ENDEAVOUR Mining estimates its newly acquired Karma project, a property in Burkina Faso, will help boost 2016 production by about 100,000 ounces to just over 600,000 oz.
The project, which is due to come into commercial production in June, was bought as part of the Toronto-listed firm’s C$191m ($153m) all-share acquisition of True Gold announced on April 22.
Although Endeavour Mining said it would only publish an updated gold output figure in the second quarter, a graph in its first quarter presentation showed output from Karma, as well as additional gold from the heap leach operations at Ity, lifting output beyond 600,000 oz.
The company had estimated production of between 535,000 oz to 560,000 oz at an all-in sustaining cost (AISC) of between $870 to $920/oz for the current financial year. This compares to production of 517,000 oz in Endeavour Mining’s 2015 financial year.
Endeavour Mining operates four mines in Mali, Côte d’Ivoire, and Ghana. Output in the first quarter of the year was marginally lower quarter-on-quarter at some 132,000 oz partly owing to problems at Nzema mine in Ghana. The operation treats ore from its Adamus pit but it supplements this by buying in ore which, in the first quarter, was interrupted owing to permitting problems with suppliers.
However, Neil Woodyer, CEO of Endeavour, said the company was on track to meet production and AISC forecasts set down prior to the purchase of True Gold. “The Agbaou and Ity mines are delivering excellent performance and the underground Tabakoto mines should gain momentum in the coming quarters,” he said.
“Our group AISC has continued to decrease, achieving $889/oz from our current operations, which provides a solid cash generation foundation,” said Woodyer. AISC is expected to be between $870/oz to $920/oz for the eyar.
Endeavour more than doubled free cash flow quarter-on-quarter to $28m (before working capital, taxes and financing costs) taking cash from operating activities to $117m.
In terms of the share-based purchase of True Gold, however, shareholder La Manché, a private investment group, had the option to buy shares in Endeavour in order to maintain its 30% holding. This is due to boost cash to $65m to $185m and give a lift to Endeavour’s net debt position. Endeavour consequently has net debt of $71m after accounting for a payback in debt of $40m to a net position of $200m.
Endeavour needs the liquidity. In the current (second) quarter, the company is due to embark on construction of its recently approved Houndé project which is situated in Burkina Faso. The project has an estimated capital cost of $328m.
“The second quarter will be important for Endeavour with the integration of True Gold’s Karma Mine and its ramp-up to commercial production, and the start of construction at our Houndé project which will ultimately become our flagship low-cost mine,” said Woodyer.
