ENDEAVOUR Mining unveiled a maiden dividend today of $60m, equal to 0.37 cents a share, and said it had locked in a combined 500,000 ounces a year in gold production over the next five years from its flagship mines that would underpin its payout policy.
Sebastien de Montessus, president and CEO of Endeavour Mining, said the company’s strategy would be to maintain the dividend – to be paid on a semi-annual basis – at its current yield of 1.6% until the firm had amassed net cash of $250m.
It would then re-assess its “capital allocation priorities” which would include “increasing our shareholder return program” through an increased dividends and share buy-backs. An assessment of a buy-back program could come as early as Endeavour’s year-end results presentation in March, said De Montessus.
As of end-September, Endeavour had net debt of $175m representing a reduction in net debt of 71% since the beginning of the year, and $298m in the third quarter alone. The company’s net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) stood at 0.3x compared to 1.94x a year ago.
“We will be net cash by the year-end if gold stays at $1,900/oz,” said De Montessus in a presentation today. He declined to comment on discussions the company was having with Teranga Mining Corp, a Toronto-listed firm, on a potential ‘merger of equals’. “Don’t worry, there’s plenty of other exciting things to talk about,” he said.
He did say of the merger talks, confirmed by the company on Tuesday: “Rest assured we remain committed to generating strong cash flows, deleveraging and paying dividends”. Shares in Endeavour Mining fell 16% in early trade in Toronto today.
The maiden dividend and strong deleveraging were largely fuelled by the sustained improvement in the dollar gold price over the last 12 to 18 months. Endeavour said that for the third quarter it had realised an average price of $1,841/oz for its gold – around $400 more per ounce than for the third quarter in its 2019 financial year.
Year-to-date gold production was nearly 100,000 oz more year-on-year (64% higher in the third quarter at some 244,000 oz compared to the Covid-19 hit second quarter) with additional output growth to flow from the restart of Burkina Faso’s Boungou mine acquired following the April merger with compatriot miner, SEMAFO.
Critical, however, was the stabilisation of long-term production. Endeavour announced today that through resource to reserve definition, it had locked in annual production of about 250,000 oz each from the Houndé mine, also in Burkina Faso, and Cöte d’Ivoire’s Ity mine.
The four to five year pathway developing the assets had now made way for a period of returns in order to reward long-standing shareholders, said De Montessus. “Now is about maximising cash flow,” he said of the 2021 financial year in which Endeavour had no major capital projects earmarked.
It would provide details of a pre-feasibility study in Fetekro, a potential source of new gold production from Côte d’Ivoire with an investment decision set down for 2022. Endeavour also operates the Agbaou mine in Côte d’Ivoire as well as the Burkina Faso mines Karma and Mana, acquired in the SEMAFO transaction.
A decision on a second listing for Endeavour Mining in either London or New York was likely to be announced by Endeavour Mining at its year-end results presentation. De Montessus said the company had “nearly made a decision” having assessed its options. The company was also pushing for index inclusion following the announcement of a dividend, due to be paid during the first quarter.