\n\tPerseus<\/span> has operations and developments in Ghana and the Cote d’Ivoire<\/span>. In Cote d’Ivoire<\/span>, the company’s promising Sissingue<\/span> development has been held up for several months due to uncertainty over the government’s fiscal policy – whether or not it would impose a super profits tax – but it is the operating Edikan<\/span> mine in Ghana which has caused Perseus<\/span> the most grief.<\/p>\n \n\tThe crusher required to process ore at Edikan<\/span> has quite simply had a case of the gremlins, confounding the engineers. With problems persisting, Perseus’<\/span> gold production has fallen well short of guidance. A ray of light was shined, nevertheless, at last month’s interim profit result releases and operational update. The gremlins had finally been identified. New parts were on their way.<\/p>\n \n\tThe crusher was shut down for four days in February to replace the parts and the first week of operation thereafter saw a return to 58% capacity. This doesn’t sound all that healthy, but as JP Morgan notes it’s a big improvement on the December quarter’s 44% capacity. While management warned at its interim result that previous full-year production guidance would not be met, the good news is that the crusher is now on a path back to re-achieving nameplate capacity.<\/p>\n \n\tOf seven brokers in the FNArena<\/span> database covering the stock, six took a Buy or equivalent rating into the result release and made no change thereafter. The thumping of the PRU<\/span> share price was enough to provide a buffer against any further delays on full production at Edikan<\/span>. Now that the crusher is on the mend, JP Morgan has decided the stock has plenty of scope to re-rate further than its initial bounce as it becomes clear the crusher is indeed back working properly.<\/p>\n \n\tJP Morgan also notes the current Perseus<\/span> share price is offering little value for the Sissingue<\/span> project, but it is now expected the government will scrap its plans for a super profits tax (someone probably pointed out how successful one had been in Australia) and resort to a sliding royalty regime instead. JPM<\/span> is assuming a top royalty rate of 6.5% to replace the previous flat rate of 3.5%, before sliding, and even on those numbers the broker considers Sissingue<\/span> to be as a good as a “free option” in the current share price.<\/p>\n \n\tPerseus<\/span> thus boasts a 3moz<\/span> plus gold reserve to support what is low-cost gold production now Edikan<\/span> is recovering, an option on Sissingue<\/span> and a further Ghanian<\/span> deposit at Kayeya<\/span>. JP Morgan considers the current price to be “an attractive entry point” and has thus upgraded its rating on PRU<\/span> to Overweight from Neutral.<\/p>\n \n\tThat just leaves BA-Merrill Lynch with a lonely Hold in the database. Merrills<\/span> suggested last month the Sissingue<\/span> fiscal uncertainty prevented a more positive stance. The consensus price target among brokers in the database is $2.47, suggesting almost 50% upside.<\/p>\n \n\tThe USD gold price has strengthened a little this last week or so, but clearly PRU<\/span> has some re-rating potential to exploit before leverage to the price of gold again becomes the major earnings driver.<\/p>\n \n\t
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