Can you introduce the company’s projects and its focus heading into 2019?

Perseus has one operating mine in Côte d’Ivoire called Sissingué and another in Ghana called Edikan. Later this year or possibly early next year, we hope to begin construction of our third mine, Yaouré, which is also in Côte d’Ivoire, with the objective of having three operating mines by 2020-2021, making us a multi-mine, multi-jurisdiction operator and a fairly sizable producer of gold.

We have come a long way in a fairly short period of time and in the last few years, the company has really started to hit its stride. We achieved our best quarter yet in June 2018, after we brought the Sissingué mine on stream earlier this year. We are very pleased that the plan we articulated to the world has started to be realized.

Can you elaborate on the progress the company has made in the construction of Yaouré in Côte d’Ivoire?

We completed the feasibility stage last year and have now completed approximately 50-60% of the front-end engineering and design. We believe the government in Côte d'Ivoire will grant the exploitation license fairly shortly; my understanding is that all of our applications have been reviewed and approved by the Minerals Commission and the proposal is on its way to the Inter-Ministerial Committee for approval prior to being signed by the President.

At the moment, we are also implementing our financing plan. We will not need to go back to the equity market as on current projections, we can comfortably finance the project through internally generated cash and an amount of bank debt. We estimate that Yaouré will cost around US$260 million to build

As soon as the exploitation license is issued, our intent is to finish the compensation of farmers and land owners and begin early works around the site such as roads and fencing.  

What do you believe is the main reason for disagreements between government and mining companies?

There appears to be a large gap in the understanding of mineral economics between mining companies and governments. Everybody is under pressure to find funds and when governments approach traditional lenders, like the World Bank or OECD, the advice they seem to receive is to extract more value from the country’s existing resources. There seems to be a belief amongst some politicians, not shared I should say by the companies, that the mining industry is not sufficiently contributing to their host countries economic welfare.

The Ghanaian deputy minister recently made a valid point when she observed that there has been a gold mining industry in Ghana for over 100 years but not much of the extracted wealth appears to have stayed in the country. Examining some of the infrastructure in Ghana, particularly the roads around Edikan, for example, and you have to agree. My observation to her was that, while this may be true, it is a fact of the past and the “lost” money cannot be retrieved as in many cases the composition of the industry has changed. Looking to the future however, host governments, and the industry (and by industry I mean both the formal and informal sectors) need to sit down, understand where each other is coming from, and find a solution where both miners and host governments will benefit.

Can you breakdown this conundrum from a stakeholder engagement perspective?

In the mining business, there are essentially five key stakeholders: host governments, host communities, employees, suppliers of goods and services, and financiers. There are two subsets in financiers: bankers, and the equity investors. There has to be an equitable balance between the distribution of benefits of any project between the various stakeholders, otherwise if one group feels hard done by, they are going to become very upset. Government’s can pull the license or levy draconian taxes, the community can create disruption, employees might withdraw their labour, or worse still their enthusiasm for work; and if the suppliers of goods and services get upset, they will go somewhere else to sell their products. If the bankers are upset, they may call their loans. The equity investor is between a rock and a hard place, because once their money is in the ground, there are only two alternatives; one is to walk away and leave everything behind, the other is to make it work. Our job in the middle of this is to try to strike and then maintain the balance between the competing stakeholders.

If the host government’s demands more than the share allocated to them, the incremental benefit won’t come from the employees, because they're not going to take a cut in pay; it will not come from the suppliers of goods and services, and we don't want it to come from the community, because for us, the community is synonymous with our workforce. Banks generally won’t accept a reduction in terms and so that means that the squeeze comes on the equity investor and there is only so much that they will put up with.  From our perspective, we have to work out how our equity investors can maintain their fair share of benefits because if they become dissatisfied, we lose their support and our access to equity capital. It is a very complex problem and one that we wrestle with daily.

How will Ghana’s push to diversify away from gold impact Perseus?

I don't think it will affect our business at all, but it is worth bearing in mind that if this effort to diversify makes conditions worse for participants in the gold industry, then future investment in our business could become problematic. Global investors have choices. The gold game in West Africa has become quite competitive now, especially in Côte d'Ivoire as a new address for people to explore. Burkina Faso and Mali are big competitors, and even Guinea is starting to get involved.

What is the access to skilled labor in a country like Ghana that has a long tradition in gold mining?

There are several educational institutions generating very skilled Ghanaian professionals, including mining staff. Unfortunately, a lot of those individuals are working outside of Ghana. In fact, in Perth, there is a huge diaspora of Ghanaians. This brain drain is not ideal for the country, but nonetheless there are still a lot of very good people working in-country. In some of the specialist areas, finding in-country expertise can be challenging and the government has been placing severe restrictions on us bringing in external expertise,  even though sometimes it is necessary. Obviously, given the choice we would always prefer to source labour and expertise locally, but sometimes this is simply not possible.

Can you share a final message about the fundamentals that will underpin the future success of Perseus going forward?

The four elements that are absolutely essential for a successful mining operation are good physical assets, good human assets, strong social license, and financial capacity. Without one of those, the whole system breaks down. We have always worked hard at the social license, and we have curated a strong team of people both in our corporate office and on our sites. We are now looking very hard at our physical assets to evolve our portfolio and upgrade the quality. This of course takes financing, and there is currently a chronic disinterest in gold in the global equity market. Battery metals are receiving a lot of attention, alongside trends like cannabis and crypto-currency in North America. Nonetheless, compared to several years ago, we at Perseus are now fairly adept at dealing with the challenge of operating in West Africa and we will leverage that experience going forward in each of the critical areas mentioned.