Endeavour Mining, the leading West-Africa-focused gold miner, sets sights on free cash flow and organic growth for 2021

• One of the top 15 global gold producers and member of the World Gold Council
• Aims to discover 10 to 15Moz of indicated resources by 2021, representing over double the reserve depletion during the period
• Quickly approaching a net cash position

What Endeavour Mining Corp does:

Endeavour Mining Corporation (TSE:EDV) (OTCMKTS:EDVMF) is a leading gold miner with several assets, focused on West Africa, which offers investors near a and long term growth potential.

Its strategy is focused on increasing the quality of its portfolio to establish long life mines and low all-in sustaining cost (AISC) through a focus on operational excellence, developing projects on time and on budget, unlocking value through exploration and maintaining a healthy balance sheet.

The company employs 4,700 staff and already has 23 million ounces of measured and indicated (M&I) resources to its name. It aims to have discovered between 10 and 15 million indicated ounces by 2021 and has so far notched up over 6 million.

In July, 2020, the company successfully completed its acquisition with SEMAFO Inc and integrated SEMAFO’s two assets Mana and Boungou in Burkina Faso into its portfolio.

Endeavour operates six producing mines across Ivory Coast (two mines with Ity and Agbaou) and Burkina Faso (four at Houndé, Mana, Karma and Boungou). It also has four potential development projects (Fetekro, Kalana, Bantou and Nabanga) and a strong portfolio of exploration assets on the highly prospective Birimian Greenstone Belt across Burkina Faso, Ivory Coast, Mali and Guinea.

How is it doing:

On November 16 last year, Endeavour confirmed it was buying Teranga Gold Corporation (TSE:TGZ) (OTCQX:TGCDF) (FRA:0TGA), a low-cost, mid-tier gold producer with two producing gold mines in Burkina Faso and Senegal, in a C$2.4 billion deal.

Once finalized, the combined company will have gold production of over 1.5 million ounces per year and boast one of the largest exploration portfolios in the Birimian greenstone belt.

And in December, it announced it had struck a deal to lift its stake ( to 80% from 65%) in the Fetekro exploration project in the Ivory Coast, having said in August, that the project had the potential to be the company’s highest grade operation, after it more than doubled indicated resources there.

An initial preliminary economic assessment (PEA) at the Lafigué deposit at the asset based on 1.2 million ounce (Moz) indicated resource had shown an eight year mine and pre-tax net present value (NPV) of US$372 million.

Endeavour is lifting the stake ahead of a pre-feasibility study (PFS) for Fetekro, which is due to be published in the first quarter of this year.

Then on January 22 this year, the miner said it would sell its 85% stake in non-core Agbaou gold mine in Ivory Coast to Allied Gold Corp for up to C$80 million to concentrate on high-margin, long-life core assets.

The sale is expected to conclude on March 1 this year, and Endeavour retains a net smelter royalty (NSR) royalty on ounces produced in excess of the Agbaou reserves as at an estimate at the end of 2019.

On January 25, the miner said it generated, despite the challenges of the pandemic, a record 908,000 ounces of gold in 2020, to end-December, which was a 39% increase on 2019.

Fourth quarter output came in at 344,000 ounces of the yellow metal, while all-in-sustaining-costs (AISC) decreased by 15% to around US$770 per ounce in the three months.

It was the eighth consecutive year the group achieved its annual output guidance, it noted.

The group’s net cash position was around C$70 million at year-end, marking a reduction in net debt of around $245 million during Q4, 2020 and of around C$600 million during the whole year.

Significantly, Endeavour said it would pay a first dividend payment on February 5 this year, and said it may increase the dividend and/or carry out a buyback once it has reached a targeted net cash position of C$250 million.

Endeavour told investors in the statement that it would strongly focus this year on free cash flow generation and progressing its organic growth pipeline with a preliminary feasibility study (PFS) on Fetekro (Ivory Coast) and Kalana (Mali) due in the first quarter. A definitive feasibility study (DFS) is targeted for the Sabodala-Massawa plant expansion in the fourth quarter, it added.

The group’s 2021 exploration budget stands at between C$55 million and 60 million.

What the broker says: 

Following the  Q4/2020 results, broker Canaccord Genuity repeated a ‘Buy’ recommendation and a target price of C$48, noting that the miner’s production in the fourth quarter was a 24% beat over the broker’s estimate and a 41% increase quarter-on-quarter.

“We note that all assets outperformed our expectations except at Agbaou, which was largely in line,” said analyst Carey MacRury.

Endeavour’s 2021 guidance is for consolidated production, not including the Teranga assets and Agbaou, of between 900,000 and 990,000 ounces, against the broker’s estimate of 1.023 million ounces at all-in-sustaining costs (AISC) of between US$880 and US$930 per ounce. Canaccord’s estimate is for US$893 per ounce.

MacRury also noted that the Teranga transaction was expected to close in mid-February this year after Endeavour and Teranga shareholders voted in favour last week.

“Management is expected to provide updated 2021 guidance including the Teranga assets following the closing,” said the analyst.

The broker notes the following upcoming catalysts:

• • Closing of Teranga acquisition (mid-February)
• • Maiden reserve estimates for Kari Center and Kari Gap (mid-March)
• • Fetekro pre-feasibility study (late Q1/21)
• • Kalana pre-feasibility study (late Q1/21)
• • Premium LSE listing (late Q2/21)

What the boss says:

In the statement accompanying the fourth quarter/2020 results, Sebastien de Montessus, Endeavour’s president and chief executive, noted that 2020 had been a transformational year for the company as it consolidated its position in West Africa.

“In spite of the challenges presented by the global pandemic, we are proud to have achieved our annual production and AISC guidance for the eighth consecutive year. Looking ahead to 2021, our focus will be the integration of the Teranga assets and progressing our organic growth pipeline,” he said.

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Story by ProactiveInvestors