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Perseus Mining Downgraded To 'Sector Performer' By CIBC

 January 22, 2013 10:12 AM


(By Balaseshan) CIBC World Markets Inc. analyst Cosmos Chiu downgraded rating of Perseus Mining Ltd. (TSE: PRU) to "Sector Performer" from "Sector Outperformer" and lowered price target to $2.80 from $3.50.

The analyst said Perseus is facing headwinds on several fronts, in both Ghana and Ivory Coast. Chiu now estimates a flat production profile for each of calendar 2013 and 2014, at about 200,000 ounces annually and total cash costs of more than $800/oz.

At Edikan, the main issues pertain to the primary crusher, and can be traced back to the initial installation and commissioning, as well as sub-optimal operational and maintenance practices, the analyst noted. Fixes include the replacement of the main shaft, while further studies are underway.

[Related -Toll Brothers Inc. (TOL) Q3 Earnings Preview: Big Beat, Small Move?]

Chiu looks at costs a little differently, in a way he believes to be reflective of underlying costs. He believes total cash costs of production for the December quarter are $844/oz (versus the company's reported $695/oz).

In the Ivory Coast, the proposed windfall tax was not passed into law, a clear positive, the analyst noted. That said, negotiations between the government and the mining industry continue on alternative fiscal measure. At this time, PRU has deferred its construction decision until further clarity is received.

PRU is trading down 2.97% at $1.96 on Tuesday.

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