Endeavour Reports Q3-2017 Results; FY-2017 Guidance Increased with Houndé
(Thomson Reuters ONE) -
ENDEAVOUR REPORTS Q3-2017 RESULTS; FY-2017 GUIDANCE INCREASED WITH HOUNDÉ
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OPERATIONAL AND FINANCIAL Highlights
* Q3 total production remained fairly flat over Q2 at 148koz with AISC also
flat at $906/oz; year-to-date performance on track to meet the initial FY-
2017 guidance
* Successful early commissioning of the Houndé flagship mine lifts full year
production guidance to
* 630-675koz and decreases AISC guidance to below $900/oz
* Q3 Free Cash Flow Before Growth Projects flat over Q2 at $34m, with $100m
achieved year-to-date
* Net Debt increased from $183m to $221m since the previous quarter-end due to
Houndé construction spend, with Net Debt to EBITDA ratio remaining healthy
at 0.98 times
* Well positioned to fund growth with $325m in available sources of financing
and liquidity
Project Highlights
* Houndé construction and commissioning completed ahead of schedule and below
budget
* Ity CIL Project construction launched in September after Optimization Study
demonstrated it will be another flagship asset with a long 14-year mine
life, average annual production of 235koz at AISC of $494/oz over the first
5 years, and an after-tax NPV(5%) of $710m and IRR of 40% at $1,250/oz
EXPLORATION Highlights
* Exploration success increases FY-2017 budget from $40m to $45m, with $37m
already spent YTD
* Near-mine exploration success includes 1Moz already added at Ity this year
and new discoveries made at both Karma and Houndé
* Greenfield exploration activities launched in early 2017 with encouraging
results already received
* Exploration JV formed in Q4 2017 with Randgold for adjacent properties in
Ivory Coast
George Town, November 9, 2017 - Endeavour Mining (TSX:EDV) (OTCQX:EDVMF) is
pleased to announce its financial and operating results for the quarter ended
September 30, 2017, with highlights provided in the table below.
Table 1: Key Operational and Financial Highlights
(Held-for-sale Nzema QUARTER ENDED NINE MONTHS ENDED
asset included for all
figure, Sep. 30, Sep. 30,
except where Sep. 30, Jun. 30, Sep. 30, 2017 2016 Variance
indicated as for 2017 2017 2016
continuing operations)
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Total Gold Production, 148 152 146 459 416 +10%
oz
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Realized Gold Price,
$/oz 1,235 1,219 1,328 1,214 1,238 (2%)
AISC, $/oz 906 897 898 903 900 0%
All-in Sustaining 330 322 430 311 338 (8%)
Margin, $/oz
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Free Cash Flow Before
Growth Projects(1), $m 34 33 44 100 106 (6%)
Net Free Cash Flow 32 (11) 2 59 12 +392%
From Operations, $m
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Net Debt At Period
End, $m (221) (183) 83 (221) 83 +166%
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Earnings from
Continuing Mine
Operations, $m 7 35 49 66 125 (47%)
Basic Net Earnings
(Loss) from Cont. (0.26) 0.20 0.16 (0.24) (0.01) n.a
$/share
Adj. Net Earnings
(Loss) from Cont. (0.10) 0.11 0.26 0.10 0.91 (88%)
Operations, $/share
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Reference MD&A for more details. 1) Free Cash Flow before Growth Projects stated
before WC, tax & financing costs.
Sébastien de Montessus, President & CEO, stated: "While the year is not yet
over, clearly 2017 will be underpinned by the successful construction and
commissioning of our flagship Houndé mine which reached commercial production
under-budget and two months ahead of schedule. Houndé will now have an immediate
positive impact on our operational and financial performance for the remainder
of 2017 and beyond, enabling us to increase group production, lower group AISC
and ultimately increase group free cash flow generation.
During the third quarter we also set in motion our next growth phase by
launching the construction of the Ity CIL project which will become our second
flagship mine as shown with the recently published optimization study. In
addition, we have launched the Kalana Project optimization study to maintain a
growth pipeline beyond Houndé and Ity CIL.
On the operational front we have successfully completed the mill optimization
program at Karma, executed a turn-around at Nzema which enabled us to
successfully sell the asset, and advanced restructuring and cost-cutting
initiatives at Tabakoto which should start to yield positive results in the
upcoming quarters.
Recently, we also upsized our revolving credit facility from $350 to 500
million, which provides us with additional financial flexibility to advance our
growth projects.
We are confident the important strategic milestones already achieved this year,
combined with our exploration success, have us well positioned to meet our 2019
objective of achieving an annual production of more than 800koz with AISC of
below $800/oz and mine lives of more than 10 years."
PRODUCTION & AISC ON TRACK TO MEET FULL YEAR GUIDANCE
* Group production totaled 148koz in Q3-2017 and 459koz for the first nine
months of the year, on track to meet the initial full year guidance of
600-640koz.
* The Group's total production in Q3-2017 remained fairly flat compared to
Q2-2017 (down 4koz), as a strong increase at Nzema (due to higher grades
following the cut-back) compensated for the expected lower production at
Tabakoto (open pit mining transitioned to a lower grade deposit) and the
impact of the rainy season.
* As announced on August 9, 2017, Nzema has been classified as an asset
held-for-sale according to IFRS and the transaction is expected to close
upon receiving regulatory approval.
* The Group remains on-track to meet its initial full year guidance as
strong performance at Agbaou and Nzema are expected to counterbalance
Ity's under-performance, while both Tabakoto and Karma are expected to
be within guidance.
Table 2: Group Production, koz
QUARTER ENDED NINE MONTHS ENDED INITIAL
(All amounts in 2017 FULL-
koz, on a 100% Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, YEAR
basis) 2017 2017 2016 2017 2016 GUIDANCE
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Agbaou 46 45 49 134 138 175 - 180
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Tabakoto 32 41 37 116 115 150 - 160
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Ity 12 14 15 42 58 75 - 80
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Karma 21 24 20 77 33 100 - 110
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PRODUCTION FROM
CONTINUING 369 344 500 - 530
OPERATIONS 111 124 121
Nzema (held for 37 27 24 91 64 100 - 110
sale)
Youga (sold in - - - - 8 - - -
March 2016)
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TOTAL PRODUCTION 148 152 146 459 416 600 - 640
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* Group AISC was $906/oz in Q3 and $903/oz for the first nine months of the
year, on track to meet the higher-end of the initial FY-2017 guidance.
* Group AISC in Q3-2017 increased slightly compared to Q2-2017, as the
reduction at Nzema was offset by increases across the other mines due to
seasonal and mine sequencing factors. In addition, the AISC were
adversely impacted by the 7% appreciation of the Euro versus the US
dollar in Q3-2017.
* Group AISC for the first nine months of the year remained fairly flat
compared to the same period of 2016 as the increases at Agbaou, Ity, and
Tabakoto were offset by the addition of Karma and a reduction at Nzema.
In addition, G&A costs decreased from $52/oz to $42/oz while sustaining
exploration increased from $18/oz to $26/oz in line with Endeavour's
reinvigorated exploration strategy.
* The Group remains on track to meet the higher-end of the initial FY-
2017 guidance as the over-performance of Agbaou and Nzema is expected to
offset higher costs at Ity and Tabakoto.
Table 3: Group All-In Sustaining Costs, US$/oz
QUARTER ENDED NINE MONTHS ENDED INITIAL
2017
(All amounts in Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, FULL-YEAR
US$/oz) 2017 2017 2016 2017 2016 GUIDANCE
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Agbaou 638 606 550 634 534 660 - 700
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Tabakoto 1,278 1,054 1,071 1,085 1,067 950 - 990
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Ity 1,141 780 724 920 737 740 - 780
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Karma 973 755 - 811 - 750 - 800
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MINE-LEVEL AISC FOR
CONTINUING 937 801 763 846 768 785 - 835
OPERATIONS
-------------------------------------------------------------------------------
Corporate G&A 28 51 58 42 52 42 - 40
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Sustaining 11 28 24 26 18 28 - 25
Exploration
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GROUP AISC FOR
CONTINUING 976 880 844 914 838 855 - 900
OPERATIONS
Nzema (held for 705 985 1,136 859 1,184 895 - 940
sale)
Youga (sold in - - - - 1,101 - - -
March 2016)
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GROUP AISC 906 897 898 903 900 860 - 905
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FULL YEAR GUIDANCE INCREASED WITH SUCCESSFUL HOUNDE START-UP
Due to its quicker than expected construction and ramp-up period, commercial
production at Houndé was declared two months ahead of schedule on November
1, 2017. With the Houndé flagship mine expected to produce between 30,000 and
35,000 ounces during Q4-2017 at AISC between $550-600/oz, the Group's 2017 full
year total production guidance has been increased from 600,000 - 640,000 ounces
to 630,000 - 675,000 ounces while the total AISC guidance has been decreased to
below $900/oz, as shown in Tables 4 and 5 below.
Table 4: Updated Group Production Guidance, koz
UPDATED 2017
FULL-YEAR
(All amounts in koz, on a 100% basis) GUIDANCE
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Current Production From Continuing Operations (Unchanged as 500 - 530
per Table 2)
Hounde 30 - 35
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PRODUCTION FROM CONTINUING OPERATIONS 530 - 565
Nzema (held for sale) 100 - 110
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TOTAL PRODUCTION 630 - 675
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Table 5: Updated All-In Sustaining Costs Guidance, US$/oz
UPDATED 2017
FULL-YEAR
(All amounts in US$/oz) GUIDANCE
-------------------------------------------------------------------------------
Current Group AISC For Continuing Operations (Unchanged as per 855 - 900
Table 3)
Hounde 550 - 600
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GROUP AISC FOR CONTINUING OPERATIONS 845 - 890
Nzema (held for sale) 895 - 940
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GROUP AISC 850 - 895
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Houndé is expected to immediately be cash flow generative. As such, the Group's
2017 expected Free Cash Flow before growth projects (and before working capital
movement, tax and financing costs) has been increased from $155 million to $165
million, assuming a gold price of $1,250/oz. In addition to adding Houndé, the
guidance has been updated to incorporate an increase in the Group's non-
sustaining exploration budget by $5 million following significant exploration
success at Ity and to classify Nzema as a non-continuing operation, as presented
in Table 6 below.
Table 6: Updated Free Cash Flow Guidance based on US$1,250/oz, in $m
In $m INITIAL REVISED
GUIDANCE GUIDANCE
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NET REVENUE (based on production guidance mid-point for 755 665
continuing operations)
Mine level AISC costs (based on AISC guidance mid-point for (510) (440)
continuing operations)
Corporate G&A (21) (21)
Sustaining exploration (14) (14)
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GROUP ALL-IN SUSTAINING MARGIN FOR CONTINUING OPERATIONS 210 190
Nzema All-in Sustaining Margin (based on guidance mid- - 35
points)
Non-sustaining mine exploration (20) (25)
Non-sustaining capital (35) (35)
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FREE CASH FLOW BEFORE GROWTH PROJECTS 155 165
(and before WC, tax and financing cost)
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AGBAOU MINE
Q3 vs Q2-2017 Insights
* Production remained fairly flat as greater tonnes processed offset the lower
head grade.
* Tonnes of ore mined increased due to the continued improvement in
equipment availability. As the rainy season limited access to the higher
grade harder transitional/fresh ore in the South pit, mining activities
shifted to the lower grade softer oxide ore in the West pit.
* Mill throughput increased as the proportion of fresh ore processed
decreased from 21% to 15%.
* Recovery rates remained fairly constant.
* All-in sustaining costs increased by $32/oz due to planned higher sustaining
capital costs, while increased mining unit costs were offset by lower
processing unit costs.
* The mining unit costs increased from $2.40/t to $2.62/t mainly due to
increased blasting in the South pit and deeper elevations mined.
* Processing unit costs decreased from $7.67/t to $7.08/t mainly due to
greater throughput volume associated with a lower quantity of harder
fresh material processed.
* As planned, sustaining capital costs increased from $12/oz to $46/oz due
to land compensation and increased waste capitalisation.
YTD 2017 vs YTD 2016 Insights
* In line with guidance, production decreased slightly and AISC increased as
Agbaou moved from processing mainly soft oxide ore in 2016 to processing a
blend of oxide and harder transitional and fresh ore in 2017.
* AISC since the beginning of the year stand at $634/oz, well below the guided
$660-700/oz, as less fresh and transitional ore was processed than planned.
Table 7: Agbaou Quarterly Performance Indicators
For The Quarter Ended Q3-2017 Q2-2017 Q3-2016
--------------------------------------------------------------
Tonnes ore mined, kt 824 709 651
Strip ratio (incl. waste cap) 8.19 8.81 9.56
Tonnes milled, kt 770 693 709
Grade, g/t 1.96 2.23 2.21
Recovery rate, % 93% 94% 96%
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PRODUCTION, KOZ 46 45 49
Cash Cost/oz 548 528 432
AISC/OZ 638 606 550
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Table 8: Agbaou 9 Months Performance Indicators
For The Nine Months Ended Sept 30 2017 Sept 30 2016
--------------------------------------------------------------
Tonnes ore mined, kt 2,157 2,123
Strip ratio (incl. waste cap) 8.68 7.89
Tonnes milled, kt 2,146 2,106
Grade, g/t 2.09 2.20
Recovery rate, % 94% 97%
--------------------------------------------------------------
PRODUCTION, KOZ 134 138
Cash Cost/oz 541 430
AISC/OZ 634 534
--------------------------------------------------------------
Outlook
* In Q4-2017, production is expected to decrease slightly and AISC is expected
to increase as the mine continues to progress towards a greater oxide to
fresh/transitional ore blend, with an increased planned sustaining capital
spend.
* Agbaou remains on track to meet the FY-2017 production guidance of
175,000-180,000 ounces and is expected to achieve the lower-end of the
initial AISC guidance of $660-700/oz.
TABAKOTO MINE
Q3 vs Q2-2017 Insights
* Production decreased mainly due to lower open pit tonnage and grade, in
addition to the impact of strong rainfall and a national strike.
* As anticipated, the high grade Kofi C pit was depleted during the
quarter and activities transitioned to mining the Kofi B pit and to
initiating pre-stripping at the Tabakoto North pit, which resulted in a
higher strip ratio.
* Open pit tonnes of ore mined decreased due to the aforementioned
depletion of Kofi C and pit access at Kofi B being limited because of
the wet road conditions.
* Underground tonnes of ore mined slightly decreased due to increased
development activities and the national strike.
* Processing activities continued to perform well, maintaining a fairly
stable throughput as the old Djambaye deposit low grade ore stockpiles
were used to supplement the feed supply to the plant.
* The recovery rate decreased slightly due to the ore characteristics of
the old Djambaye stockpiles.
* The head grade decreased due to the aforementioned depletion of Kofi C
and the contribution from lower grade stockpiles.
* AISC increased by $224/oz mainly due to the volume effect related to the
decrease in gold sold, an increased strip ratio and an increase in mining,
processing and G&A unit costs, which were partially offset by lower
sustaining costs.
* Open pit mining unit costs increased from $3.72/t to $3.91/t due to
lower volumes mined and increased pumping because of the rainy season.
* Underground mining costs increased from $61.18/t to $75.79/t due to more
maintenance on the underground mining fleet.
* Processing unit costs increased from $19.00/t to $20.83/t due to
increased cyanide and lime consumption due to the ore characteristics of
Djambaye stockpiles treated.
* G&A unit costs increased from $9.39/t to $12.13/t due to the timing of
expenditures, remaining flat compared to Q3-2016.
* Sustaining capital decreased from $252/oz to $174/oz mainly as a result
of less open-pit waste capitalization and underground development.
YTD 2017 vs YTD 2016 Insights
* Production remained flat as higher open pit feed compensated for lower
underground feed, while the overall head grade and recovery remained
constant.
* AISC increased as higher mining costs and the use of low grade stockpiles
was partially offset by lower processing, G&A and sustaining costs.
Table 9: Tabakoto Quarterly Performance Indicators
For The Quarter Ended Q3-2017 Q2-2017 Q3-2016
-----------------------------------------------------------------
OP tonnes ore mined, kt 108 157 160
OP strip ratio (incl. waste cap) 9.13 8.87 8.81
UG tonnes ore mined, kt 179 184 238
Tonnes milled, kt 392 407 381
Grade, g/t 2.64 3.32 3.31
Recovery rate, % 93% 94% 95%
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PRODUCTION, KOZ 32 41 37
Cash cost/oz 1,104 802 894
AISC/OZ 1,278 1,054 1,071
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Table 10: Tabakoto 9 Months Performance Indicators
For Nine Months Ended Sept 30 2017 Sept 30 2016
-----------------------------------------------------------------
OP tonnes ore mined, kt 482 454
OP strip ratio (incl. waste cap) 8.40 11.13
UG tonnes ore mined, kt 599 691
Tonnes milled, kt 1,204 1,186
Grade, g/t 3.16 3.17
Recovery rate, % 94% 94%
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PRODUCTION, KOZ 116 115
Cash Cost/oz 872 843
AISC/OZ 1,085 1,067
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Outlook
* Ongoing cost saving and optimization programs are underway including
overhead reduction, centralizing procurement, fleet replacement, and
improvement of equipment availability and mining efficiency. A redundancy
program totaling approximately 300 people has already been completed in
early Q4-2017.
* Q4 production is expected to remain stable and AISC are expected to slightly
improve following implementation of the aforementioned cost savings program,
as well as the end of the rainy season.
* Tabakoto is on track to meet the lower-end of the initial FY-2017 production
guidance of 150,000 - 160,000 ounces while AISC are expected to be above the
initial guidance of $950-990/oz.
Baboto North Acquisition
* After quarter-end, Endeavour entered into an agreement with Randgold
Resources Ltd to purchase the Baboto North deposit, which is adjacent to
Endeavour's Kofi C deposit, for $12 million payable in two tranches.
Endeavour expects to initiate mining activities at Baboto North in late
2018.
ITY MINE
Q3 vs Q2-2017 Insights
* Production decreased due to lower processed grades and recovery rates, which
were partially offset by increased stacked tonnage.
* Tonnes of ore mined decreased over the previous quarter as mining activities
were slowed due to the rainy season, but increased over the previous year as
a result of improved equipment availability.
* Mining activities initially focused on the high-grade Bakatouo deposit early
in the quarter. However, due to its low heap leach recovery rate, a decision
was made to preserve Bakatouo for the upcoming CIL plant (due to better
economics from high CIL recovery rates and lower operating costs).
Consequently, mining activities were shifted to the Zia and Ity Flat pits
where only lower grade areas were accessible on short notice.
* Ore stacked significantly increased despite the rainy season, due to the
softer nature of the Ity Flat laterite ore.
* The stacked grade decreased as a result of the aforementioned mine plan
change, which resulted in lower grade areas being accessible for mining on
short notice.
* Recovery rates decreased as a result of Bakatouo's low heap leach recovery
rate due to its high soluble copper content.
* AISC increased due to higher mining costs and increased sustaining capital
expenditures, which were partially offset by lower stacking costs.
* Mining unit costs increased from $2.86/t to $5.16/t, following a similar
trend to last year due to increased pumping required during the rainy season
and lower volumes mined.
* Stacking costs decreased from $16.03/t to $14.75/t, despite the higher
cyanide consumption rate associated with the ore processed from the Bakatouo
deposit which was mainly due to greater stacking volumes.
* Sustaining capital costs increased from $50/oz to $149/oz due to upgrades in
the mining fleet which were allocated over reduced production.
YTD 2017 vs YTD 2016 Insights
* Production decreased as mining shifted to lower grade deposits, stacking
activities were negatively impacted by wet and sticky ore from Bakatouo, and
the recovery rate returned to normalised levels.
* While mining and processing costs per tonne decreased, the AISC increased as
fixed costs were allocated over less production.
Table 11: Ity Quarterly Performance Indicators
For The Quarter Ended Q3-2017 Q2-2017 Q3-2016
--------------------------------------------------------------
Tonnes ore mined, kt 305 374 200
Strip ratio (incl. waste cap) 2.90 4.32 3.74
Tonnes stacked, kt 312 243 271
Grade, g/t 1.58 2.15 1.90
Recovery rate, % 74% 84% 91%
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PRODUCTION, KOZ 12 14 15
Cash cost/oz 933 625 456
AISC/OZ 1,141 780 724
--------------------------------------------------------------
Table 12: Ity YTD Performance Indicators
For The Nine Months Ended Sept 30 2017 Sept 30 2016
--------------------------------------------------------------
Tonnes ore mined, kt 1,008 870
Strip ratio (incl. waste cap) 3.93 4.32
Tonnes stacked, kt 822 878
Grade, g/t 1.85 2.20
Recovery rate, % 85% 94%
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PRODUCTION, KOZ 42 58
Cash cost/oz 762 566
AISC/OZ 920 737
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Outlook
* In Q4, Ity's production and cost profile is expected to improve slightly as
the grade profile increases.
* The construction of the Ity CIL Project, which commenced in September, is
now the priority on site due to its significant importance for the Group.
This was demonstrated by the published optimization study which outlined its
potential for annual production of 235koz at AISC below $500/oz over the
first 5 years. As such, if deemed necessary, the current heap leach
activities may be slowed (due to its immaterial production over the
construction period) in favour of quickly advancing the CIL construction.
* Due to the shift away from mining the higher grade Bakatouo deposit in H2-
2017 and greater priority given to the CIL construction activities,
production is expected to fall below the initial guidance of 75,000 -
80,000 ounces and AISC are expected to be above the initial guidance of
$740-780/oz.
KARMA MINE
Q3 vs Q2-2017 Insights
* Production decreased due to lower grades and tonnage stacked which was
partially offset by higher recovery rates.
* Total tonnes mined remained flat at 3.6Mt, and tonnes of ore mined decreased
as a greater amount of waste was mined at GG2 due to the mine plan
sequencing. As a result, the strip ratio temporarily increased and is
expected to decrease to a normalized level in Q4-2017.
* Mining activities focused on the GG2 lower-grade deposit as less tonnes were
extracted at the higher-grade Rambo pit where mining its harder transitional
ore has been postponed to Q4-2017 given it is better suited to be stacked
with the upgraded crushing circuit.
* Stacking decreased due to the downtime associated with commissioning the
upgraded crushing circuit, as well as decommissioning the original circuit.
* Stacked grade decreased as lower quantities of higher-grade Rambo ore was
stacked and low grade stockpiles represented nearly 20% of the total feed
(130,000 tonnes at 0.6 grams per tonne).
* Recovery rates increased as less Rambo harder transitional ore was
introduced onto the heap.
* AISC increased as a result of the aforementioned lower grades and higher
strip ratio, in addition to higher unit processing costs which were
partially offset by lower unit mining costs.
* Mining unit costs decreased from $1.96/t to $1.75/t, due to lower drilling
and blasting requirements as a result of mining less hard ore from the Rambo
deposit and less drill grade control due to mining more waste.
* Stacking costs increased from $9.30/t to $11.25/t, due to lower volumes
stacked and increased cyanide and cement consumption associated with the GG2
transitional ore.
* Sustaining capital costs increased from $65/oz to $85/oz due to the
aforementioned increased capitalized stripping which were allocated over
fewer ounces sold.
YTD 2017 vs YTD 2016 Insights
* Karma had its first gold pour in Q2-2016. Its year-to-date financial data is
not presented for the pre-commercial production period up to October
1, 2016.
Table 13: Karma Performance Indicators*
For The Quarter Ended Q3-2017 Q2-2017 Q3-2016
--------------------------------------------------------------
Tonnes ore mined, kt 593 1,035 3,040
Strip ratio (incl. waste cap) 5.13 2.49 3.68
Tonnes stacked, kt 720 852 570
Grade, g/t 0.91 1.24 1.21
Recovery rate, % 87% 83% 90%
--------------------------------------------------------------
PRODUCTION, KOZ 21 24 20
Cash cost/oz 786 657 n.a.
AISC/OZ 973 755 n.a.
--------------------------------------------------------------
Table 14: Karma YTD Performance Indicators*
For The Nine Months Ended Sept 30 2017 Sept 30 2016
--------------------------------------------------------------
Tonnes ore mined, kt 2,678 4,730
Strip ratio (incl. waste cap) 3.33 3.32
Total Tonnes milled, kt 2,526 927
Grade, g/t 1.08 1.18
Recovery rate, % 85% 90%
--------------------------------------------------------------
PRODUCTION, KOZ 77 33
Cash cost/oz 694 n.a.
AISC/OZ 811 n.a.
--------------------------------------------------------------
*AISC for the pre-commercial period before October 1, 2016, not available
Optimization Project Insights
* Plant optimization work has been successfully carried out during the past
year. The newly installed front-end completed its performance testing and is
running at steady-state while the new ADR plant is expected to be
commissioned by mid-November. In addition, an on-site camp was built.
Outlook
* Q4 profile is expected to slightly improve as the grades are expected to
increase with the higher-grade Rambo ore feed, which is expected to be
however slightly offset by its lower recovery rates due to its higher
transitional and fresh ore content. In addition, stacking capacity is
expected to increase following the upgrades made to the plant and crushing
circuit.
* Karma is on track to meet the initial FY-2017 production guidance of
100,000 - 110,000 ounces and with AISC expected to be at the top end of the
initial guidance of $750-800/oz.
NZEMA MINE - ASSET HELD FOR SALE
Nzema Sale Insights
* On August 9, Endeavour announced it had agreed to sell its 90% stake in the
non-core Nzema Mine to BCM International Ltd for a total cash consideration
of up to $65m. Under the sale agreement, BCM will pay Endeavour US$20
million upon closing of the transaction, with an additional US$45 million in
deferred payments to be made over the remaining current mine life, until
2019, based upon reaching certain agreed upon milestones related to mine
free cash flow generation.
* The transaction will close following the approval from the Ghanaian
government.
Q3 vs Q2-2017 Insights
* Production increased significantly due to higher processed grades and
increased mill throughput.
* As expected, tonnes of ore mined decreased slightly due to the rainy season.
Following the completion of the Adamus push-back in H1-2017, mined grades
continued to increase.
* Quality control processes for purchased ore established in H1-2017 led to
higher purchased ore grades with a lower tonnage.
* Mill throughput performed very well, marking a strong increase as the
previous quarter was impacted by an increased proportion of fresh ore
processed.
* The head grade significantly increased as both the mined and purchased ores
contributed to the improvement.
* Recovery rates remained constant.
* AISC decreased by $280/oz mainly due to the aforementioned higher grades and
subsequent increased production.
* The mining costs decreased from $6.45/t to $6.20/t mainly due to shorter
load and haul distances.
* Processing costs increased from $15.88/t to $17.00/t mainly due to an
increase in power and water treatment costs.
* Sustaining capital costs decreased from $36/oz to $34/oz due to reduced
activity on the tailings storage facility lift during the wet season.
YTD 2017 vs YTD 2016 Insights
* Production significantly increased and AISC significantly decreased as the
mine is benefiting from higher grade ore following the push-back, and from
high-grade purchased ore.
Table 15: Nzema Performance Indicators
For The Quarter Ended Q3-2017 Q2-2017 Q3-2016
--------------------------------------------------------------
Tonnes ore mined, kt 310 352 222
Mined ore grade, g/t 2.91 2.24 2.05
Strip ratio (incl. waste cap) 3.30 3.01 11.83
Purchased ore milled, kt 53 82 141
Purchased ore grade, g/t 4.69 3.20 3.23
Total Tonnes milled, kt 368 362 424
Grade, g/t 3.39 2.46 2.40
Recovery rate, % 92% 92% 82%
--------------------------------------------------------------
PRODUCTION, KOZ 37 27 24
Cash cost/oz 600 838 1,038
AISC/OZ 705 985 1,136
--------------------------------------------------------------
Table 16: Nzema YTD Performance Indicators
For The Nine Months Ended Sept 30 2017 Sept 30 2016
--------------------------------------------------------------
Tonnes ore mined, kt 1,058 712
Mined ore grade, g/t 2.38 1.57
Strip ratio (incl. waste cap) 4.14 8.00
Purchased ore milled, kt 213 332
Purchased ore grade, g/t 3.51 3.11
Total Tonnes milled, kt 1,121 1,333
Grade, g/t 2.73 1.77
Recovery rate, % 93% 85%
--------------------------------------------------------------
PRODUCTION, KOZ 91 64
Cash cost/oz 739 1,099
AISC/OZ 859 1,184
--------------------------------------------------------------
Outlook
* After a strong Q3, production in Q4 is expected to decrease and AISC are
expected to increase notably due to anticipated lower grade and recovery
rate.
* Nzema is on track to meet the top-end of the initial FY-2017 production
guidance of 100,000 - 110,000 ounces and the low-end of the initial AISC
guidance of $895-940/oz.
HOUNDE MINE
* Houndé achieved its first gold pour on October 18, 2017.
* Commercial production was declared on November 1, more than 2 months ahead
of schedule following the rapid construction and ramp-up periods, with
nameplate capacity achieved within weeks following the introduction of ore
into the mill on September 25, 2017.
* A successful performance trial over seven days was completed in late October
with all key metrics exceeded: processing rate is 8,600 tonnes per day (105%
of nameplate capacity), overall plant capacity is 96% and the gold recovery
rate is 95% - all above design parameters.
* Construction was completed $15 million below the initial $328 million
budget. An additional $21 million has been spent, mainly on the addition of
a 26MW back up power station and fuel farm and to build a second tailings
storage facility.
* No Lost-Time-Injury occurred over the 7-million man hours worked during the
construction period.
* Mining activities are progressing well with nearly 3-months of feed already
stockpiled and positive grade reconciliation against the resource model
being achieved.
* Houndé is expected to produce between 30,000 and 35,000 ounces at an AISC of
$550-600/oz for Q4-2017.
ITY CIL PROJECT UPDATE
* Ity CIL Project Optimization Study was published in September and
demonstrated it will be another flagship asset with a long 14-year mine
life, average annual production of 235koz at AISC of $494/oz over the first
5 years, and an after-tax NPV(5%) of $710m and IRR of 40% at $1,250/oz.
* Construction was launched in September as the Houndé construction team
transitioned to Ity.
* Long-lead items have been ordered and $116 million has already committed.
* The EPCM contracted was award to Lycopodium.
* Construction workforce mobilisation is progressing well.
* Process plant area earthworks progressing well.
* Danane to Ity 90kV OHL corridor compensation estimation in progress.
KALANA PROJECT UPDATE
* The Avnel transaction was closed on September 18, 2017.
* Following the close of the transaction, Endeavour completed the integration
of Avnel and initiated pre-development activities to optimize the Kalana
Project, which include:
* Ceasing the current small-scale operations and clearing the underground
workings and existing infrastructure to allow for the development of
future open pits, as well as grant access to exploration.
* Resuming exploration activities on both the Kalana deposit and nearby
targets including Kalanako, with the initial campaign expected to run
until the end of 2018.
* Launching a revised Feasibility Study with the aim to increase the
current plant design capacity to lift the average annual production and
shorten the mine life based on current reserves, integrate the
exploration results from the upcoming drilling campaign, and leverage
Endeavour's construction expertise and integrate operating synergies.
* Creating dedicated Kalana Project Community Relations and HSE teams to
validate the census and stakeholder mapping, with the aim of defining a
resettlement action plan before relocation activities commence.
EXPLORATION ACTIVITIES
* In line with Endeavour's strategic exploration focus, the exploration
program increased from $23 million in the first 9 months of 2016 to $37
million in the same period of 2017, with $40 million budgeted for the full
year.
Table 17: Exploration Expenditure
(Includes expensed, sustaining and non-sustaining)
AREAS OF FOCUS Q3-2017 YTD FY-2017 INITIAL GUIDANCE
SEPT. 30, 2017
------------------------------------------------------------------------
Agbaou 2.0 5.1 7.0
Tabakoto 1.4 6.6 9.0
Ity 1.8 7.7 10.0
Karma 0.5 2.2 4.0
Houndé 1.0 4.0 5.0
Other 2.4 11.6 5.0
------------------------------------------------------------------------
Total 9.2 37.2 40.0
------------------------------------------------------------------------
* During the first 9 months, the near-mine exploration expenditures were
focused on Ity, Tabakoto, Agbaou and Karma, in line with guidance and our
Strategic Exploration plan.
* Due to significant exploration success, in particular at Ity, the FY-2017
budget has been increased to $45 million.
Agbaou
* Exploration activity during the first 9 months amounted to approximately
31,000 meters drilled out of the 45,000 meters planned for the year. In
addition, several ground geophysics were acquired.
* The drill program focused on various pit extensions, the Agbaou south and
Niafouta targets, targets on structurally parallel trends, in addition to
exploration targets located within a 20km range of the processing plant.
* A dedicated deeper drilling program was also initiated in Q3-2017 targeting
Agbaou's at-depth potential.
Karma
* In 2017 a $4 million exploration program totaling approximately 38,500
meters has been planned and approximately 41,000 meters were effectively
drilled during the first nine months.
* During 2017, drilling focused on testing the extensions of the Rambo,
Goulagou and North Kao deposits, as well as the Yabongso target.
* A maiden Resource is expected to be delineated by year-end, with the aim of
further extending the mine life.
* After quarter-end, Endeavour paid $0.6 million to Golden Rim Resources Ltd
to acquire geological data relating to their previously owned tenement in
proximity to Karma, which Endeavour recently secured.
Tabakoto
* As Tabakoto operations are characterized by a short-term mine life, a $9
million exploration program totalling approximately 86,000 meters of
drilling on the Tabakoto and Kofi properties has been planned for 2017, of
which 54,000 meters were drilled in the first nine months of 2017.
* During the first nine months, the Tabakoto open pit program focused mainly
on drilling out the Kreko and Fougala West targets and on testing
exploration targets supported by the ongoing auger program.
* During the first nine months, underground drilling focused on testing the
eastern side extensions at Segala and the north-east extensions at Tabakoto,
which generated encouraging preliminary results.
Ity
* In 2017, a $10 million exploration program totalling approximately 52,500
meters has been planned for the greater Ity area. Due to the initial success
of the program, the 2017 exploration budget was increased to $15 million.
During the first nine months of 2017, some 56,000 meters were drilled, and
drilling is ongoing on the Le Plaque discovery.
* During the first nine months, drilling focused on the Bakatouo, Mont Ity
Flat, Daapleu, and Colline Sud areas. Positive results were achieved as the
Indicated Resource grew by 1.0 million ounces since the beginning of the
year, reaching 3.8 million ounces (as announced on July 27, 2017).
* The Le Plaque discovery was announced, and a maiden Inferred Resource is
expected by year-end.
* A regional auger campaign is underway and drilling was initiated at
Yacetouo, Vavoua, Daapleu southwest, Bakatouo northeast targets. On the
Toulepleu exploration license, which is situated to the southwest of the Ity
area, a comprehensive gold in soil program was performed to consolidate and
validate the only existing and very old data available for this area, and a
very preliminary short RC drilling campaign was conducted with results still
being analyzed.
* A large airborne VTEM/Mag/spectro geophysical program totaling $0.8 million
was also acquired in 2017, to better prioritize and define exploration
targets for 2018 and beyond.
Houndé
* Following a two-year period of no exploration drilling, activities resumed
in 2017 with a $5 million program.
* During the first nine months a total of 6,400 meters diamond drilling,
2,700 meters reverse circulation drilling and 48,300 meters air-core
drilling were conducted on:
* Bouere with the aim of increasing the current resource;
* Kari Pump/Sia/Sianikoui (higher grade exploration targets) which resulted in
positive initial results; and
* Grand Espoir, Bombi, Koho and Kari Fault, which resulted in initial
exploration works.
* Work performed also included advanced soil geochemistry, ground geophysics
on selected targets, regolith and geological mapping.
* After significant effort was concentrated on the Kari area during H1-2017,
our Q4 activity will concentrate on interpreting all the results and conduct
some additional drilling on the Sia/Sianikoui area.
Greenfields Exploration
* In addition to near-mine activities, greenfield exploration efforts were
initiated on the 80km Greater Ity trend, Houndé, and other regional
exploration properties in Burkina Faso, and pursued in Côte d'Ivoire.
* Due to exploration success, a total expenditure of $11 million has been
incurred since the beginning of the year compared to an initial budget of $5
million.
* A detailed review of Endeavour's exploration portfolio was also conducted,
which resulted in some exploration licenses being dropped, and others
applied for or newly awarded, so as to concentrate our efforts on the most
promising areas.
* After the quarter-end, Endeavour and Randgold Resources established a 30:70
joint venture covering their adjacent Sissedougou and Mankono exploration
properties located in the northern region of Côte d'Ivoire. A $3.8 million
exploration campaign has been approved for the remainder of 2017 and 2018.
NET FREE CASH FLOW FROM OPERATIONS DOUBLED
* Year-to-date gold sales from continuing operations totaled 370koz, up from
312koz in the same period in 2016, mainly due to the addition of the Karma
mine.
* The year-to-date realized gold price was $1,214/oz (net of the impact of the
Karma stream) compared to $1,238/oz in the same period in 2016. Without the
stream the year-to-date 2017 realized gold price would have been $1,251/oz.
* The Group's year-to-date Free Cash Flow (before working capital, tax,
finance cost, and growth projects) decreased by $6 million to $100 million,
compared to the same period of 2016, as increased gold sales were offset by
a $12 million increase in sustaining and non-sustaining exploration
expenditures and lower margins from notably the Tabakoto and Ity mines.
* The working capital variation improved to $18 million in Q3-2017, from
negative $27 million in Q2-2017, with the year-to-date outflow reduced to $1
million.
* The year-to-date Net Free Cash Flow from Operations increase from $12
million in 2016 to $59 million in 2017 mainly due a large negative working
capital variation in 2016.
* Growth projects cash outflow was $90 million in Q3-2017 compared to $63
million in Q2-2017 and $221 million for year-to-date compared to $92 million
for year-to-date 2016. The year-to-date 2017 spend consists of $186 million
of Houndé construction costs, $13 million on the Ity CIL project, and $22
million on Karma optimisation.
* Acquisition of mining interests consists mainly of $54 million for the
purchase of an additional 25% stake in the Ity mine which was offset by the
$8 million inflow of cash acquired upon the Avnel acquisition.
Table 18: Simplified Cash Flow Statement
NINE MONTHS ENDED
(in US$ million) SEPT. 30, 2017 SEPT. 30, 2016
-------------------------------------------------------------------------------
GOLD SOLD FROM CONTINUING OPERATIONS, koz 370 312
Gold Price, $/oz 1,214 1,238
REVENUE FROM CONTINUING OPERATIONS 445 394
Total cash costs (260) (190)
Royalties (23) (18)
Corporate costs (15) (15)
Sustaining capex (30) (32)
Sustaining exploration (9) (5)
-------------------------------------------------------------------------------
ALL-IN SUSTAINING COSTS ("AISC") (338) (260)
-------------------------------------------------------------------------------
ALL-IN SUSTAINING MARGIN FROM CONTINUING 107 133
OPERATIONS
AISC Margin from asset held for sale 37 5
Less: Non-sustaining capital (23) (20)
Less: Non-sustaining exploration (22) (13)
-------------------------------------------------------------------------------
FREE CASH FLOW BEFORE GROWTH PROJECTS
(and before interest, working capital, tax & 100 106
financing costs)
Working capital (1) (49)
Taxes paid (16) (12)
Interest paid (19) (19)
Cash settlements on hedge programs and gold (4) (13)
collar premiums
-------------------------------------------------------------------------------
NET FREE CASH FLOW FROM OPERATIONS 59 12
Growth projects (221) (80)
Greenfield exploration expense (6) (4)
Restructuring costs (7) (18)
Acquisition & disposal of mining interests (54) 11
Cash paid on settlement of share appreciation (4) (2)
rights, DSUs and PSUs
Net equity proceeds and dividends to non- 77 181
controlling interests
Proceeds (repayment) of long-term debt 160 (106)
Proceeds from pre-production gold sales - 34
Other (foreign exchange gains/losses and (4) -
other)
-------------------------------------------------------------------------------
CASH INFLOW (OUTFLOW) FOR THE PERIOD 1 28
-------------------------------------------------------------------------------
Additional notes available in Endeavour's MD&A filed on Sedar.
BALANCE SHEET AND FINANCING & LIQUIDITY SOURCES
* As expected, the Net Debt position increased from $26 million as at the end
of December 2016, to $221 million as at the end of September, 2017, mainly
due to:
* $221 million spent on growth projects,
* $39 million added from the Houndé financing agreement,
* $54 million for the purchase of an additional 25% stake in the Ity mine,
partially offset by the net equity proceeds of $77 million since the
beginning of the year.
* Upon closing of the Avnel acquisition, La Mancha Holding S.A.R.L. exercised
its anti-dilution right via a private placement of circa $60 million (C$73
million), of which $30 million was received after quarter-end. The pro-forma
Net Debt position, as at September 2017, inclusive of the private placement
received after quarter-end, stood at $191 million.
* During Q3-2017, Endeavour drew a further $80 million on its Revolving Credit
Facility ("RCF") to fund its growth projects, increasing the total drawn
amount to $300 million.
* During the quarter Endeavour upsized its previous $350 million RCF to $500
million on improved terms.
* Endeavour is well positioned to fund its growth as its available sources of
financing and liquidity increased from $215 million at the end of June to
$325 million at the end of September comprised of its $125 million cash
position and $200 million undrawn on its upsized RCF. In addition, Endeavour
expects to obtain equipment financing of approximately $60 million for its
Ity CIL Project and expects to receive proceeds from the Nzema sale.
Table 19: Net Debt Position
(in US$ million) SEPT. 30, 2017 SEPT. 30, JUN. 30, DEC. 30,
PRO-FORMA(2) 2017 2017 2016
-------------------------------------------------------------------------------
Cash(1) 155 125 85 124
Less: Equipment finance lease (46) (46) (47) (10)
Less: Drawn portion of $500 million (300) (300) (220) (140)
RCF
-------------------------------------------------------------------------------
NET DEBT POSITION (191) (221) (183) (26)
-------------------------------------------------------------------------------
NET DEBT / ADJUSTED EBITDA (LTM) 0.85 0.98 0.76 0.11
RATIO
-------------------------------------------------------------------------------
Notes:
(1)September 30, 2017 position includes $28m of cash held at the Nzema held-for-
sale asset.
(2)Includes La Mancha private placement which closed after quarter-end.
ADJUSTED NET EARNINGS
* Year-to-date adjusted net earnings of $19 million compare to $83 million for
the same period of 2016.
* Total adjustments of $62 million were made over the 2017 year-to-date
period, mainly related to net loss on discontinued operations, unrealised
loss on financial instruments, stock-based compensation, acquisition and
restructuring costs, non-cash inventory adjustments, and deferred income tax
expense.
* Adjusted net earnings attributable to shareholders amounted to $10 million
for the year-to-date, representing an adjusted net earnings per share of
$0.10.
Table 20: Net Earnings and Adjusted Earnings
Three months ended NINE MONTHS ENDED
(in US$ million except per SEPT. 30, JUN. 30, SEPT. 30, SEPT. 30, SEPT. 30,
share amounts) 2017 2017 2016 2017 2016
-------------------------------------------------------------------------------
TOTAL NET EARNINGS (LOSS) (65) 22 24 (43) 17
Less adjustments (see MD&A 55 (8) 10 62 66
non-GAAP section)
-------------------------------------------------------------------------------
ADJUSTED NET EARNINGS (10) 14 34 19 83
Less portion attributable
to non-controlling 1 4 10 8
Unternehmensinformation / Kurzprofil:
Datum: 09.11.2017 - 13:52 Uhr
Sprache: Deutsch
News-ID 567488
Anzahl Zeichen: 65554
contact information:
Town:
George Town, Grand Cayman
Kategorie:
Business News
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