Perseus’ (ASX: PRU) first-half fiscal 2026 net profit after tax fell 8% to USD 186 million, or $0.12 per share, as lower volumes and higher unit cash costs more than offset the 38% increase in its realized gold price. But the firm doubled its interim dividend to 5 cents per share, unfranked.

Why it matters: The result is tracking below our full-year expectations, largely due to softer-than-expected gold sales volumes in the half. But management reaffirmed guidance for production of between 400,000 and 440,000 ounces and all-in sustaining costs, or AISC, of between USD 1,600 and USD 1,760 per ounce.

  • Our forecast for fiscal 2026 production remains near the midpoint of guidance. We expect volumes to rise in the second half as the miner transitions toward higher grades at a couple of its mines.
  • But volumes are nevertheless likely to fall this year, by about 16% on fiscal 2025, and we still expect materially higher AISC as a result. Increased royalties due to higher gold prices and the new increased royalty rate applied in Cote d’Ivoire contribute.

The bottom line: We maintain our fair value estimate for no-moat Perseus at AUD 3 per share. Shares are materially overvalued, trading at close to double our intrinsic assessment. This is likely driven by investors assuming the gold price remains near historical highs at about USD 5,000 per ounce.

  • This is more than double our assumed price of USD 2,050 per ounce midcycle from 2030 based on our estimate of the long-run marginal cost of production. Many investors may also assume a lower cost of capital than we do.

Coming up: The Nyanzaga project is slated to begin production in fiscal 2027, with its reserve life modestly increased to 16 years from 14. But Perseus still has a relatively short reserve life of about a decade and so is dependent on exploration or acquisitions to maintain production.

Perseus shares remain materially overvalued

Perseus Mining owns three gold mines in West Africa. All were purchased as exploration licenses or development projects. In 2004, the company purchased the Tengrela project in Ivory Coast that became its 86%-owned Sissingue mine. The exploration license that became its 90%-owned Edikan mine in Ghana was bought in 2006, with its 90%-owned Yaoure mine in Ivory Coast acquired as a development project via the merger with Amara Mining in 2016.

The purchase of Orca Gold in 2022 brought the 70%-owned Meyas Sand gold project in Sudan into its portfolio. It also acquired Orecorp in fiscal 2024 and is developing its 80%-owned Nyanzaga gold project in Tanzania.

We forecast Perseus to sell around 510,000 ounces of gold in fiscal 2030, modestly higher than fiscal 2025. The development of Nyanzaga, with first gold likely in fiscal 2027, will likely offset falling volumes from its other mines. Though it is not our base case, it could potentially offset these mines’ reserve depletion through successful exploration or acquisitions of nearby deposits that could use their existing infrastructure. We expect Nyanzaga to produce around 200,000 ounces per year for about a decade.

If developed, Meyas Sand could also add around 170,000 ounces per year for more than a decade.

Excluding Meyas Sand, where development is on hold due to armed conflict in Sudan, the company had about a decade of reserves at the end of fiscal 2025.

Its average all-in sustaining cost, or AISC, of around USD 1,240 per ounce for fiscal 2025 places it around the top end of the first quartile of the gold industry cost curve.

Perseus’ focus is on Africa, with the goal of owning three to four gold mines with remaining lives of at least a decade. It is targeting maintaining production at around 500,000 ounces per year and prefers to buy assets at the predevelopment stage and subsequently develop them.

Bulls say

  • Perseus’ strong balance sheet means it is well placed to purchase or develop additional mines.
  • The company sits around the top end of the first quartile of the gold cost curve, meaning it is less leveraged to changes in the gold price than its higher-cost competitors.
  • Gold prices tend to be uncorrelated to other asset prices. They can also provide a hedge to inflation risk

Bears say

  • With only around a decade of reserves at end June 2025, Perseus risks overpaying to discover, develop or buy replacement ounces.
  • With its mines all located in Africa, Perseus carries potential sovereign risk.
  • Gold is subject to the whims of investors, who can move as a herd and affect the price.

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.