Endeavour Mining continues growth momentum, but debt hiked up to $535m

Ity gold mine

ENDEAVOUR Mining was on course to register the upper end of its gold production guidance of 590,000 ounces for the 2018 financial year after reporting strong third quarter numbers in which its Houndé mine in Burkina Faso began to make its presence felt.

Quarter production totalled 139,000 ounces taking year-to-date output to 438,000 oz. The guidance for the year was between 555,000 and 590,000 oz.

Shares in the company, listed in Toronto, closed just over 2% lower on November 7. The counter has been under some pressure year-to-date having lost about a fifth of value. The company has a market value of C$2.1bn (US$16bn).

No doubt investors will be keeping close tabs on Endeavour’s net debt position which came in 142% higher year-on-year at the close of the third quarter to $535m from $410m at the close of the second quarter – a function of Endeavour’s aggressive growth strategy.

As of quarter-end, Endeavour had financing and liquidity of $213m, a number that included some $33m in cash (which fell $45m in the quarter), and an $180m undrawn amount on a revolving credit facility. Adjusted net debt to EBITDA basis is 1.75x (Q2: 1.49x).

In terms of returns, Endeavour produced attributable net earnings of $15m for the quarter, an improvement from the $4m reported in the second quarter. On a adjusted net earnings basis, the outcome was negative, however. Operating cash flow per share (before non-cash working capital) amounted to $0.42 for the third quarter, a decrease from $0.64 in the second quarter owing to less ounces sold at a lower gold price, the company said.

The main mover in terms of reducing the net debt situation is the Ity CIL project, also in  Cote D’Ivoire which is tracking two months ahead of schedule and has been described by Sébastien de Montessus, Endeavour President and CEO, as the firm’s next flagship mine.

“As a result of the pace of construction, we accelerated the Ity CIL capital spend, which has been possible due to financial flexibility provided by our strong balance sheet,” he said in notes to the firm’s results. “With Ity CIL’s low projected production costs, we expected to quickly deleverage from current levels once the project goes into commercial production.”

Endeavour operates five mines in three West African countries – Burkina Faso, Mali and Cote D’Ivoire – and is the largest gold producer in Cote D’Ivoire.

3 COMMENTS

  1. What do fellow enlightened readers of Miningmx think of the results of this co. ?

    I will share my views upon receiving opinions of others. This is a classic test of “what is a good set of numbers of a gold miner?”

  2. Dear Fellow Readers,

    hahachaching you are spot on!

    VERY OVERRATED !

    The armchair critic did comment previously about EDV this company ‘s very worrying inability to generate cash. However, during 2010-2015, the company never took any debt and it build its mines from internal cash flows. This was a good strategy. This ensured that shareholders can better assess capital allocation within the co. and evaluate the subsequent cash flow streams. This approach has been abandoned for DEBT to develop POOR MINING ASSETS!

    However, there was a deal with La Macha , which came with 55% of Ity and ±$60M for 30% of EDV. Today, the same stake is worth $500M! Such shareholder wealth transfer deals add-up…

    The Ity CIL project was billed as a $282M CapEx , the current FEC is $430M.

    All told, EDV does upgrade the portfolio when warranted. They have disposed Nzema, Youga and now Tabakoto. The asset sales were inconsequential with proceeds = $145M over 3yrs. However, This proceeds were not enough to cover the close to ±$800M spend.

    In 2015, this company came out and proclaimed that it will be producing >900koz/yr at <$800/oz by 2018, with visibility of 10yrs LoM on all its assets. It provided all its exploration projects to support this target. This target was reduced to 800Koz/yr , then now its more a 2x. So debt repayment should be priority NOT Kalana project. Dividends repayment is a remote possibility given the poor cash flow generation. The asset quality is JUST NOT THERE…to support a MCap= ±$2Bn !

    Yours Truly,
    GS

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