ENDEAVOUR Mining would pay dividends that recognised shareholders “deserve to be paid something today” – but not at the expense of the firm’s long-term prospects, said Ian Cockerill, CEO of the C$7.49bn gold miner.
Endeavour announced in its second quarter and interim results presentation on Wednesday that it would increase its base dividend payment to $225m – 19% higher than the $210m it is committed to pay in the current financial year, ended-December 31. A proviso, however, is that the gold price averages $1,850 per ounce.
Given the metal is currently trading at a fresh record level of $2,422/oz, the 2025 base dividend seems a likelihood. Less certain, however, is the extent of supplemental payments which could be in share repurchases, or buy-backs.
The firm’s net debt position figures highly in the final outcome. So far this year, Endeavour has bought back $20m in shares but it hasn’t announced supplemental dividend payments.
One question posed by analysts today is the scale of production improvements for the remainder of the year given Endeavour is heavily second half weighted (on a 40:60 basis, according one analyst). Another issue is the firm’s balance sheet.
Endeavour is at peak net debt of $835m, equivalent to a net debt to Ebitda ratio of 0.8x. Whilst Cockerill said Endeavour had previously racked up a 3x times ratio during a previous investment cycle peak, the balance sheet is much more leveraged year-on-year. Net debt last year end-June was $171m.
The aim was to trim net debt by “a couple of hundred millions”, said Guy Young, Endeavour’s CFO. A revolving credit facility would be targeted in particular, he added. “We aim to be as de-levered ahead of the next phase of [mine] build.”
In its 2022 financial year, Endeavour set out a base dividend of $175m but paid a total return to shareholders of $266m which most of the additional returns in share buy-backs. Shares in the company traded 2.6% lower in Toronto taking its year-to-date gain to a modest 3.5%.
Another concern analysts mentioned during the presentation was the surprise departure of the firm’s COO Mark Morcombe as well as Jono Lawrence, executive vice-president of exploration. The COO role would be divided between two employees in the future.
Cockerill said employees “get stale” after they are in a job too long adding that the work pressure was “punishing on individuals” over time. Morcombe, who has been at Endeavour for five years, said he decided last year not to stay much longer at the firm.
