Following its acquisitions of SEMAFO and Teranga, Endeavour has become one of the top 10 major gold producers globally, with seven mines in Côte d’Ivoire, Burkina Faso and Senegal plus a portfolio of development projects, all in the West African Birimian greenstone belt.
Investment summary
In the wake of an excellent set of third quarter results, we have increased our production forecasts for Houndé and Sabodala-Massawa for Q421 by 7.3% and 4.9% respectively, with the result that we expect Endeavour to meet almost exactly the top of its guidance range of 1,350–1,475koz gold for the full year at all-in sustaining costs (AISC) within its guided range of US$850–900/oz (see Exhibit 2). In the meantime, Q321 results were materially ahead of our expectations on virtually every measure of performance (despite Q3 normally being the quarter most affected by west Africa’s seasonal rains) with the result that adjusted net EPS outperformed our prior forecast by 65.4% (see analysis on pages 5–8). As a result, we have upgraded our estimate of adjusted net EPS for Q421 by 10.3% and for FY21 by 13.9% on a pro forma basis and by 14.8% on an ‘as reported’ basis (see Exhibit 4).
Exploration has yielded 84% of a five-year target of 10–15Moz Au after four years and a second five-year plan now aims to discover a further 15–20Moz in FY21–26. This success has already increased medium-term production levels at Ity and Hounde to 0.5Moz pa (combined) until 2028. In the meantime, the company is hedge-free, has announced a progressive minimum dividend policy, added US$342m in value to Fetekro and Kalana via updated PFSs (100% basis) and also announced a share buyback programme. Our valuation of Endeavour is US$34.62/share (plus exploration) and potentially as high as US$55.84/share.
