ENDEAVOUR Mining has kept shareholders hanging on for a cash payout a while longer saying today in a second quarter and half year results announcement that the firm would be net cash “in the coming quarters at which point it intends pay an initial dividend”.
The company ended the first six months of its financial year with net debt of $473m which compares to $660m at the interim point last year, a 28% reduction. This was after posting adjusted net earnings of $86m, equal to 78 US cents/share for the six months ended June.
The numbers cannot compare to last year as they incorporate the assets of SEMAFO, the Canadian firm with which Endeavour merged in May.
Sébastien de Montessus, CEO of Endeavour Mining, hinted that the dividend might come quicker than currently planned given gold price strength. “The dividend is the right instrument to put in place once we are net cash, which can come quite quickly depending on the gold price,” he said in a results presentation on Wednesday.
The average gold price received by Endeavour over the six months totalled $1,612/oz, which is about 27% higher than the first six months of 2019. Following another surge overnight, in which dollar gold moved through $2,000/oz, current spot is another 26% higher than the first half average price collected by Endeavour.
The flight to gold among investors, brought on by the economic consequences of the Covid-19 pandemic, has put esprit into nearly all gold shares globally. In the case of Endeavour, its shares are 49% higher year-to-date. At some C$37 per share today, the company – at C$6.02bn – has never been more highly valued by the market.
However, De Montessus also raised the possibility of a share buy-back if the board felt the company’s shares were trading below its enterprise value. “Step one is to be net cash. Step two is to build up some cash on the balance sheet to send a message of more confidence; that, despite geographic risk and exposure, we can support the business,” he said.
In SEMAFO, Endeavour has bought the Mana and Boungou mine in Burkina Faso. Although Endeavour already operates the Agbaou and Karma mines in the West African country, the addition of the SEMAFO mines is viewed as risky. Boungou has been closed since late last year following an attack on a mine bus that killed 37 employees and injured many others.
De Montessus met with Burkinabé prime minister, Christophe Dabiré, in the second quarter where a security plan was discussed, the details of which are currently under wraps.
Once implemented, the security plan will enable Endeavour to embark on exploration activities beyond the mine perimeter. Current exploration targets are within the perimeter or no more than five kilometres from the mine, said De Montessus.
In the meantime, the company is working on the reopening of Boungou by the fourth quarter. Infrastructure development, which has included the rebuild of the mine’s private landing strip, is underway. Along with Boungou’s re-opening, Endeavour hopes to chase through a host of other good news events including a preliminary economic assessment of its Fetekro in Côte d’Ivoire.
PRODUCTION
Including SEMAFO, production for the half year came in at 479,000 ounces. Given that the merger with SEMAFO was expected to result in a one million oz per year gold producer, Endeavour has some catching up to do in the current half.
De Montessus said Endeavour was “on track” to reach full year production guidance of between 995,000 and 1,1 million oz at an all-in sustaining cost (AISC) of $865 to $915/oz. It hoped to stage “… a significantly stronger performance in the second half of the year with higher grades,” said De Montessus.
LISTING
A secondary listing in either of London or New York was under discussion, said De Montessus who added that as the company was headquartered in the UK, London would be “the natural landing place”.
“But New York has some interest,” he said.
“There are pros and cons to both listing destinations. We will definitely decide on one of them on the next two to three months”. A company such as the former Randgold Resources (now merged with Barrick Gold) would be a suitable comparative company, said De Montessus in terms of rating.
