ENDEAVOUR Mining, a Toronto-listed gold producer operating in West Africa, is betting on its strongest operating quarter yet to take it to forecast full-year production and free cash flow targets.
“Our results year-to-date, combined with our expectation for stronger performance from each of our five operating mines in the fourth quarter have us well positioned to meet our key guidance metrics in 2016,” said Sébastien de Montessus, CEO and President of Endeavour Mining in the company’s third quarter results statement today.
The company has produced 408,000 ounces of gold from five mines in Mali, Côte d’Ivoire, and Ghana, including the now sold Youga operation so far this year. Of this, some 146,000 oz was in the third quarter which includes a first time contribution from Karma, a newly built mine sited in Burkina Faso.
Endeavour has guided for full-year production of between 575,000 to 610,000 oz at an all-in sustaining cost (AISC) of $870 to $920/oz. AISC came in at just below $900/oz in the September quarter.
It added that free cash flow was “well on-track” to meet 2016 full year guidance of $135m owing to the improvement in operating performance, including Karma which is now in commercial production, lower non-sustaining working capital as the company had completed a lot of its development, and the close of a hedge at Nzema which lost $9m on forward gold sales.
The company’s working capital movement is expected to be neutral after significant outflows earlier in the year, especially a $20m outflow in the first quarter.
The group’s free cash flow is presented before working capital, taxes and financing costs, as well as capital expenditure it may still incur on Karma, as well as Houndé, a proposed $328m mining project.
However, Endeavour remains well capitalised. It has $137m in cash as well as $210m undrawn on a revolving credit facility, and $50m in mine equipment financing at Houndé.
Net debt has been reduced to $14m as of September 30 compared to $242m at the same date last year as a result of $180m in net equity proceeds. This included an equity injection from shareholder La Mancha which was anxious to avoid dilution following an equity issue.
Endeavour said in a presentation published on its website in July that it intended to reach 900,000 oz/year in gold production by 2020 at an all-in cash cost of less than $800/oz. This will be achieved partly through the development of its Houndé project. The life of mine of its core assets would exceed 10 years, it added.
It also outlined an aggressive exploration programme and said earlier this year it would raise C$125m through a share placement at a price of $20 per common share.
For the September quarter, the company produced adjusted net earnings from continuing operations some 19% higher over the previous quarter, rising to $33m and about 39% higher on a per share basis.
Shares in the company have rocketed in the past 12 months rising to C$24.83 per share from C$6.70/share.
