaining margin at Edikan remains the near-term focus: While the strategic rationale for PRU merger with AMA remains valid, we note the more immediate priority of maintaining strict cost control at the Edikan operations given the low-grade feed and capital intensive phase of current operations. While the merged entity balance sheet should remain healthy (pro-forma Net Cash of US$76.4m), we note PRU's continued susceptibility to any down side in the gold price. Based on our current price deck, additional funding will be required to meet likely development costs should PRU wish to pursue any of the merged company's development assets. Valuation: We have updated our model to reflect the terms of the acquisition of AMA and the inclusion of the Yaoure and Baomahun assets into a merged entity. We have valued Yaoure on an indicative DCF and heavily risk adjusted this (30%) to reflect the earlystage and unfunded nature of the project. The revisions have resulted in our pro-forma NAV/share (NPV 5% for operating assets, net of corporate and other working capital adjustments) remaining unchanged at A$0.65/share. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX CF. : LSE) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. For important information, please see the Important Disclosures beginning on page 11 of this document.

2 FINANCIAL SUMMARY Perseus Mining Limited PRU:ASX PRU:TSX Analyst: Reg Spencer Rating: SPEC BUY Date: 1/03/2016 Target Price: $0.65 Year End: June Market Information Share Price A$ 0.37 Market Capitalisation (pro-forma) A$m Month Hi A$ Month Lo A$ 0.23 Issued Capital (pro-forma) m Company Description Perseus Mining Ltd (ASX:PRU TSX:PRU) is a gold mining and development company. It operates the 90% owned, +200kozpa Edikan mine in Ghana, and is assessing the development of the 85%-owned Tengrela Gold project in Cote d'ivoire.and produce up to 150kozpa. Options (pro-forma) m Profit & Loss (A$m) 2015a 2016e 2017e 2018e Fully Diluted (pro-forma) m Revenue Operating Costs Valuation A$m A$/share Royalties Edikan 5% Corporate & O'heads Yaoure 5%; risked Exploration (Expensed) Exploration & Projects (inc Sissingue) EBITDA Investments Dep'n Corporate (127.8) (0.16) EBIT Gold forwards Net Interest Cash Tax Debt - - NPAT Bullion Abnormals TOTAL Net Asset Valuation NPAT (reported) Price/NAV 0.57x NAV at Spot US$1,239/oz, AUDUSD $ Cash Flow (A$m) 2015a 2016e 2017e 2018e Target Price 0.65 Cash Receipts Cash paid to suppliers & employees Assumptions 2015a 2016e 2017e 2018e Tax Paid Gold Price (US$/oz) 1,224 1,194 1,250 1,255 Net Interest AUD:USD Operating Cash Flow Exploration and Evaluation NAV Sensitivity Capex $1.50 Other Investing Cash Flow $0.75 Debt Drawdown (repayment) Share capital $0.00 Dividends % -20% -10% 0% 10% 20% 30% Financing Expenses $0.75 Financing Cash Flow Gold Price US$ Exchange Rate Opening Cash Increase / (Decrease) in cash Production Metrics 2015a 2016e 2017e 2018e FX Impact Edikan Closing Cash Gold Production (koz) Balance Sheet (A$m) 2015a 2016e 2017e 2018e Yaoure Cash + S/Term Deposits Gold Production (koz) Other current assets Current Assets Group Production (oz) Property, Plant & Equip AISC (US$/oz) 975 1,298 1,319 1,423 Exploration & Develop Other Non-current Assets Payables Group Reserves & Resources Mt Grade Moz Short Term debt Reserves (100%) Long Term Debt Edikan Other Liabilities Tengrela Net Assets Reserves TOTAL Shareholders Funds Reserves Resources (100%) Retained Earnings Edikan Total Equity Grumesa Tengrela Ratios & Multiples 2015a 2016e 2017e 2018e Resources TOTAL EBITDA Margin 36% 13% 1% 2% EV/EBITDA 0.7x 2.6x 77.5x 42.6x Op. Cashflow/Share $0.16 $0.04 $0.02 $0.01 Directors P/CF 2.3x 9.6x 16.9x 42.3x Name Position P/FCF 6.5x -14.5x -34.0x -4.5x R Gillard Chairman EPS $0.17 $0.02 -$0.05 -$0.06 J Quartermaine Managing Director EPS Growth nm -86% -331% nm C Carson Exec Director PER 2.2x 15.9x -6.9x -6.6x S Harvey NE Director Dividend Per Share $0.00 $0.00 $0.00 $0.00 M Bohm NE Director Dividend Yield 0% 0% 0% 0% ROE 16% -4% -10% -12% ROIC 8% -1% -10% -11% Substantial Shareholders Shares (m) % Debt/Equity 0% 0% 0% 0% Van Eck & Assoc % Net Interest Cover nm nm nm nm Book Value/share $1.11 $0.67 $0.61 $0.54 Price/Book Value 0.3x 0.6x 0.6x 0.7x 2 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 2

3 Perseus Mining Limited to Acquire Amara Mining PLC PRU has announced that it plans to acquire AIM-listed Amara Mining PLC (AMA:GB Not rated) by way of a UK Scheme of Arrangement. Key terms of the proposed transaction include: 0.68 new PRU Shares per Amara share 0.34 unlisted, transferable PRU warrants for each AMA share held. These entitle the holder to subscribe to one PRU share at a price of A$0.44 Proposed transaction is subject to AMA shareholder approval (75% in favor), court approval and other customary closing conditions. PRU shareholder approval is not required bar regulatory waivers from the ASX and TSX. Pro-forma ownership of the enlarged company is 64.9% (PRU) and 35.1% (AMA) with a market capitalisation (basic) of US$242.3m and Enterprise Value of US$165.9m. Final court approvals and transaction closing is expected by mid 16. About Amara Mining Amara Mining (AMA) is an AIM listed gold development company, whose primary asset is the Yaoure Gold project located in Cote d Ivoire, West Africa. AMA was listed on the AIM in November 2003 (formally known as Cluff Gold) and since this time have owned several gold projects in the region to various levels of development. From March 2009 until 2014 AMA produced ~275koz at the Kalsaka/Sega Heap Leach project in Burkina Faso before the project was placed in care and maintenance due to the project being uneconomic at deteriorating gold prices. AMA s primary project is the 7.3 Moz Yaoure project in Cote d Ivoire. Other assets include the feasibility study-stage, Baomahun project in Sierra Leone. YAOURE PROJECT The Yaoure project has been held by AMA (then known as Cluff Gold) since The Yaoure project had previously been operated by Normandy Mining from as a low-grade oxide heap leach project producing ~180koz of gold. Upon transfer of ownership AMA (as Cluff Gold) undertook significant exploration with over US$30m in March 2007 and $25m in March 2008 in capital being raised in part to expand the resource base and recommence production at the existing heap leach facility. From ~54koz of gold was produced in total from the upgraded Yaoure heap leach plant, with the political environment in Cote d Ivoire and deteriorating gold price resulting in operations being placed on care and maintenance. A timeline of key development activities at Yaoure is contained in Figure 1 below. 3 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 3

4 Figure 1: Timeline of Yaoure Development Activities Source: Perseus Company Presentation The Yaoure Project is located in central Côte d Ivoire in West Africa, 40 km northwest of Yamoussoukro, and 270 km northwest of Abidjan. The Project comprises two exploration licences granted to AMA that cover a combined 367 km². The Project site is accessed by paved national and main roads, with the last 5 km section of the primary access being gravel. Electrical power is supplied by a 33-kV feeder line from the nearby 150-MW Kossou hydroelectric power station. This provides a key benefit to the project with grid power of US$0.113/kWh significantly lower than other regional operations and more critically, at a higher level of reliability owing to proximity to key infrastructure servicing nearby Yamoussoukro. Figure 2: Yaoure Project Location Source: Amara Mining Technical Report 4 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 4

5 GEOLOGY, RESOURCES & RESERVES Geology The Yaoure project is located within the eastern half of the main central Birimian aged greenstone belt. This belt is a north-north eastern trending assemblage of Paleo-Proterozic volcanic, sedimentary and intrusive rocks and is synonymous with some of the largest gold deposits within Africa. These include Sadiola (13Moz resources), Loulo (11Moz) and Syama (7Moz). The Yaoure deposit consists of the Yaoure Central mineralization (CMA) underlying Amara s Yaoure Central open pit and the cross-cutting CMA South (CCC) zone, a mostly barren structure in the CMA South pit to the south of Yaoure Central. Smaller oxide and sulphide deposits are found at Kongonza, Angovia 2, and Zone North. Elsewhere on the property, exploration has identified mineralization and, in some cases, defined and exploited resources, under the following categories: Greenstone-hosted, mesothermal, brittle-ductile shear zone deposits. Oxidized deposits in saprolites and laterites, down to regolith, overlying the primary sulphide deposits. Small alluvial deposits which are being mined by artisanal miners. Resources/Reserves Yaoure s total mining inventory is presented below in Figure 3. As part of the completion of an optimised PFS, released in February 2016, a resource update was finalised in November in The new resource model focuses on delineating more ore within the northern area of the Yaoure Central zone. Figure 3: Yaoure Mining Inventory Source: Amara Mining Presentation Development & Production The development concept we have used for our indicative modelling and asset valuation is based on the optimized Pre-feasibility Study (PFS) AMA completed in Feb 16. PRU have highlighted that over the next months these findings will be validated during which time financing and execution options will be considered. We have assumed that the merged company will spend ~US$10m over this time on these studies. Key outputs from the revised PFS are indicated in Figure 4 below. These are based on a 4.5Mpta open pit, conventional CIL+ gravity circuit, producing an average of 203koz (248kozpa from year 1-5) over a 15-year mine life. 5 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 5

6 Annual Production (oz) AISC (US$/oz) Perseus Mining Limited Figure 4: Key capital & operating cost inputs from updated Yaoure PFS Source: Company Reports PRU has estimated a timetable of ~18-24 months to complete a definitive feasibility study (DFS) for Yaoure with an 18-month construction and commissioning period. As such, we have modelled first production from Yaoure as during H2 19. The key influences on this start date will be securing finance and committing capital against other less intensive smaller growth projects within the Group such as Sissingue (~US$100m for 75kozpa over 5.25 years) and Baomahum (US$253m 95koz pa over 12 years). Regardless, we view a possible development of the Yaoure project as timely given the critical scale of production (+200koz) the project provides, its potential for good operating margins, and the fact that PRU s Edikan mine will be in the last 3 years of its current reserve life (see Figure 6 below). We have undertaken indicative modeling of the Yaoure project, which is largely based on the outcomes of the outputs of the optimized pre-feasibility study provided in figure 4 above. This sees an average production of~203kozpa over 14.5 years at an estimated average AISC of US$665/oz. These are summarized in figure 5 below. Figure 5: Indicative Yaoure Production & AISC Profile (June year end) 300, , , , ,000 50, Yaoure Production (US$/oz) AISC (US$/oz) Source: Canaccord Genuity estimates Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 6

7 Based on the current reserves and parameters given in the PFS (we estimate a forward curve derived, current period NPV5% of ~US$487m (A$686m). Based on our current price deck (LT US$1,307/oz and US$/A$ of 0.675), we estimate that the project would deliver a post-tax payback period of ~3.5 years using our current gold price assumptions. At spot conditions (US$1,233/oz and US$/A$ of 0.714), we derive a project NPV of US$414m (A$583m) and a post tax payback period of 5 years. Since the initial release of a PFS on Yaoure in May 2015 AMA have optimised certain parameters of the project to improve project economics. We envisage that PRU will continue to focus on some of the below areas which could offer potential upside to the project and our valuation. Potential reduction in upfront capital through use of contractor mining: AMA have indicated $US60m of capital expenditure associated with the purchase of mining fleet to coincide with the most active mining period at the start of the project. AMA, however, has indicated that this expenditure will be critically assessed as a more detailed mine plan is developed to investigate the deployment of contract mining. Initial estimates are for an increase unit mining costs ~40% (from US$2.10/t) to US$2.90/t) for a saving of ~US$40m in upfront capital. Staged plant expansion: While the revised PFS reduced the plant nameplate capacity (and subsequent capital) from 6.5Mpta to 4.5Mpta to optimize project NPV, we expect that future studies may focus on a staged expansion of the processing plant. This would allow Yaoure to maintain a production of +200kozpa from year 6 onwards as head grades decrease. Grid power: The Yaoure project is at a competitive advantage to other gold development projects within the region due to full access to reliable and comparative cheap power (expected grid costs of US$0.113/kWh) via a 33 kv feeder line from the nearby 150 MW Kossou hydroelectric power station. AMA indicated that a key de-risking activity within future project advancement will be to commence discussions with the Government state electricity provider to sign a power stability agreement over Yaoure's LOM to ensure that power costs remain consistent during the mine's life. Impact on our view In our view, the potential acquisition of AMA looks to have valid strategic rationale for PRU based on a number of factors. PRU is currently a single-asset producer with the ability to generate meaningful cash flow from its Edikan operations currently hampered by processing lower head grade feed and undertaking a capital intensive mining extension program. To this end the Yaoure project has the potential to offer PRU a timely replenishment of production ounces as the reserves at Edikan are exhausted from 2024 as per the current mine plan. More significantly we note that Yaoure could provide this production growth at a substantially lower cost base with group AISC expected to fall to ~US$700/oz from current levels of +US$1,200/oz (Figure 6). 7 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 7

8 Figure 6: PRU Pro-forma Group Production Profile Pro-Forma Group Production (oz) Yaoure (oz) Edikan (oz) Group AISC (US$/oz) Yaoure AISC (US$/oz) Source: Canaccord Genuity estimates AISC (US$/oz) Assuming the proposed transaction proceeds to closing, we see the Yaoure project as being superior to PRU s existing development project at Sissingue in terms of scale and mine life. While PRU management has not made any firm statements on which project would rank higher in terms of the combined groups development pipeline, we remain of the view that any development at Sissingue is likely to be deferred. The proposed transaction with AMA also enables PRU to fulfill its stated aim of reducing operating and geo-political risk through diversifying its development options to now encompass three countries in the region (Ghana, Cote d Ivoire and Sierra Leone). Combining the companies would provide a mineral resource base of 14Moz which is the fourth largest within its regional peer group. A comparison of recent M&A transactions that have taken place in ASX listed companies is provided in Figure 7 below. This highlights that the value for mineral inventories contained at AMA s Yaoure and Baomahun projects are comparatively low despite the recent appreciation in the gold price. A valid comparison (shown in yellow) can be made with the price paid for the Fekola and Natougou preproduction assets during 2014 when the gold price was at similar levels to today.. 8 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 8

9 Figure 7: Summary of key ASX listed Merger and Acquisitions TARGET COMPANY ACQUIRIER ASSET DATE Source: Company Reports, Canaccord Genuity estimates,snl Mining SPOT GOLD AT DATE (US$/oz) VALUE (US$m) Resources (US$/oz) Reserves (US$/oz) Alacer Gold Metals X Limited Higginsville 29/10/2013 1,420 $44.0 $6 $ PMI Gold Corp Asanko Gold Assanko 17/12/2013 1,240 $183.0 $38 $ Barrick Gold Northern Star Resources Plutonic 23/12/2013 1,355 $25.0 $13 $ Norilsk Saracen Mineral Holdings Thunderbox 21/01/2014 1,419 $23.0 $11 $ Barrick Gold Northern Star Resources Kanow na Belle/EKJV 23/01/2014 1,416 $75.0 $82 $ Reed Resources Metals X Limited Central Murchison 14/04/2014 1,288 $7.0 $2 $ New mont Mining Northern Star Resources Jundee 13/05/2014 1,293 $93.0 $186 $ Papillon Resources B2 Gold Fekola 3/06/2014 1,243 $570.0 $136 n/a Chesser Resources Nurol Holdings Kestanelik 25/07/2014 1,293 $40.0 $57 n/a Mutiny Gold Doray Minerals Deflector 28/10/2014 1,227 $36.6 $62 $ Orbis Gold Semafo Natougou 1/12/2014 1,200 $140.0 $56 n/a Norton Gold Fields Zijin Mining Group Paddington 13/01/2015 1,180 $25.5 $10 $ Tanami Gold Northern Star Groundrush 26/02/2015 1,205 $80.0 $25 $ LaMancha Evolution Mining Frog's Leg 20/04/2015 1,203 $321.0 $110 $ New mont Mining OceanaGold Corp Waihi 30/04/2015 1,203 $101.0 $281 $ Crocodile Gold New Market Gold Fosterstville 11/05/2015 1,182 $190.0 $28 $ Barrick - Lake Cow al Evolution Mining Cow al 25/05/2015 1,188 $550.0 $162 $ Romarco Minerals OceanaGold Corp Haile 30/07/2015 1,088 $657.2 $137 $ Panoramic Resources Metals X Limited Mt Henry 31/07/2015 1,096 $18.1 $11 $ RNI NL Metals X Limited Grosvenor 31/07/2015 1,096 $13.5 $10 $ St Barbara Saracen Mineral Holdings King of The Hills/Kailis 20/08/2015 1,151 $2.2 $6 $ Phoenix Gold Evolution Mining Castle Hill 20/08/2015 1,151 $39.0 $10 $ Endeavor Mining LaMancha Ity 18/09/2015 1,124 $70.0 $38 $ Amara Mining Perseus Mining Yaoure/Baomahun 20/08/2015 1,235 $69.2 $7 $ RSC'S (Moz) RSV'S (Moz) Given the high capital cost of the Yaoure project (US$334m) relative to its market capitalisation (US$60m), AMA is in a similar predicament to a number of African gold developers seeking a feasible funding solution. Given the relatively low value of its equity, we view a combination with PRU and access to its clean balance sheet (US$72.3m in cash, no debt) as offering a plausible and sensible strategy to advance the Yaoure toward production. In our view, the increase in the pro-forma market capitalisation to US$242m and the inclusion of a producing asset allows the combined entity more avenues for project financing. As mentioned previously, the deal presents AMA shareholders with a generous premium (~20%) and with greater liquidity. From PRU s perspective, the acquisition of AMA should be viewed as an upgrading of development assets within the group at a comparatively low price. Based on these factors, we see few hurdles to the transaction proceeding. Figure 8: Transaction Summary PRU AMA Pro-Forma Share Price local currency A$ A$0.415 Shares Outstanding m * Options, warrants & pref. rights m ** Market Capitalisation - basic US$m Cash and Bullion US$m Debt US$m Enterprise Value US$m Pro-Forma Ownership % * Includes 0.68 Ordinary PRU shares per outstanding AMA shares (285.8m) **Includes 0.34 PRU Warrants per outstanding AMA shares (142m) Source: Company Presentation 9 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 9

10 Valuation We have updated our model to reflect the acquisition of AMA and the inclusion of the Yaoure and Baomahun assets into a merged entity (we have assumed that the transaction proceeds but note that transaction close is not expected for 4-5 weeks and remains subject to AMA shareholder and court approval). In valuing Yaoure we have prepared an indicative discounted cash flow model based on the optimised PFS parameters and stated ore reserves. This has generated a project NPV of A$580m which we have risk adjusted to 30% given the early stage of development (PFS level) and uncertainty around project funding. We continue to exclude any development scenario at Sissingue in our valuation on the basis that, assuming the transaction is completed, Yaoure would likely be prioritised due to the scale (+200kozpa) of the project. We ascribe a nominal valuation to the Sissingue and Baomahun projects. The changes have resulted in our pro-forma NAV/share (NPV5% for operating assets, net of corporate and other working capital adjustments), remaining unchanged at A$0.65, with the dilution to the issued capital from the proposed acquisition offset by our estimates of the risk adjusted valuation for Yaoure. Figure 9: PRU Sum of Parts Valuation vs PRU+AMA pro-forma DCF Discount Rate 5% PRO FORMA PRO -FORMA PRU Shares Outstanding (M) A$m RISK ADJ. EQUITY A$m PER SHARE A$m PER SHARE Edikan % 90% $ Tengrela (Sissingue) % 100% 0.00 $ Yaoure % 100% $ Baomahun % 100% 0.00 $ Exploration & Resources $ $0.04 Investments $ $0.01 Corporate $ $0.16 Gold forwards $ $0.02 Cash $ $0.18 Debt $ $0.00 Bullion $ $0.01 TOTAL $ $0.66 Target price (rounded) $0.65 $0.65 Source: Company Reports, Canaccord Genuity estimates 10 Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 10

11 Appendix: Important Disclosures Analyst Certification Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst s coverage universe and (ii) no part of the authoring analyst s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research. Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Target Price / Valuation Methodology: Perseus Mining Limited - PRU Net asset valuation and target price are based on DCF analysis (NPV5%) of operating assets and other corporate and working capital adjustments. Risks to achieving Target Price / Valuation: Perseus Mining Limited - PRU INVESTMENT RISKS The key investment risks for PRU include: Geopolitical risk -- Geopolitical risk remains a key consideration, with relatively higher levels of political risk associated with PRU's assets in Cote d'ivoire and Ghana. Permitting risk -- While PRU has received all necessary permits to commence construction at Sissingue, the Company has yet to finalise its Mining Convention which governs the fiscal terms of the project. Geological risk -- The actual characteristics of an ore deposit may differ significantly from initial interpretations and expectations. Completion risk -- Completion risk includes delivering the Company's expansion projects on time and on budget. Operating risk -- Gold production at Edikan could be impacted by any disruption to mining or technical issues with the processing plant. Commodity price & exchange rate risk -- As with all mining and mineral exploration companies, commodity price and exchange rate risks should also be considered. Distribution of Ratings: Global Stock Ratings (as of 02/29/16) Rating Coverage Universe IB Clients # % % Buy % 34.66% Hold % 12.40% Sell % 4.00% 912* 100.0% *Total includes stocks that are Under Review Canaccord Genuity Ratings System BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months. HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months. SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months. NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer. Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the relevant issuer. Canaccord Genuity Company-Specific Disclosures (as of date of this publication) Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Perseus Mining Limited in the next three months. Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 11

12 B:AUD /15/ H:AUD /17/14 H:AUD /31/16 B:AUD /22/13 B:AUD /13/13 B:AUD /26/13 Perseus Mining Limited Rating History as of 02/25/2016 H:AUD /17/13 H:AUD /19/13 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Jan 2016 B:AUD /25/14 SB:AUD /14/16 B:AUD /10/14 B:AUD /29/14 H:AUD /13/14 B:AUD /29/14 Closing Price H:AUD /03/13 B:AUD /27/14 H:AUD /15/13 B:AUD /06/14 H:AUD /29/13 B:AUD /06/15 Target Price H:AUD /04/13 B:AUD /12/15 Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR) B:AUD /10/13 B:AUD /23/15 B:AUD /16/14 B:AUD /12/15 B:AUD /28/14 B:AUD /22/15 Online Disclosures Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically) or by sending a request to Canaccord Genuity Corp. Research, Attn: Disclosures, P.O. Box Pacific Centre, Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request by to disclosures@canaccordgenuity.com. The reader may also obtain a copy of Canaccord Genuity s policies and procedures regarding the dissemination of research by following the steps outlined above. General Disclosures Canaccord Genuity is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated company that is 50%-owned by Canaccord Genuity Group Inc. The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with principal offices located in Sydney and Melbourne. The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research. Canaccord Genuity and its affiliated companies may have a Investment Banking or other relationship with the issuer that is the subject of this research and may trade in any of the designated investments mentioned herein either for their own account or the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity or their affiliated companies, principals or employees (other than the authoring analyst(s) who prepared this research) may at any time have a long or short position in any such designated investments, related designated investments or in options, futures or other derivative instruments based thereon. Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as a result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity s policy on managing conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity s policy is available upon request. The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity, its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained in this research constitute Canaccord Genuity s judgement as of the date of this research, are subject to change without notice and are provided in good faith but without legal responsibility or liability. Canaccord Genuity s salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research. Canaccord Genuity s affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 12

13 This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. 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This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effect transactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analysts employed outside the US, as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. For United Kingdom and European Residents: This research is distributed in the United Kingdom and elsewhere Europe, as third party research by Canaccord Genuity Limited, which is authorized and regulated by the Financial Conduct Authority. This research is for distribution only to persons who are Eligible Counterparties or Professional Clients only and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) (High Net Worth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. This material is not for distribution in the United Kingdom or elsewhere in Europe to retail clients, as defined under the rules of the Financial Conduct Authority. For Jersey, Guernsey and Isle of Man Residents: This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information purposes and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This research has been produced by an affiliate of CGWI for circulation to its institutional clients and also CGWI. Its contents have been approved by CGWI and we are providing it to you on the basis that we believe it to be of interest to you. This statement should be read in conjunction with your client agreement, CGWI's current terms of business and the other disclosures and disclaimers contained within this research. If you are in any doubt, you should consult your financial adviser. CGWI is licensed and regulated by the Guernsey Financial Services Commission, the Jersey Financial Services Commission and the Isle of Man Financial Supervision Commission. CGWI is registered in Guernsey and is a wholly owned subsidiary of Canaccord Genuity Group Inc. For Australian Residents: This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN holder of AFS Licence No To the extent that this research contains any advice, this is limited to general advice only. Recipients should take into account their own personal circumstances before making an investment decision. Clients wishing to effect any transactions in any financial products discussed in the research should do so through a qualified representative of Canaccord Genuity (Australia) Limited. Canaccord Genuity Wealth Management is a division of Canaccord Genuity (Australia) Limited. For Singapore Residents: This research is distributed pursuant to 32C of the Financial Advisers under an arrangement between each of the Canaccord Genuity entities that publish research and Canaccord Genuity Singapore Pte. Ltd who is an exempt financial adviser under section 23(1)(d) of the Financial Advisers Act. This research is only intended for persons who fall within the definition of accredited investor, expert investor or institutional investor as defined under section 4A of the Securities and Futures Act. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. Recipients of this report can contact Canaccord Genuity Singapore Pte. Ltd. (Contact Tel: ) in respect of any matters arising from, or in connection with, the research. For Hong Kong Residents: Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 13

14 This research is distributed in Hong Kong by Canaccord Genuity (Hong Kong) Limited which is licensed by the Securities and Futures Commission. This research is only intended for persons who fall within the definition of professional investor as defined in the Securities and Futures Ordinance. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. Recipients of this report can contact Canaccord Genuity (Hong Kong) Limited. (Contact Tel: ) in respect of any matters arising from, or in connection with, this research. Additional information is available on request. Copyright Canaccord Genuity Corp Member IIROC/Canadian Investor Protection Fund Copyright Canaccord Genuity Limited Member LSE, authorized and regulated by the Financial Conduct Authority. Copyright Canaccord Genuity Inc Member FINRA/SIPC Copyright Canaccord Genuity (Australia) Limited Participant of ASX Group, Chi-x Australia and of the NSX. Authorized and regulated by ASIC. All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Canaccord Genuity Corp., Canaccord Genuity Limited, Canaccord Genuity Inc or Canaccord Genuity Group Inc. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of the entities listed above. Speculative Buy unchanged Target Price A$0.65 unchanged 29 February 2016 Precious Metals - Producer 14