Materially ahead of expectations

Endeavour Mining 3 December 2018 Update
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Endeavour Mining

Materially ahead of expectations

Q3 results

Metals & mining

3 December 2018

Price

C$16.56

Market cap

C$1,785m

C$1.3209/US$

Net debt (US$m) at end-September 2018

509.2

Shares in issue

107.8m

Free float

70.1%

Code

EDV

Primary exchange

TSX

Secondary exchange

US OTC

Share price performance

%

1m

3m

12m

Abs

(18.0)

(16.4)

(29.1)

Rel (local)

(18.9)

(10.6)

(25.0)

52-week high/low

C$26.6

C$16.6

Business description

Endeavour Mining is an intermediate gold producer, with five mines in Côte d’Ivoire (Agbaou and Ity), Burkina Faso (Houndé, Karma) and Mali (Tabakoto) and two major development projects (Ity CIL and Kalana) in the highly prospective west African Birimian greenstone belt.

Next events

Kalana updated resource
and feasibility study

Q418 and H119

Ity CIL production

Mid-FY19

Q418/FY18 results

March 2019

Analyst

Charles Gibson

+44 (0)20 3077 5724

Endeavour Mining is a research client of Edison Investment Research Limited

Endeavour’s Q318 results were materially ahead of our expectations, driven by better than expected operational performances at Karma and Ity and lower operating expenses and depreciation relative to Q2, notwithstanding the usual rains during the quarter. These were partially counteracted by a higher tax charge. However, we have still materially increased our forecasts for FY18 in light of the Q318 results and in expectation of a further improvement in Q4. Higher than expected net debt reflected merely the acceleration of Ity CIL capex from H119 into H218.

Year
end

Revenue (US$m)

EBITDA (US$m)

PBT*
(US$m)

Operating cash flow per share (US$)

Capex (US$m)

Net debt** (US$m)

12/16

566.5

213.9

103.4

1.91

212.3

21.4

12/17

652.1

201.2

51.6

2.25

441.4

216.8

12/18e

720.5

261.0

74.8

1.53

456.5

475.4

12/19e

762.1

372.1

153.3

2.77

81.4

305.9

Note: *PBT is normalised, excluding amortisation of acquired intangibles, discontinued operations and exceptional items; **includes restricted cash.

FY18 production and cost guidance to be met easily

In the aftermath of its third-quarter results, Endeavour’s operations seem likely to broadly meet their production guidance, with the notable exception of the Ity heap leach operation, which has already surpassed its own target and now seems likely to produce a further 15koz gold in Q4. Similarly, all operations appear likely to achieve their AISC cost guidance, with the exception of Tabakoto, which was expected since at least Q2 and which has been sold as a consequence. Group-wide guidance for FY18 is now for production to be at the upper end of the 555–590koz range (Edison 582koz) at an all-in sustaining cost (AISC) at the bottom end of the US$760–810/oz range (Edison US$773/oz).

Adjusted net EPS forecast upgrades

As a result of its operational outperformance in Q3, Endeavour reported adjusted net EPS of minus 1.3c compared with our prior forecast of a loss of 9.9c (ie a positive 8.6c variance). In anticipation of continued improvements in the aftermath of the traditional Q3 rains, we have also increased our expectations for Q4, from 2.0cps to 2.8cps (ie a positive 0.8c variance) and for the full year, from 23.3cps to 32.7cps (a positive 9.4c variance – see Exhibit 2).

Valuation: US$30.74/sh vs US$29.76 previously

In valuing Endeavour, we have opted to discount potential cash flows back over four years from end-FY18 and then to apply an ex-growth, ad infinitum terminal multiple of 10x (consistent with a discount rate of 10%) to forecast cash flows in that year (FY22). In the case of Endeavour, our estimate of cash flow in FY22 is US$3.36 per share (including exploration expenditure), in which case our terminal valuation of the company at end-FY22 is US$33.63/share, which (in conjunction with forecast intervening cash flows) discounts back to a value of US$30.74/share (cf US$29.76/share previously) at the start of FY19.

Investment summary

Endeavour’s Q318 results were materially ahead of our expectations, driven by better than expected operational performances at Karma and Ity, partially offset by a worse than expected performance at Agbaou. From a financial perspective, operating expenses were US$9.1m (9.6%) better than our prior forecast (see Exhibit 2), while depreciation was US$10.2m lower (owing to lower mined tonnages) and there was a US$24.8m gain on financial instruments (which we declined to forecast). These were partially counteracted by a US$15.6m higher tax charge to result in profit after tax US$33.4m higher. However, this was mostly offset by a US$25.9m negative variance in net profits from discontinued operations (ie Tabakoto) – although this figure included a non-cash US$32.0m impairment to the related assets. A full comparison between Endeavour’s actual results and both those of Q218 and our prior expectations is provided in Exhibit 2.

In general, the depredations of the rainy season were more muted than we had expected – especially at Ity and Karma. Houndé, in particular, continued to perform well, with the plant continuing to operate nearly 30% above nameplate capacity and despite the rains limiting access to higher grade ore and the utilisation of fresh ore resulting in increased processing costs. At Agbaou, mining was constrained to low-grade areas and mill feed continued to be supplemented from low-grade stockpiles. The proportion of fresh ore also increased, from 28% to 32%, at the same time that the plant was subject to scheduled maintenance. Despite lower mining rates on account of the rainy season, production at Karma increased as it benefited from the higher grades and better recovery rates associated with Kao oxide ore. At the same time, notwithstanding lower grades stacked on account of supplemental feed from stockpiles and a lower recovery rate, opportunistic mining based on equipment availability at Ity resulted in an increase in ore stacked as a result of high plant availability and utilisation, such that production materially outperformed our expectations and has already surpassed Endeavour’s production guidance of 60–65koz for the full 12-month period. Finally, production at Tabakoto remained flat, despite the effect of heavy rainfall, as slightly higher mill throughput was offset by a slightly lower average processed grade.

Endeavour has a good history of meeting its production and cost guidance targets. For FY18, the overall guidance ranges for both production and costs remain unchanged, albeit with the following qualifications:

Exhibit 1: Current Endeavour production and AISC cost guidance, by mine

Mine

Production guidance (koz)

AISC cost guidance (US$/oz)

Hondé

Top end of 250–260koz

Low end of US$580–630/oz

Agbaou

Lower end of 140–150koz

Low end of US$860–900/oz

Karma

Low end of 105–115koz

Top end of US$780–830/oz

Ity (heap leach)

Already surpassed guidance of 60–65koz

Bottom half of US$790–850/oz

Continuing operations

Upper end of 555–590koz

Bottom end of US$760–810/oz

Tabakoto

Low end of 115–130koz

Above US$1,200–1,250/oz

Source: Endeavour Mining

The current year is a transitional one for Agbaou, in particular, with a focus on waste capitalisation activities, which are expected to provide access to higher-grade areas in the latter part of Q418. Karma’s profile also is expected to improve slightly in the fourth quarter, following the end of the rainy season. Our financial forecasts for Q418 and FY18, within this context (reflecting, in particular, a general recovery from the rains of Q3) are as follows:

Exhibit 2: Endeavour Mining FY18 earnings forecasts, by quarter (US$000s unless otherwise indicated)

Q3/Q2

Q3 vs Q3e

Previous

Current

*Q118

Q218

Q318e

Q318

Change

(%)

Variance

(%)

Variance (units)

Q418e

FY18e

Q418e

FY18e

Houndé production (koz)

73.8

66.9

58.4

60.7

-9.3

3.9

2.3

58.4

258

63

264

Agbaou production (koz)

32.1

33.7

34.3

31.2

-7.4

-9.0

-3.1

39.8

140

37

134

Karma production (koz)

28.2

21.0

22.0

26.1

24.3

18.6

4.1

33.5

105

29

104

Ity heap leach production (koz)

18.3

25.0

11.1

21.0

-16.0

89.2

9.9

5.6

60

15

79

Tabakoto production (koz)

32.4

26.8

25.7

26.5

-1.1

3.1

0.8

32.7

117

27

112

Total gold produced (koz)

152

147

126

139

-5.4

10.3

13

137

562

144

582

Total gold sold (koz)

154

151

126

134

-11.3

6.3

8

137

568

144

583

Gold price (US$/oz)

1,328

1,306

1,212

1,161

-11.1

-4.2

-51

1,225

1,249

1,225

1,237

Cash costs (US$/oz)

524

608

758

643

5.8

-15.2

-115

667

633

680

612

AISC (US$/oz)

669

768

924

820

6.8

-11.3

-104

828

790

846

773

Revenue

 

 

 

- Gold revenue

198,894

189,515

152,506

155,764

-17.8

2.1

3,258

168,189

709,104

176,341

720,514

Cost of sales

 

 

 

- Operating expenses

83,276

92,646

95,375

86,238

-6.9

-9.6

-9,137

91,547

362,844

97,860

360,020

- Royalties

12,183

10,254

8,801

8,293

-19.1

-5.8

-508

10,005

41,243

9,854

40,584

Gross profit

103,435

86,615

48,330

61,233

-29.3

26.7

12,903

66,637

305,017

68,627

319,910

Depreciation

(39,504)

(43,538)

(46,120)

(35,911)

-17.5

-22.1

10,209

(47,034)

(176,196)

(40,786)

(159,739)

Expenses

 

 

 

- Corporate costs

(6,488)

(6,130)

(5,957)

(5,888)

-3.9

-1.2

69

(5,957)

(24,532)

(5,957)

(24,463)

- Impairments

0

0

0

0

N/A

N/A

0

(13,195)

(13,195)

1,129

1,129

- Acquisition etc costs

0

0

0

0

N/A

N/A

0

0

0

0

0

- Share based compensation

(2,668)

(10,109)

(5,986)

(4,007)

-60.4

-33.1

1,979

(5,986)

(24,749)

(7,000)

(23,784)

- Exploration costs

(2,754)

(2,284)

(1,720)

(2,583)

13.1

50.2

-863

(1,720)

(8,478)

(3,000)

(10,621)

Total expenses

(11,910)

(18,523)

(13,663)

(12,478)

-32.6

-8.7

1,185

(26,858)

(70,954)

(14,828)

(57,739)

Earnings from operations

52,021

24,554

(11,453)

12,844

-47.7

-212.1

24,297

(7,255)

57,867

13,012

102,431

Interest income

0

0

N/A

N/A

0

0

0

Interest expense

(7,496)

(4,549)

(4,818)

(6,679)

46.8

38.6

-1,861

(4,818)

(21,681)

(7,743)

(26,467)

Net interest

(7,496)

(4,549)

(4,818)

(6,679)

46.8

38.6

-1,861

(4,818)

(21,681)

(7,743)

(26,467)

Loss on financial instruments

(11,403)

10,922

24,755

126.7

N/A

24,755

(481)

24,274

Other expenses

(165)

(818)

(173)

-78.9

N/A

-173

(983)

(1,156)

Profit before tax

32,957

30,109

(16,271)

30,747

2.1

-289.0

47,018

(12,073)

34,722

5,269

99,082

Current income tax

10,772

17,095

1,823

17,443

2.0

856.8

15,620

5,000

34,691

5,540

50,850

Deferred income tax

(4,881)

4,432

0

(2,007)

-145.3

N/A

-2,007

0

(449)

0

(2,456)

Total tax

5,891

21,527

1,823

15,436

-28.3

746.7

13,613

5,000

34,242

5,540

48,394

Marginal tax rate

17.9

71.5

(11.2)

50.2

-29.8

-548.2

61.4

(41.4)

98.6

105.1

48.8

Profit after tax

27,066

8,582

(18,094)

15,311

78.4

-184.6

33,405

(17,074)

480

(271)

50,688

Net profit from discontinued ops.

593

(24,025)

(9,798)

(35,705)

48.6

264.4

-25,907

(2,466)

(35,696)

(56)

(59,193)

Total net and comprehensive loss

27,659

(15,443)

(27,892)

(20,394)

32.1

-26.9

7,498

(19,540)

(35,216)

(327)

(8,505)

Minority interest

14,567

(132)

(3,369)

(3,619)

2,641.7

7.4

-250

400

11,466

2,522

13,338

Minority interest (%)

52.7

0.9

12.1

17.7

1,866.7

46.3

5.6

(2.0)

(32.6)

(771.1)

(156.8)

Profit attributable to shareholders

13,092

(15,311)

(24,523)

(16,775)

9.6

-31.6

7,748

(19,940)

(46,682)

(2,849)

(21,843)

Dividend

0

0

0

0

N/A

N/A

0

0

0

0

0

Retained earnings

13,092

(15,311)

(24,523)

(16,775)

9.6

-31.6

7,748

(19,940)

(46,682)

(2,849)

(21,843)

 

 

 

Basic EPS from continuing ops. (US$)

0.116

0.037

(0.137)

0.136

267.6

-199.3

0.273

(0.162)

(0.102)

(0.026)

0.347

Diluted EPS from continuing ops. (US$)

0.116

0.037

(0.136)

0.136

267.6

-200.0

0.272

(0.162)

(0.100)

(0.026)

0.339

Basic EPS (US$)

0.122

(0.142)

(0.228)

(0.156)

9.9

-31.6

0.072

(0.185)

(0.433)

(0.026)

(0.203)

Diluted EPS (US$)

0.121

(0.142)

(0.227)

(0.155)

9.2

-31.7

0.072

(0.185)

(0.424)

(0.026)

(0.198)

Norm. basic EPS from continuing ops (US$)

0.222

(0.064)

(0.137)

(0.094)

46.9

-31.4

0.043

(0.040)

0.025

(0.036)

0.111

Norm. diluted EPS from continuing ops (US$)

0.221

(0.064)

(0.136)

(0.094)

46.9

-30.9

0.042

(0.040)

0.025

(0.036)

0.111

Adj net earnings attributable (US$000s)

24,411

9,189

(10,646)

(1,408)

-115.3

-86.8

9,238

2,150

25,104

3,070

35,262

Adj net EPS from continuing ops. (US$)

0.227

0.085

(0.099)

(0.013)

-115.3

-86.9

0.086

0.020

0.233

0.028

0.327

Source: Endeavour Mining, Edison Investment Research. Note: *Q1 restated to reflect Tabakoto as a ‘discontinued operation’. Company reported basis.

Note that the US$32.2m non-cash impairment to the value of Tabakoto has contributed to the reduction in the value of its net assets from US$73.2m as at end-Q218 to US$58.9m as at end-Q319 and has therefore reversed our anticipated loss on its sale in Q4 for US$60m, from US$13.2m to a profit of US$1.1m (under forecast ‘impairments’ in the above table).

Valuation

Endeavour is a multi-asset company that has shown a willingness and desire to trade assets in order to maintain production, reduce costs and to maximise returns to shareholders (eg the sale of Youga in FY16 and Nzema in FY17). Rather than our customary method of discounting maximum potential dividends over the life of operations back to FY19, therefore, we have opted to discount potential cash flows back over four years from end-FY18 and then to apply an ex-growth terminal multiple of 10x (consistent with using a standardised discount rate of 10%) to forecast cash flows in that year (ie FY22). In the normal course of events, exploration expenditure would be excluded from such a calculation, on the basis that it is an investment. In the case of Endeavour, however, we have included it in our estimate of FY22 cash flows on the grounds that it may be a critical component of ongoing business performance in its ability to continually expand and extend the lives of the company’s assets.

In the wake of its Q318 results, our estimate of Endeavour’s cash flow in FY22 is, to all intents and purposes, unchanged at US$3.36 per share (cf US$3.38/sh in our note Endeavour: From the ground upwards, published on 16 October 2018), on which basis our terminal valuation of the company at end-FY22 is US$33.63/share (cf US$33.76/sh previously), which (in conjunction with forecast intervening cash flows) discounts back to a value of US$30.74/share (cf US$29.76/share previously) at the start of FY19.

Exhibit 3: Endeavour forecast valuation and cash flow per share, FY18–FY22 (US$/share)

Source: Edison Investment Research

Financials

Endeavour had US$509.2m in net debt on its balance sheet at end-Q3, compared with US$399.9m at end-Q218, after US$110.8m in ‘mining interests’ capex. This level of net debt equates to a gearing (net debt/equity) ratio of 52.1% and leverage (net debt/[net debt+equity]) ratio of 34.3%. Note that US$509.2m accords with Endeavour’s accounts; it differs from the figure of US$535.4m quoted in some of the company’s other materials, since the formal accounting treatment of the finance leases on the balance sheet in particular requires future cash flows to be discounted back to present value – whereas the higher figure is quoted on an undiscounted basis. In addition, the higher figure does not include restricted cash.

The company has embarked on a major period of capital expenditure in FY18 relating to the Ity CIL project. Construction is reported to be progressing on budget and ahead of schedule, with overall project completion standing at 75% and tailings storage facility completion standing at over 70%. To achieve this, capital expenditure was brought forward from FY19 into FY18. As at 30 September therefore, project capital expended amounted to US$276m (out of an estimated total of US$351m), including c US$232m in cash outflow, US$33m in leased equipment and US$11m in non-cash working capital. Cash outflow for Q418 is expected to be c US$50–60m (almost completely offset by US$60m in cash proceeds from the Tabakoto sale, which we assume will be received by Endeavour in Q4), with the remaining expenditure of c US$62-72m expected to occur by end-H119. As a result, we now forecast that Endeavour will have US$475.4m in net debt as at end-FY18 (cf US$304m previously, which assumed an equal split of Ity CIL capex between FY18 and FY19), which will equate to a gearing ratio of 48.2% and a leverage ratio (see above) of 32.5%. First gold is now expected from the Ity CIL plant early in Q219. Thereafter, net debt should decline rapidly (notwithstanding capex related to the Kalana project) such that we estimate the company will be net debt-free in FY21, at which point it will potentially be able to make dividend distributions to shareholders.

Exhibit 4: Financial summary

US$'000s

2016

2017

2018e

2019e

2020e

December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

566,486

652,079

720,514

762,133

1,002,952

Cost of Sales

(376,794)

(597,528)

(458,343)

(390,076)

(441,940)

Gross Profit

189,692

54,551

262,171

372,057

561,012

EBITDA

 

 

213,916

201,166

261,042

372,057

561,012

Operating Profit (before amort. and except.)

127,981

70,379

101,302

200,811

377,829

Intangible Amortisation

0

0

0

0

0

Exceptionals

(36,272)

(149,942)

25,403

0

0

Other

(1,989)

(2,242)

(1,156)

0

0

Operating Profit

89,720

(81,805)

125,549

200,811

377,829

Net Interest

(24,593)

(18,789)

(26,467)

(47,540)

(30,592)

Profit Before Tax (norm)

 

 

103,388

51,590

74,835

153,271

347,237

Profit Before Tax (FRS 3)

 

 

65,127

(100,594)

99,082

153,271

347,237

Tax

(27,643)

(32,945)

(48,394)

(55,962)

(95,285)

Profit After Tax (norm)

73,756

16,403

25,285

97,309

251,952

Profit After Tax (FRS 3)

37,484

(133,539)

50,688

97,309

251,952

Average Number of Shares Outstanding (m)

80.6

98.5

107.7

107.8

107.8

EPS - normalised (c)

 

 

(37.8)

(6.5)

(43.9)

63.5

185.9

EPS - normalised and fully diluted (c)

 

(37.5)

(6.5)

(42.9)

62.2

181.8

EPS - (IFRS) (c)

 

 

28.8

(114.5)

34.7

63.5

185.9

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

33.5

8.4

36.4

48.8

55.9

EBITDA Margin (%)

37.8

30.8

36.2

48.8

55.9

Operating Margin (before GW and except.) (%)

22.6

10.8

14.1

26.3

37.7

BALANCE SHEET

Fixed Assets

 

 

1,073,562

1,331,745

1,477,848

1,387,960

1,390,711

Intangible Assets

29,978

6,267

6,267

6,267

6,267

Tangible Assets

1,039,529

1,317,952

1,464,055

1,374,167

1,376,918

Investments

4,055

7,526

7,526

7,526

7,526

Current Assets

 

 

283,536

361,766

143,578

324,970

614,291

Stocks

110,404

141,898

147,044

155,537

204,684

Debtors

36,572

95,212

103,734

107,155

126,948

Cash

124,294

122,702

(135,884)

33,594

253,974

Other

12,266

1,954

28,684

28,684

28,684

Current Liabilities

 

 

(149,626)

(241,185)

(213,632)

(186,496)

(205,283)

Creditors

(145,311)

(223,527)

(195,974)

(168,838)

(187,625)

Short term borrowings

(4,315)

(17,658)

(17,658)

(17,658)

(17,658)

Long Term Liabilities

 

 

(246,811)

(451,705)

(391,894)

(391,894)

(391,894)

Long term borrowings

(146,651)

(323,184)

(323,184)

(323,184)

(323,184)

Other long term liabilities

(100,160)

(128,521)

(68,710)

(68,710)

(68,710)

Net Assets

 

 

960,661

1,000,621

1,015,900

1,134,540

1,407,824

CASH FLOW

Operating Cash Flow

 

 

164,522

244,092

185,719

354,338

532,191

Net Interest

(19,626)

(15,212)

(26,467)

(47,540)

(30,592)

Tax

(10,625)

(22,301)

(21,357)

(55,962)

(95,285)

Capex

(212,275)

(441,396)

(456,481)

(81,358)

(185,934)

Acquisitions/disposals

32,098

(37,332)

60,000

0

0

Financing

174,702

116,536

0

0

0

Dividends

(2,612)

(5,177)

0

0

0

Net Cash Flow

126,184

(160,790)

(258,586)

169,478

220,380

Opening net debt/(cash)

 

 

152,856

26,672

218,140

476,726

307,248

HP finance leases initiated

0

0

0

0

0

Other

0

(30,678)

0

0

0

Closing net debt/(cash)

 

 

26,672

218,140

476,726

307,248

86,868

Source: Endeavour Mining, Edison Investment Research. Note: includes discontinued operations; *excludes restricted cash.

General disclaimer and copyright

This report has been commissioned by Endeavour Mining and prepared and issued by Edison, in consideration of a fee payable by Endeavour Mining. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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General disclaimer and copyright

This report has been commissioned by Endeavour Mining and prepared and issued by Edison, in consideration of a fee payable by Endeavour Mining. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Neither this Communication nor any copy (physical or electronic) of it may be (i) taken or transmitted into the United States of America, (ii) distributed, directly or indirectly, in the United States of America or to any US person (within the meaning of regulations Regulation S made under the US Securities Act 1933, as amended), (iii) taken or transmitted into or distributed in Canada, Australia, the Republic of Ireland or the Republic of South Africa or to any resident thereof, except in compliance with applicable securities laws, (iv) taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities or in the context where the distribution thereof may be construed as such solicitation or offer, or (v) or taken or transmitted into any EEA state other than the United Kingdom. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this Communication in or into other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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