Endeavour Mining is an intermediate gold producer, with four mines in Côte d’Ivoire (Agbaou and Ity) and Burkina Faso (Houndé and Karma) and one major development project in Mali (Kalana), all in the highly prospective West African Birimian greenstone belt.
Endeavour’s Q1 results were characterised by record revenue, record adjusted EBITDA and record operating cash flow. At least as importantly, all operations were reported to be operating near normal. While Q120 was, to all intents and purposes, unaffected by the effects of COVID-19; however, it is clear there have been some consequences in Q2. In the main, these have arisen as a result of travel restrictions on technical and engineering consultants and have particularly affected maintenance schedules. As a result, we have updated our Q2–Q420 forecasts to reflect changes in mine scheduling. Offsetting this, we have decreased our expectations of unit working costs. We have also refined our forecasts for SEMAFO’s Mana and Boungou mines to reflect operational detail on a quarter by quarter basis provided by management.
Endeavour’s exploration programme is intended to extend and maintain near-term production rates by discovering 10–15Moz gold over five years at a cost of US$45m pa. In valuing EDV, we therefore discount three years of forecast cash flows to shareholders and then apply an ex-growth multiple to terminal cash flows consistent with a 10% discount rate to result in a valuation of US$32.74/share. In the meantime, EDV’s all paper acquisition of SEMAFO will create a top 15 gold producer by adding c 315–355koz of near-term production at an AISC of US$895–960/oz plus two highly prospective exploration targets.