PRU - Perseus Mining

[jman2007]

I've added in the total shares of this raising and the cash to the gold stock comparison spreadsheet and it pushes them up to the $65 an ounce mark, which is probably still a little low for this stage of development, but they're not as cheap as they were a few months ago down around $30-40 an ounce. That was a great opportunity in this environment. Hard to believe GRY deserve to be trading at a premium to them.

Hhmm yes, interesting comparsion between GRY and PRU... could be due to more 'smart money' flowing into this corner of the world than there was 12-18 months ago, and generating more 'exposure'?

Anyhow, about PRU's contract award:

Can someone please explain to me what a "Lump Sum turnkey basis" means??... I've never heard of that term before, it sounds totally bizarre. Is that the same as a fixed price contract?

Never heard of either of these two companies 'DRA' or 'Group Five' before. At least they have plenty of relevant experience in Ghana by the sounds of it, although lets hope they have worked together before. JV's make me nervous. Take a look at Resolutes experience at Syama if you want an example of how wrong it can go in West Africa (not a JV issue as far as I'm aware though), an absolute cluster f$$k. It sends a shiver down my spine just thinking about it.

I hope they didn't award the contract based solely in price, someone like Leighton who constructed CGX's Masbate plant in the Phillipines, and surely have experience in Africa maybe got knocked out in one of the earlier tendering rounds?

 

[Sean K]

Can someone please explain to me what a "Lump Sum turnkey basis" means??... I've never heard of that term before, it sounds totally bizarre. Is that the same as a fixed price contract?

Never heard of either of these two companies 'DRA' or 'Group Five' before. At least they have plenty of relevant experience in Ghana by the sounds of it, although lets hope they have worked together before.

Maybe they pay in a lump sum, not in installments, and you use a key to turn the plant on, or something? Bizaar.

I hadn't heard of those companies in the JV either, but they seem to have some track record. After a Google:

Group Five look like a pretty diverse engineering company with mining just a small part of the picture.

http://groupfive.investoreports.com/corporate/business-units/construction

DRA seemed to have completed a number of projects in Africa across a bunch of mineral groups.

They've completed the following gold projects (which I haven't heard of):

• Aflease Gold Mining – Modder East Project
• DRD - Blyvooruitzicht Gold Mine
• Backfill Plant for Driefontein Gold Mine
• Kalana

http://www.drainternational.com/dra/view/dra/en/global/page1

Yes, lets hope they do better than the bozoes at Syama.

Gee, markets looking dodgy at the moment. Start or a major correction way back down to make a W ish type pf recovery, or is this just a 5-10% dip and a buying opportunity. Gold needs to stay above $1030 I think for it to remain really bullish and for gold stocks to remain well supported.

 

[shag]

just an eng contract

http://answers.yahoo.com/question/index?qid=20090402064548AAQUPbG

http://www.eng-tips.com/viewthread.cfm?qid=141319&page=6

note.....Lump Sum Turn Key (LSTK) projects are suited in cases where:
- things are well known ahead of time....can be quantified...

Most owners use LSTK to limit their exposure to cost and schedule overruns...


People sometimes forget that a bidder may also have the right to refuse a Change Request....

you hope they, pru, know what they are doing...

you assume they have a mine that they have copied, or i do.

- no "Change Orders" are anticipated....

disclaimer....my project management knowledge is limited and old.

 

[shag]

jmans going to know this or more, but when projects hit variances, thats when it gets murky and yr choice of contract is paramount. a variance is some type of unforseen or forseen possible design or schedule change etc.

it seems this vauge? form of contract is more akin to say placing a contract on say building bolts, where there are few unknowns and most criterion can be prescribed easily. whereas say putting out that oilwell up north-timor sea oil spill, presently wouldnt be the best contract for this to be used upon.

maybe someone else can educate us better anyway, and why they may have used this type of project management product.

i'd be hoping the australian gov was telling them to use the, 'put the ...... out yesterday', type contract. three weeks and growing....

i'm sure kennas would be greatly enthused if they have used the sayma mine as their design copy...
low grades, close proximity, large....and they both arn't working...or maybe they used the 'Lump sum turkey' contract, up the road.

 

[Sean K]

Wow, some outstanding hits at Tengrela.

Should significantly upgrade the resource base when a new estimate come out. Currently sits at about a million ounces. No idea what it could turn into. Hopefully LOTS!

Perseus Mining Limited (ASX: PRU) is pleased to announce further significant RC and diamond drill results from the Sissingue prospect at its Tengrela Gold Project in Ivory Coast.

Recent intercepts include:

SRC 720 - 66m at 5.0g/t Au from 6m including 2m at 97.3g/t Au from 16m;
SLC 005 - 63m at 5.1g/t Au from 78m including 32m at 7.2g/t Au from 92m;
SRC 704 - 8m at 5.1g/t Au from 10m and 38m at 6.6g/t Au from 32m including 2m at 110.4g/t Au from 34m;
SRC 726 - 78m at 3.2g/t Au from 36m including 24m at 5.3g/t Au from 82m;
SRC 725 - 26m at 3.9g/t Au from 64m including 4m at 12g/t Au from 86m;
SD 079 - 8.3m at 2.2g/t Au from 11.2m, 16.5m at 4.6g/t Au from 61.5m and 27.8m at 2.0g/t Au from 97m; and
SD 080 - 52m at 2.6g/t Au from 42m including 13.5m at 6.0g/t Au from 51m.

Significant high grade intercepts have now been made intermittently over a strike length of 960m. The Company is working to further increase drilling production rates on the Tengrela Gold Project and has commenced a Definitive Feasibility Study.

And moving into DFS already! Could have 2 mines up and running in 2011 producing somewhere between 200 and 300k pa. Must be worth more than $70 an ounce by then!

 

[jonojpsg]

Wow, some outstanding hits at Tengrela.

Should significantly upgrade the resource base when a new estimate come out. Currently sits at about a million ounces. No idea what it could turn into. Hopefully LOTS!

And moving into DFS already! Could have 2 mines up and running in 2011 producing somewhere between 200 and 300k pa. Must be worth more than $70 an ounce by then!

Indeed! Given their cash costs are around $500/oz, if POG stays around $1000 they are going to be making 500x250000 a year free cash = $125m a year!!!! Even if they have a bit of debt to pay down, if they have $100m a year to give back to us or keep growing, we'll be looking at a PE of around 5 which is about a quarter of what the bigger gold producers run at.

Looking forward to a quadrupling of the SP by 2012

 

[CapnBirdseye]

Indeed! Given their cash costs are around $500/oz, if POG stays around $1000 they are going to be making 500x250000 a year free cash = $125m a year!!!! Even if they have a bit of debt to pay down, if they have $100m a year to give back to us or keep growing, we'll be looking at a PE of around 5 which is about a quarter of what the bigger gold producers run at.

Looking forward to a quadrupling of the SP by 2012

Assuming that there us no significant fall in the POG in AUD terms you are probably right, perhaps a little conservative. Plenty of scope for reserve increases too.

The falling USD is the biggest risk to a good leg up in SP.

 

[Sean K]

Yep agree on the risks.

USD must correct back up shortly, but if they keep printing money and don't get out of debt, the longer term view is for USD to turn to wallpaper. The more likely scenario at this point I think.

Implimentation is also a risk. If the engineering JV don't get it right then the stock could suffer. They need it to come in on time and on budget and running to production schedule early on. We can only wait and see on that one.

Upside is still from further POG appreciation, and a surprise in resource upgrades perhaps.

Great break up yesterday. What an awesome looking chart!

 

[jman2007]

Wow, some outstanding hits at Tengrela.

Should significantly upgrade the resource base when a new estimate come out. Currently sits at about a million ounces. No idea what it could turn into. Hopefully LOTS!

Yes some really outstanding widths and grades from Tengrela.

I would say conservatively that they should be able to prove up 2Moz by the end of next year, this is fast becoming a 2nd-string project that most juniors/developers would love to have as a primary project!

Grades definitely superior to that of Ayanfuri so they'll probably employ a different mining method to try and keep the head grade high. Should turn into a good little money maker in a few years.

 

[jman2007]

jmans going to know this or more, but when projects hit variances, thats when it gets murky and yr choice of contract is paramount. a variance is some type of unforseen or forseen possible design or schedule change etc.

I think your guess is probably as good as mine shag

Starting to get into the Project Management and Contract Law area here, definitely not my strong point! This is generally where guys in suits yell and swear at each other behind closed doors until a mutually acceptable stance is achieved, so they can eventually come out all smiles and slapping each other on the back :

 

[CapnBirdseye]

The conditions of contract are important.

Where variations occur are generally when the contractor has to do something he didnt expect to (or wasn't propery defined in the contract, or contractors offer).

These variations are generally due to a change in scope from the client. Say, PRU decided they wanted to alter the layout of the plant in some way, or that they wanted additional accommodation for their staff.

Alternatively latent conditions can lead to a variation. These are items that the contractor could not price the risk for. Pricing the risk for all latent conditions would lead to uncompetitive pricing, so the client hs to bear the risk for such changes.

These could be unforseen ground conditions, leading to a change in foundation design. This can be a risk is there was only a limited ground investigation. Likewise groundwater. The assumptions on these conditions would have been qualified in the contractors bid.

There are a few others - delay due to unforseen weather conditions (allowed by some contracts), delay due to regulatory intervention or delay in approvals.

The nice thing about a turnkey contract, is that the contractor is undertaking all of the design (or under his control). So long as the parameters have been properly set by the client, then the risk for all is reduced and therefore the likelihood of a variation is decreased.

If PRU become a meddling pain in the a*** client, then expect to see prices soar.

I think your guess is probably as good as mine shag

Starting to get into the Project Management and Contract Law area here, definitely not my strong point! This is generally where guys in suits yell and swear at each other behind closed doors until a mutually acceptable stance is achieved, so they can eventually come out all smiles and slapping each other on the back :

 

[Sean K]

Stalled and consolidated above the $1.50 ish long term support line. That should be pretty solid down the track if there's a decent correction, but if the world falls apart again, nothing will be saved.

Interesting that this has not responded to the charging POG. I put this down to the fact that it ran from $1.00 to $1.80 in 3 months, while POG just ambled up in comparison. So, it's just coming back to a reasonable level I think.

Should expect more drilling updates shortly with 5 (I think) rigs working away in various locations.

Looking forward to the resource upgrade at Sissingue and updated Reserves statement for Ayanfuri. Could be the catalyst for another run.

At $71 an ounce EV trading cheaper than GRY, FML, and IGR which is a bit silly. I think they might be too expensive at the moment acually...

 

[jonojpsg]

PRU have got to be undervalued though - the DFS stated a paback for Ayanfuri of what, 18 months at $950/oz. At $1050 that leaves an extra $20 million on the table on top of that or takes off another few months. IFF POG stays high, eg $1000+ then PRU will have to move up pretty strongly (eg at least 100%) over the next 12 months to keep up IMO.

 

[globstarr]

I read a recent Rodman & Renshaw (US brokers) report that has the company valued at AUD$4.00 per share. Extract below.

__________
October 16 2009

Raising our target price to AUD 4.00 from AUD 2.75

Our target price is based on the Perseus shares trading at 2x our estimated NAV of AUD 1.90/share. Perseus Mining owns one of the largest undeveloped gold deposits in West Africa having a total resource base of 7 MM ozs of gold.

We expect the resource size to be increased to 10 MM ozs with more drilling at which point every major gold producer in Ghana will take a closer look at the company. We believe that at the current gold price, Perseus is a take-out target and the acquirer will have to pay a significant premium to the current share price.

 

[Sean K]

I read a recent Rodman & Renshaw (US brokers) report that has the company valued at AUD$4.00 per share. Extract below.

Thanks globstarr, plenty of upside IF they get it right. I agree that if everything goes to plan then they should be valued much higher. But, there is a lot of water to slide under the bridge between drilling and selling. If they get it right, longer term holders will do extremely well. I have my fingers crossed in-pit resource grades improve a tad. And, double Reserves and Sissingue resources. Not much to ask!!

 

[jancha]

Stalled and consolidated above the $1.50 ish long term support line. That should be pretty solid down the track if there's a decent correction, but if the world falls apart again, nothing will be saved.

Interesting that this has not responded to the charging POG. I put this down to the fact that it ran from $1.00 to $1.80 in 3 months, while POG just ambled up in comparison. So, it's just coming back to a reasonable level I think.

Should expect more drilling updates shortly with 5 (I think) rigs working away in various locations.

Looking forward to the resource upgrade at Sissingue and updated Reserves statement for Ayanfuri. Could be the catalyst for another run.

At $71 an ounce EV trading cheaper than GRY, FML, and IGR which is a bit silly. I think they might be too expensive at the moment acually...

Kennas howz that chart looking now? With the USD strengthening PRU is taking a bit of a belting. In your opinion would think that gold has reached it's peak or just taking a breather? I hope the latter as i'm holding.

 

[Sean K]

Looks like a decent correction, well overdue.

Short term I'm not sure where gold's going but longer term, if governments keep printing money and keep rates arificially low, gold will go higher. If there's a magical change in policy and everyone gets out of debt, then gold will be cactus.

Personally, I sold all my shares, in everything, last week. I'm having a break from the computer and full time trading/investor for a few months, at least.

All the best!

 

[jonojpsg]

Looks like a decent correction, well overdue.

Short term I'm not sure where gold's going but longer term, if governments keep printing money and keep rates arificially low, gold will go higher. If there's a magical change in policy and everyone gets out of debt, then gold will be cactus.

Personally, I sold all my shares, in everything, last week. I'm having a break from the computer and full time trading/investor for a few months, at least.

All the best!

Hey mate, sounds like a great idea, wish I could say I was doing the same

Hope you have a great break

 

[jancha]

PRU have got to be undervalued though - the DFS stated a paback for Ayanfuri of what, 18 months at $950/oz. At $1050 that leaves an extra $20 million on the table on top of that or takes off another few months. IFF POG stays high, eg $1000+ then PRU will have to move up pretty strongly (eg at least 100%) over the next 12 months to keep up IMO.

The way things are looking I would say that PRU will be heading further south.
I doubt that gold in the short term will regain it's high with the USD strengthening & the possibility the US raising interest rates early next year.
I cant see PRU moving up 100% in the next 12mths however I am still holding but my thinking is of getting out & investing eslewhere.
Any thoughts?

 

[Sean K]

If I wasn't so bearish on the universe right now (and therefore cashed up) this looks like a great set up to me.

Totally oversold due to the GEC capitulation, very strong buying support from the bottom with minor consolidation, smashed through 90c - $1.00 major resistance and then all through time highs, and now consolidating above that level on great volume.

Fundamentally sitting high for an explorer, but closing in on development with piles of cash in the bank.

But, what the fvck is POG going to do?

All things being equal, this should spike up from here.

(therefore, put your shorts on! he he )