Endeavour questioned on Burkina Faso after “security concerns” led to Boungou write-down

Sebastien de Montessus, president and CEO, Endeavour Mining

A REDUCTION in gold reserves at Endeavour Mining’s Boungou mine in Burkina Faso was a result of security concerns which prevented the firm from conducting exploration last year.

Sébastien de Montessus, CEO of Endeavour, said in a year-end presentation today that the group’s view on Boungou had not “fundamentally changed” and that it remained a core asset. The mine, which was bought as part of Endeavour’s all-share purchase of SEMAFO in 2020, was today written down in the firm’s books by $246m.

De Montessus said the company had, however, taken a prudent approach with Boungou. “As part of the allocation of the purchase price we clearly had views on reserves and also on the conversion of resources into reserves. Fundamentally, this hasn’t changed.

“The only difference is that because of the security environment we had to delay our exploration programme there, and therefore those conversions we expected to do in 2021 have been delayed,” he said.

“In order to be cautious in the current environment we preferred to do the impairment calculation on the reserves rather than including the resources we haven’t been able to drill yet. It is a more cautious approach rather than a change in approach to the asset.”

Burkina Faso has witnessed growing acts of terrorism perpetrated by roving Jihadist gangs. When Endeavour bought SEMAFO, Boungou had been closed for a year following an attack on a convoy heading to the mine, killing 39 people and injuring 60 others.

The government of the West African country has since fallen to a coup. Although a relatively peaceful event, analysts were concerned as to how smoothly the current military junta plans to transition to democratic rule.

De Montessus said the new transitional government had given assurances it would “revert to constitutional life and so far it has kept to its word”.

He added Endeavour was familiar with some of the key figures in the transitional government including its president Paul-Henri Damiba (a lieutenant) as well as the mines minister.

The new government would take “a tough stance on terrorism,” he said. “They have very strong ties with France which will be more involved in the country to fight terrorism so we see that as positive. We are not expecting any particular turbulence on that front.”

De Montessus also faced questions about why Endeavour had not chosen to write down another of its mines, Mana which is also situated in Burkina Faso. It reported a 23% decline in reserves in the 12 months ended December.

Mana was “a bit of a different story” because the company had decided to include underground resources rather than open pit gold that previous owner SEMAFO wanted to mine, said De Montessus.

“There was a reduction in reserves which was based on open pit expansion SEMAFO had in mind and we converted resources on the underground into reserves,” he said. The company consequently decided not to impair Mana because it was “comfortable with … the future of the asset”.

Endeavour announced earlier today that it would pay a $140m dividend for its 2021 financial year, $15m more than its previously stated target following a 79% year-on-year increase in adjusted net earnings of $577m.

The final dividend of 70c/share would match the interim dividend announced last calendar year and follows the 60c/share maiden dividend unveiled in 2020.