Côte d’Ivoire has created an investment environment that is more attractive to foreign capital than Ghana, claims Australian gold explorer, developer and producer Perseus Mining CEO Jeff Quartermaine.

He explains that this has not always been the case and that, in 2011, when Perseus established its Edikan mine on the Ashanti gold belt of Ghana, the country had an international reputation as one of the most attractive destinations for gold mining investment. “Progressively, that reputation has . . . diminished and Côte d’Ivoire is certainly a beneficiary of this change.”

Power supply disruptions and an increasingly difficult operating environment have impacted negatively on Perseus’s operations in Ghana. This has led Quartermaine to predict that the company’s biggest growth this year will be in Côte d’Ivoire, where the company is developing its Sissingué gold project and, subject to the completion of Perseus’s offer to acquire gold explorer Amara Mining, the Yaoure gold project.

Quartermaine says the power load-shedding in Ghana last year was particularly damaging to the Edikan mine, as it resulted in reduced production, deferred cash flow and a decline in the company’s market credibility. Perseus has since bought additional generating capacity and aims to operate independently of the national power grid by midyear. Under normal conditions, the mine will continue to draw from the grid; however, it will be self-sufficient during future electricity shortages. “The need to allocate capital to this investment was not part of the original plan in developing Edikan,” he points out.

Galamsey, or illegal mining activity, has further impacted on company operations in Ghana, although government and military assistance has satisfactorily resolved the situation for now. While Quartermaine acknowledges that traditional artisanal mining has been prevalent in Ghana for many years and accepts this as part of the mining environment and he says the modern galamsey are highly organised and well equipped, and “are allowed to continue unchecked by some of those who are empowered to prevent illegal activities”.

Perseus will, however, continue to invest in Edikan through several projects to improve productivity and reduce maintenance costs. These works will be carried out progressively during the year.

Edikan produced 76 693 oz of gold at an all-in sustaining cost (AISC) of $1 208/oz for the six months ended December 31, 2015. The mine has a strong production profile until financial year 2024 and, for the 2016 financial year, it is expected to produce 172 000 oz to 192 000 oz of gold at an AISC of $1 130/oz to $1 250/oz. Edikan currently benefits from an in-the-money gold hedge of about 120 000 oz at $1 276/oz and is expected to deliver strong cash flow at current gold prices after the financial year to June 30, 2017, when the company’s current reinvestment programme ends.

In February, Perseus announced its intention to acquire Amara Mining, which will enable Perseus to access not only Amara’s Yaoure gold project but also its Baomahun gold project, in Sierra Leone. The boards of the two companies maintain that the combination will create a leading midtier West African gold producer with a high-quality development pipeline, a strong balance sheet and cash flow potential to deliver production growth, as well as an experienced mine construction and operating team. These elements will also deliver significant benefits to shareholders of the combined group.

The combination will further enable Perseus to potentially generate multiple cash flows from mines in different geopolitical settings, reducing the overall risk profile of the company while expanding its production profile, scale and market profile. A key aim of the acquisition will be to progress Yaoure and bring it into production. The company’s recent and projected performance should enhance its ability to finance the combined group’s development pipeline with limited new equity, if required.