Endeavour Mining reports 3Q; on pace to beat top end of full year output guidance

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Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) told investors it had a strong third quarter, putting the gold miner on pace to beat the top end of its 1.5 million ounce (Moz) full year production forecast with all-in-sustaining-costs (AISC) within its guided range of between US$850 and US900 per ounce.


West Africa’s largest gold producer generated 382,000 ounces from across its seven mines in the three months to September 30, up from 244,000 ounces in the year-earlier quarter, at an AISC of US$904 per ounce versus US$906 per ounce in 3Q, 2020.


The miner realized gold prices of US$1,763 per ounce in the quarter, down from US$1,841 in the year-ago period, while revenue came in at US$692 million, up from US$435 million in 3Q, 2020, but down from the US$753 million seen in the second quarter of this year, mainly due to lower gold sales at its Ity, Karma and Wahgnion mines, it said in a statement.


The group’s operating cash flow before working capital was US$326million (3Q, 2020: US$195 million) and earnings before taxes were US$173 million, compared to US$75 million in the prior year quarter.


“Given this strong performance we expect to generate well in excess of $1 billion in operating cash flow for the full year, which has already significantly improved our balance sheet strength and bolstered our ability to reward shareholders,” noted CEO Sebastien de Montessus.


“Having already returned $224 million in dividends and share buybacks this year, and considering our near zero Net Debt to adjusted EBITDA leverage ratio, we expect to continue to supplement our shareholder return programme with further share buybacks and deliver more than the guided minimum dividend of $125 million for the full year,” he said.


READ: Endeavour Mining, a leading West-Africa-focused gold miner, sets sights on free cash flow and organic growth for 2021


The company boss also highlighted the growth pipeline, with the construction of the Sabodala-Massawa project’s Phase 1 expansion on schedule to be completed by the end of the year and a definitive feasibiluty study (DFS) underway for Phase 2 expansion at that asset and the Fetekro and Kalana projects.


“We continue to demonstrate exploration success, with the group on track to delineate over 2.5 million ounces of indicated resources in 2021, significantly more than the expected annual depletion, said de Montessus.


“Looking forward, we expect to unlock significant additional value by delivering on our recently published 5-year exploration strategy targeting the discovery of 15 to 20 million ounces of indicated resources,” he added.


The miner completed a listing on the premium-segment of the London Stock Exchange in June this year and was assigned UK nationality status on August 9 by the FTSE Russell group.


Endeavor was also included in the FTSE All Share, FTSE 250, FTSE 350 and FTSE 350 Lower Yield indexes as part of the FTSE Q3-2021 rebalancing, which became effective on September 20.


The company said it expects to beat the top end of its full year-2021 production guidance of between 1.365 and 1.495 million ounces within its guidance of U$850 to US$900 per ounce.


This outperformance is mainly driven by its Hounde, Ity, Sabodala-Massawa and Mana mines where full-year production is expected to be near or above the top end of their respective guidances, while the other mines are tracking within guidance. Endeavour said it was also benefiting from the successful rapid integration of the Teranga Gold assets.


The tier 1 gold producer has seven mines across Senegal, Cote d’Ivoire and Burkina Faso, along with a strong portfolio of advanced development projects and exploration assets in the Birimian Greenstone Belt in West Africa.


Berenberg repeats a ‘Buy’


Following the results, German bank Berenberg repeated a ‘Buy’ on the shares, with a price target of C$47, up from the current price of C$35.39, which was up over 4% on the day.


Analysts described it as “a good set of results”, which beat Berenberg’s forecasts on output and costs.


“Production was split between 70koz from Hounde (Burkina Faso, Berenberg: 59.2koz), 61koz from Ity (Ivory Coast, Berenberg: 50.4koz), 21koz from Karma (Burkina Faso, Berenberg: 18.8koz), 41koz from Boungou (Burkina Faso, Berenberg: 40.6koz), 49koz from Mana (Burkina Faso, Berenberg: 42.6koz), 106koz from Sabodala-Massawa (Senegal, Berenberg: 96koz) and 34koz from Wahgnion (Burkina Faso, Berenberg: 35.6koz),” analysts noted.


The group’s all-in sustaining costs (AISC) were US$904 per ounce, compared to Berenberg’s forecast of US$937, they added.


“The main deliverable for Q4 is the completion of the plant de-bottlenecking at Sabodala-Massawa, which remains on track. The completion of the definitive feasibility study for the Fetekro project in Ivory Coast has, however, been pushed back to Q1 2022 while the latest drilling is integrated. The Kalana (Mali) and Sabodala-Massawa phase 2 definitive feasibility studies are also on track for completion in Q1,” the analysts added.


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