Perseus Mining Ltd (ASX: PRU) shares are under pressure on Wednesday.
At the time of writing, the ASX 200 gold stock is down 7% to $3.57.
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Why is this ASX 200 gold stock sinking?
Investors have been selling the gold miner's shares after it announced its five-year operating outlook.
According to the release, Perseus expects to produce a total of between 2.6 million and 2.7 million ounces of gold over the next five financial years. This equates to an average of 515,000 to 535,000 ounces annually.
Management notes that this level of output would maintain the company's status as one of the ASX 200's leading mid-tier gold producers.
The ASX 200 gold stock expects this to be achieved with consistent margins over the five years. At a long-term gold price assumption of US$2,400 per ounce, Perseus is forecasting a cash operating margin of at least US$500 per ounce.
The company's all-in sustaining cost (AISC) over the five years is forecast to range between US$1,400 and US$1,500 per ounce, with less than ±10% fluctuation expected year-to-year.
How will it achieve this?
The release highlights that this production forecast is underpinned by four operating assets: Yaouré and Sissingué in Côte d'Ivoire, Edikan in Ghana, and the soon-to-come Nyanzaga Gold Project in Tanzania.
Impressively, 93% of planned gold production is based on existing ore reserves, giving a high degree of confidence in the outlook.
Capital investment across all four projects is expected to reach US$878 million, though this is not included in the AISC figures. However, with US$1.1 billion of liquidity, management believes its plans are fully funded.
Is this good or bad?
Although the five-year outlook looks good on paper, it appears to have disappointed the market for a couple of reasons.
One is that production is actually forecast to fall initially before ramping up. The other is that its ASIC forecast of US$1,400 to US$1,500 per ounce is meaningfully ahead of its current ASIC of US$1,162 per ounce.
Commenting on its outlook, the ASX 200 gold stock's CEO and managing director, Jeff Quartermaine, said:
In FY22, Perseus's gold production reached approximately 500,000 ounces for the first time and set in train our ambition to maintain or exceed this level of production on a consistent basis going forward.
Perseus's decision in 2023 to defer development of its Meyas Sand Gold Project in Sudan and pivot towards acquisition and development of the Nyanzaga Gold Project, will lead to a short term shortfall in 2026 and 2027 relative to this target.
From the five-year outlook published today, it is clear that this is a temporary setback and that Perseus's strategy of consistently producing between 500,000 to 600,0000 ounces of gold per year at a cash margin of not less than US$500 per ounce, is eminently achievable.
