Perseus Mining has updated the resources at the Edikan mine in Ghana.
Total resources now stand at 7.7 million ounces, reconfirming what I was hoping for before and this re-establishes Edikan as a large scale project.
The investment thesis remains unchanged, as it was built around cost controls and not around resources.
Perseus Mining (OTCPK:PMNXF) has announced an updated resource estimate for its Edikan project in Ghana, Africa. The total measured and indicated resources are now estimated at just over 5.3 million ounces at an average grade of 1.1g/t. There's also an additional inferred resource estimate of 2.36 million ounces at a slightly lower grade of 1g/t. This brings the total resource estimate to 7.7 million ounces, which is in line with the previous resource estimate, taking mine depletion into account.
Perseus' problem wasn't that the gold wasn't there (and this resource estimate confirms the Edikan project to be a very interesting and large project), its problem was the cost structure. Already in the beginning of the production phase it became quite clear that the mine would never reach the low operating costs, which were envisaged in the feasibility study and that this would be a high-cost and low-margin mining operation. The management team at Perseus has commenced a turnaround strategy, and this resource update should strengthen the confidence in the resources on the project and will be a stepping stone for further enhancements to the mine plan.
In my earlier article, I was expressing my hope that the turnaround point would have been reached, and I continue to hope that things will get better from here on. The gold is there, and will support a 25-year mine life, now it's the management's task to keep the costs low enough for this mine to be a sustainable profitable mining operation.
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