ENDEAVOUR Mining bought back $22m of its own shares so far this year, and said it would opportunistically repurchase more as it sought to boost its promised minimum dividend of $225m for the 2025 financial year.
Shares in the West African gold miner have increased about a fifth in 12 months but trail companies with similar production or operating in similar conditions such as Harmony Gold (up 50%) and Perseus Mining (+60%).
The company has consequently played up to the future benefits of its switch towards cash flow generation following a period of organic growth.
While future production of about 1.5 million oz has been pencilled in (compared to 1.1 million in the 12 months ended December), the company generated record $268m in free cash in the fourth quarter.
“As a result, our financial position also improved significantly and we ended the year with a leverage ratio of 0.55x, placing us firmly on track to achieve our near-term target of 0.50x,” said CEO Ian Cockerill in notes to the results.
Year-on-year, net debt increased to $732m as of December 31 (2023: $555m), but improved from $834m as of September 30.
BMO Capital Markets said that although Endeavour reported lower-than-consensus adjusted share earnings for the year, “the strong cash flow numbers reflect the free cashs flow inflection that investors have been waiting for”. The fourth quarter’s free cash flow “points to the free cash flow potential for 2025 with all operations in full steam,” said Raj Ray, the bank’s gold mining analyst.
“Whilst we remain focused on free cash flow in the near-term, we retain a strong platform for further growth, with the pre-feasibility study for the Assafou project, that was completed in December, confirming the project’s potential to be a tier-1 asset and underpinning the Groups production growth to 1.5 million oz by the end of the decade,” said Cockerill.
Including share buy-backs of $37m, Endeavour declared returns totalling $277m to shareholders for the 2024 financial year.
In reply to a question about shareholder returns during the firm’s results presentation on Thursday afternoon, Cockerill said the market “should expect an accelerated rate of buy-backs” as well as possible “supplemental cash” payouts, provided the firm’s capital allocation critieria was met. “The indication we have already given of an increased rate of buy-backs is that they are likely to continue for some time,” Cockerill added.
Mining codes
Endeavour was also asked for an update on discussions with Côte d’Ivoire and Senegal regarding possible changes to fiscal rules.
Guy Young, CFO of Endeavour said discussions had been held principally through the nations’ respective chambers of mines, adding: “the national trend in West Africa is clear: host nations are looking to establish revised steps of profit-sharing. The inevitable pressure is always going to be against us.
“Having said that, because our interaction has been relatively positive, we do believe we are being listened to. In each of the jurisdictions we do have stabilisation clauses that are part and parcel of that conversation”.
Possible mining code changes have been announced in Côte d’Ivoire while the new administration in Senegal, led by President Bassirou Diomaye Faye, has argued that an audit of contracts awarded by the previous government – principally related to oil and gas – will help plug a gap in the public finances.
“At this point in time, we don’t have a clear idea of when changes may be enacted, but they will not be in the short term,” said Young.
Of its 1.1 million oz in gold production last year, 40% was from two mines in Côte d’Ivoire (Ity and Lafigué), and 21% was from Sabodala-Massawa in Senegal.
Cockerill had somewhat sterner words for West Africa when asked about the matter in November. He warned against repeating the mistakes of South Africa by introducing regulations that will hurt long-term investment. “Basically when they [the South African government] brought in the new mining code in 2004, 20 years later we see what has happened. Effectively there has been an investment strike there,” he said.
