Endeavour Mining agrees sale of Burkina Faso gold mines to local firm, Lilium Mining

ENDEAVOUR Mining has finalised an agreement to sell its 90% interests in its Burkina Faso mines Boungou and Wahgnion.

The London- and Toronto-listed gold producer said today Burnikabe company Lilium Mining was the buyer. Lilium Mining would pay Endeavour up to $300m for the two mines with an initial $130m in cash due by end-July.

The balance of the consideration consists of two deferred cash payments totaling $25m, a share of net free cash flow from Boungou up to $50m, and two net smelter royalty agreements equal to 4% of gold from Boungou and Wahgnion over the life of the mines.

Lilium Mining is a subsidiary of Lilium Capital which Endeavour said was owned by West African entrepreneurs.

In the wake of the proposed sales, Endeavour adjusted its gold production forecast for its 2023 financial year down to between 1.06 to 1.14 million ounces from a previous forecast of 1.33m to 1.43 million oz.

“In line with our strategy of actively managing our portfolio to focus management efforts on higher quality assets, we are pleased to announce the sale of our non-core Boungou and Wahgnion mines to Lilium Mining,” said Sébastien de Montessus, CEO of Endeavour Mining.

He previously flagged the company was looking to divest from the mines. One aspect of their sale is that it reduces Endeavour’s exposure to social foment in Burkina Faso to which Boungou was especially exposed owing to its location in the east of the country.

But the sales also improve Endeavour’s all-in sustaining cost profile (AISC) which has been adjusted $45 per oz lower as a result. AISC is now guided to $895/oz to $950/oz. Boungou and Wahgnion contributed a combined 240,000 oz, or 17% of Endeavour’s 2022 gold production. Both mines reported a net decline in reserves.

For the 12 months ended December 31, Endeavour took an $360m impairment driving the company into a $1.04 per share headline loss. Of these impairments $197m related to Wahgnion and $163m to Boungou. Adjusting for one off items, net earnings came in at $405m for the year or $1.63 per share.

Security in Burkina Faso has deteriorated in the last three years amid increased attacks by Jihadist organisations. Last year, Endeavour suspended exploration beyond Boungou’s mine boundary about three months after the first of two coups.

In January, France announced it was withdrawing military support from Burkina Faso within the month. Burkinabe prime minister Apollinaire Kyelem de Tambela had said earlier Russia had become a “reasonable choice” of ally. “We think our partnership has to be strengthened,” he said.

“The potential sale of these two assets, in our opinion, could provide Endeavour with a multiple uplift through reduced Burkina Faso exposure,” said Raj Ray, an analyst for BMO Capital Markets in March. Endeavour’s exposure to Burkina Faso would reduce to 29% of net present value compared to 40% current were the sales completed, he said.

“In a potential divestment scenario, the realisable value could be lower than our carrying value for the two assets, but Endeavour should get a multiple uplift from reduced Burkina Faso exposure,” said Ray.