gold flake

Picking up the crown

Endeavour Mining 14 June 2021 Update
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Endeavour Mining

Picking up the crown

Premium LSE listing

Metals & mining

14 June 2021

Price

C$28.95

Market cap

C$7,301m

C$1.2109/US$, US$1.4113/£

Net debt (US$m) at end-March 2021*

173.9

*Excludes convertible premium

Shares in issue (thousands)

252,568

Free float

75.2%

Code

EDV

Primary exchange

TSX

Secondary exchange

LSE, US OTC

Share price performance

%

1m

3m

12m

Abs

8.5

15.7

(8.9)

Rel (local)

5.6

7.6

(27.9)

52-week high/low

C$38.85

C$23.58

Business description

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.

Next events

Afema maiden resource

H121

Sabodala-Massawa DFS

Q421

Fetekro DFS

Q421

Analyst

Charles Gibson

+44 (0)20 3077 5724

Endeavour Mining is a research client of Edison Investment Research Limited

Endeavour’s premium listing on the LSE brings the largest producer of gold in the second largest gold producing region to London to pick up the mantle vacated by Randgold when it departed these shores in 2018. Like Randgold, Endeavour has set a 20% post-tax IRR hurdle rate from its investments (at a gold price of US$1,300/oz), is targeting a 20% return on capital employed, an AISC of US$900/oz and has recently announced a progressive dividend policy and share buyback programme.

Year end

Revenue (US$m)

EBITDA (US$m)

PBT*
(US$m)

Op. cash flow
per share (US$)

DPS
(c)

Yield
(%)

12/19

1,362.1

618.4

220.4

3.30

0

N/A

12/20

1,847.9

910.3

501.2

5.35

37

1.5

12/21e

2,758.1

1,386.6

788.1

3.68

50

2.1

12/22e

2,495.1

1,417.3

930.2

4.82

60

2.5

Note: Pro forma basis. *PBT is normalised, excluding amortisation of acquired intangibles and exceptional items.

In the right place at the right time…

West Africa remains under-explored, despite accounting for the largest number of gold ounces discovered in any region in the past decade. According to some forecasts, it will surpass China in terms of output within a few years. It also offers simple geology, simple terrain, good infrastructure and good jurisdictional risk, where governments have made concerted efforts to ensure the region is attractive to gold mining companies, without being over-dependent on a single industry.

…with the right track record

In the past 10 years Endeavour has invested more than US$1bn to build four mines with zero lost time. In the meantime, it has adopted an exploration approach that is drawn from the oil & gas, rather than mining, industry and has been successful in delineating 84% of its five-year target of 10–15m resource ounces after only four years to increase medium-term production levels at Ity and Houndé to 0.5Moz pa (combined) until at least 2028.

Valuation: US$35.88 or C$43.45 or £25.42 per share

Having changed nothing but our dividend assumptions and updated our estimate of shares in issue to reflect the latest buyback data, our valuation of Endeavour remains substantially unchanged relative to our last note (Showing its mettle as well as its metal, published on 28 May 2021). Based on the average multiples of its gold major peers, we estimate a valuation for Endeavour of US$37.02 (C$44.82 or £26.23) per share. By contrast, using an absolute valuation methodology, whereby we discount back six years of cash flow and then apply an ex-growth, ad infinitum multiple to steady-state terminal cash flows in FY26, implies a valuation of US$35.88 (C$43.45 or £25.42) per share if a standardised 10% discount rate is used or US$56.96 (C$68.97 or £40.36) per share if a CAPM-derived discount rate of 6.5% is used. In the meantime, it is trading at a discount to the average multiples of its LSE peers in at least two-thirds of common valuation measures (see Exhibit 3) despite being the largest premium LSE-listed pure gold producer.

Valuation summary

Endeavour is a multi-asset company that has shown a willingness and desire to trade assets to maintain production, reduce costs and maximise returns to shareholders (eg the sale of Youga in FY16, Nzema in FY17, Tabakoto in FY18 and Agbaou in FY20 and the acquisition of SEMAFO in FY20 and Teranga in FY21). Historically, rather than our customary method of discounting maximum potential dividends over the life of operations back to FY21, in the case of Endeavour, we have instead opted to discount six years of forecast cash flows in FY21–26 back to the start of FY21 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 FY26). 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, it has been included on the grounds that it is a critical component of its ongoing business performance to enable it to continually expand and extend the lives of its mines.

In this case, our estimate of cash flows in FY26 is US$4.03 (cf US$4.00/share previously), giving rise to a terminal valuation of the company at end-FY26 of US$40.30/share (cf US$39.96/share previously), which (in conjunction with forecast intervening cash flows) then discounts back to a valuation of US$35.88/share (cf US$35.66/share previously) at the start of FY21, as shown in the graph below.

Exhibit 1: Endeavour current forecast valuation and cash flow per share, FY21–26e (US$/share)

Source: Edison Investment Research

Given its elevation into the ranks of the world’s foremost producers of gold however, we believe that Endeavour can increasingly attract lower cost finance and, as such, a capital asset pricing model (CAPM)-derived WACC can also be considered (as discussed in our February 2021 initiation on Newmont Corporation). Long-term nominal equity returns have been 9% and 30-year break-evens are expecting 2.32% inflation. These two measures imply an expected real equity return of 6.5% (1.09/1.0232) and applying this to our forecast cash flows would imply a terminal valuation for Endeavour of US$61.76/share (cf US$60.05/share previously) and a current valuation of US$56.96/share (cf US$55.39/share previously). Readers should note that, given its realised beta of 0.56 (source: Refinitiv, 10 June 2021), even this (real) discount rate of 6.5% is likely to prove conservative.

In the meantime, Endeavour’s valuation remains at a material discount to those of its newly acquired peer group of gold majors, as shown in Exhibit 2, below.

Relative Endeavour valuation

Endeavour’s valuation on a series of commonly used measures, relative to a selection of gold mining majors (the ranks of which it has now joined following its takeovers of SEMAFO and Teranga), is as follows:

Exhibit 2: Endeavour valuation relative to global gold major peers

Company

Ticker

Price/cash flow (x)

EV/EBITDA (x)

Yield (%)

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Endeavour (Edison)

EDV

6.5

5.0

4.9

4.6

*4.2

*3.3

2.1

2.5

3.0

Endeavour (consensus)

EDV

4.9

4.5

5.0

4.6

4.4

4.9

1.9

3.8

3.8

Majors

Barrick

ABX

7.8

7.7

7.9

7.2

6.8

6.9

2.6

1.5

1.8

Newmont

NEM

10.6

9.7

11.2

8.3

7.8

8.9

2.9

3.0

2.8

Newcrest

NCM AU

9.0

9.0

9.3

7.6

7.5

7.7

1.5

1.5

1.7

Kinross

K

6.2

4.5

4.6

5.4

4.0

3.9

1.6

1.6

1.6

Agnico-Eagle

AEM

10.6

9.7

9.9

9.5

8.1

8.5

2.1

2.1

2.0

Eldorado

ELD

5.7

5.0

4.9

4.7

4.2

4.1

0.0

0.0

0.0

Average

 

8.3

7.6

7.9

7.1

6.4

6.7

1.8

1.6

1.6

Implied EDV share price (US$)

30.60

36.76

37.96

39.43

39.16

41.41

27.93

37.31

42.64

Implied EDV share price (C$)

36.98

44.51

45.97

47.75

47.41

50.15

33.82

45.17

51.63

Source: Edison Investment Research, Refinitiv. Note: *Forecast EV. Consensus and peers priced at 10 June 2021.

Of note is the fact that Endeavour’s valuation is materially cheaper than the averages of the majors in all the measures shown in Exhibit 2, regardless of whether consensus or Edison forecasts are used. On an individual basis, it is cheaper than the majors on at least 45 out of 54 (83%) of individual valuation measures if Edison forecasts are used or 45 out of 54 (83%) if consensus forecasts are used. Reverse engineered, the average valuation measures of its peers imply an average share price for Endeavour of US$37.02, or C$44.82 or £26.23, per share.

Relative to its new-found peers listed in London, Endeavour’s valuation is as follows:

Exhibit 3: Endeavour valuation relative to London-listed precious metal peers

Company

Ticker

Price/cash flow (x)

EV/EBITDA (x)

Yield (%)

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Endeavour (Edison)

EDV

6.5

5.0

4.9

4.6

*4.2

*3.3

2.1

2.5

3.0

Endeavour (consensus)

EDV

4.9

4.5

5.0

4.6

4.4

4.9

1.9

3.8

3.8

LSE-listed peers

Polymetal

POLYP

8.1

6.9

8.1

7.3

6.6

7.4

6.5

7.9

6.5

Fresnillo

FRES

9.1

8.4

9.3

6.6

5.4

6.0

2.9

3.4

3.0

Centamin

CEY

11.2

9.3

4.4

4.3

3.9

4.2

5.9

4.4

3.4

Petropavlovsk

POG

7.2

4.5

4.3

5.8

4.2

4.2

0.0

3.4

5.5

Hochschild

HOC

4.7

4.7

5.8

3.2

3.3

3.7

2.0

2.0

2.2

Polyus

PLZL

9.1

8.0

8.0

7.7

7.6

7.4

3.7

4.3

4.4

Yamana Gold

YRI

5.9

5.6

7.3

5.7

5.4

6.0

2.3

2.3

2.2

Resolute Mining

RSG AU

2.5

2.2

2.4

3.6

2.8

3.2

3.3

3.0

3.5

Hummingbird

HUMR

2.5

3.0

3.5

2.5

2.2

0.0

0.0

Shanta

SHAN

3.1

3.3

2.7

2.2

1.8

1.3

Chaarat

CGH

9.5

16.0

13.9

3.8

0.0

0.0

0.0

Pan African**

PAFR

4.8

3.7

3.3

3.8

3.3

3.1

3.9

3.4

8.6

Average

 

6.8

5.6

5.9

5.9

5.2

4.5

2.7

3.0

3.7

Implied EDV share price (US$)

24.95

27.19

28.04

32.69

32.15

29.70

18.36

20.13

18.94

Implied EDV share price (C$)

30.21

32.92

33.95

39.58

38.93

35.96

22.24

24.37

22.94

Source: Edison Investment Research, Refinitiv. Note: *Forecast EV. **Edison forecasts. Consensus and peers priced at 10 June 2021.

Of note is the fact that Endeavour’s valuation is materially cheaper than the averages of its LSE-listed peers in six out of nine of the measures shown in Exhibit 2 if Edison forecasts are used and seven out of nine if consensus forecasts are used. On an individual basis, it is cheaper than its LSE listed peers on 49 out of 101 (48%) of individual valuation measures if Edison forecasts are used or 53 out of 101 (52%) if consensus forecasts are used. Reverse engineered, the average valuation measures of its LSE-listed peers imply an average share price for Endeavour of US$25.79, C$31.23 or £18.27 per share.

Dividend adjustments

Edison has adjusted its dividend distribution assumptions since Endeavour’s capital markets day (CMD) on 7 June.

Previously (when it declared its maiden dividend of US$0.37/share for FY20 in November), Endeavour announced a policy of declaring future dividends on a semi-annual basis with the aim of maintaining an approximate dividend yield of 1.6% until it reached a targeted net cash position of c US$250m (note, in H122 according to our estimates). Thereupon, it said that it would re-assess its capital allocation priorities, which could involve augmenting its shareholder return programme. As a result, our previous dividend forecast for FY22 and FY23 was based on the maximum distribution that Endeavour could make and still retain a net cash position of US$250m on its balance sheet. Although we believed that such payouts would be unlikely in practice, this methodology nevertheless served to demonstrate the latitude that Endeavour had at its disposal to increase its dividend distributions in the short to medium term.

At its CMD however, Endeavour announced an update to its dividend policy to the effect that it would pay minimum progressive dividends of 50 US cents, 60c and 70c per share in FY21, FY22 and FY23, respectively (assuming that the gold price remains above US$1,500/oz, otherwise payment becomes discretionary based on balance sheet strength), with the potential for additional supplementary shareholder returns as long as net debt remains below 0.5x EBITDA.

Share buyback programme

In tandem with its FY20 results, on 18 March 2021, Endeavour announced a normal course issuer bid (NCIB) or share buyback programme to supplement its policy of augmenting shareholder returns. The NCIB commenced on 22 March and will end on 21 March 2022 and will allow Endeavour to buy up to 12.2m ordinary shares, or approximately 5% of its total issued and outstanding ordinary shares at the time of the announcement, whereupon the purchased shares will be cancelled. At Endeavour’s current share price of C$28.95 (US$23.91), the NCIB is worth c US$291.7m and compares extremely favourably with its FY20 dividend payout of US$60.3m and its forecast US$125.2m pay-out in FY21. Combined, the NCIB and FY21e dividend distribution together represent c US$416.9m in aggregate returns to shareholders – equivalent to a dividend yield of 7.0% – in FY21.

Note that, owing to the inherent uncertainty surrounding whether purchases are made and at what price under the NCIB, we have not attempted to include potential future share buybacks in our financial forecasts in Exhibit 3, below, but only historical ones. To date in FY21, we estimate that Endeavour has repurchased and cancelled a total of 2.2m shares for consideration of C$60.4m, or US$49.0m.

Financials

According to its Q121 balance sheet, Endeavour had net debt of US$220.2m post the acquisition of Teranga and the injection of US$200m by La Mancha. This compares with net debt of US$43.3m as at end-FY20 (pre the Teranga acquisition). This figure of US$220.2m includes lease liabilities of US$43.6m and an option premium of US$46.3m. Excluding the latter results in a net debt position of US$173.9m or just 4.3% of the company’s balance sheet equity of US$4,007.7m at end-Q121. Note that it differs slightly from the figure of US$161.8m quoted elsewhere in Endeavour’s announcements in that the latter excludes US$43.6m in lease liabilities and owing to the discounting, variously, of certain committed future payments to present value.

Note that, for the purposes of its financial modelling (see Exhibit 3, below) and for simplicity’s sake, we have assumed the consolidation of Endeavour’s and Teranga’s balance sheets took place retrospectively on 31 December 2020. In this case, we estimate that Endeavour would have consolidated c US$242.6m in net debt on its balance sheet and c US$349.2m in gross debt as a consequence of its Teranga acquisition. As such, on a pro forma basis, we estimate Endeavour would have had US$323.1m in net debt on its balance sheet at end-FY20, which we calculate would have equated to a gearing (net debt/equity) ratio of just 8.8% and a leverage (net debt/[net debt+equity]) ratio of 8.1% on the group’s enlarged equity base.

Exhibit 4: Financial summary

US$'000s

2018

2019

2020

2021e

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,048,636

1,362,121

1,847,894

2,758,101

2,495,073

2,384,441

Cost of Sales

(669,719)

(884,869)

(1,061,891)

(1,383,683)

(1,077,784)

(1,034,014)

Gross Profit

378,917

477,252

786,003

1,374,418

1,417,289

1,350,427

EBITDA

 

 

378,917

618,443

910,295

1,386,578

1,417,289

1,350,427

Operating Profit (before amort. and except.)

 

106,090

281,400

546,072

836,328

930,000

920,276

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

8,035

(199,159)

(201,532)

29,917

0

0

Other

(3,171)

(9,392)

8,886

(19,750)

0

0

Operating Profit

110,954

72,849

353,426

846,495

930,000

920,276

Net Interest

(27,110)

(51,607)

(53,774)

(28,502)

244

7,248

Profit Before Tax (norm)

 

 

75,809

220,401

501,184

788,076

930,245

927,524

Profit Before Tax (FRS 3)

 

 

83,844

21,242

299,652

817,993

930,245

927,524

Tax

(73,637)

(97,253)

(158,466)

(231,736)

(178,048)

(168,831)

Profit After Tax (norm)

2,172

123,148

342,718

556,340

752,197

758,693

Profit After Tax (FRS 3)

10,207

(76,011)

141,186

586,257

752,197

758,693

Net loss from discontinued operations

(154,795)

(4,394)

0

0

0

0

Minority interests

8,460

33,126

44,719

87,964

110,447

109,000

Net profit

(144,588)

(80,405)

141,186

586,257

752,197

758,693

Net attrib. to shareholders contg. businesses (norm)

(16,292)

90,022

297,998

468,376

641,750

649,694

Net attrib.to shareholders contg. businesses

(8,257)

(109,137)

96,466

498,293

641,750

649,694

Average Number of Shares Outstanding (m)

155.3

157.4

160.8

250.4

250.4

250.4

EPS - normalised ($)

 

 

(0.10)

0.57

1.85

1.87

2.56

2.59

EPS - normalised and fully diluted ($)

 

 

(0.10)

0.57

1.82

1.85

2.53

2.56

EPS - (IFRS) ($)

 

 

(0.99)

(0.72)

0.60

1.99

2.56

2.59

Dividend per share (c)

0

0

37

50

60

70

Gross Margin (%)

36.1

35.0

42.5

49.8

56.8

56.6

EBITDA Margin (%)

36.1

45.4

49.3

50.3

56.8

56.6

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

10.1

20.7

29.6

30.3

37.3

38.6

BALANCE SHEET

Fixed Assets

 

 

1,594,202

2,330,033

5,093,409

5,111,622

4,996,160

4,918,676

Intangible Assets

4,186

5,498

24,851

24,851

24,851

24,851

Tangible Assets

1,543,842

2,254,476

3,968,746

3,986,959

3,871,498

3,794,014

Investments

46,174

70,059

1,099,812

1,099,812

1,099,812

1,099,812

Current Assets

 

 

327,841

652,871

1,168,382

1,931,010

2,559,155

3,175,721

Stocks

126,353

266,451

305,075

530,404

479,822

458,546

Debtors

74,757

83,836

104,545

252,237

230,619

221,525

Cash*

124,022

288,186

751,563

1,099,092

1,799,439

2,446,373

Other

2,709

14,398

7,199

49,276

49,276

49,276

Current Liabilities

 

 

(248,420)

(354,931)

(661,171)

(801,905)

(698,496)

(683,580)

Creditors

(224,386)

(312,427)

(612,862)

(753,596)

(650,187)

(635,271)

Short term borrowings

(24,034)

(42,504)

(48,309)

(48,309)

(48,309)

(48,309)

Long Term Liabilities

 

 

(729,290)

(963,736)

(1,647,799)

(1,647,799)

(1,647,799)

(1,647,799)

Long term borrowings

(618,595)

(770,902)

(1,026,337)

(1,026,337)

(1,026,337)

(1,026,337)

Other long term liabilities

(110,695)

(192,834)

(621,462)

(621,462)

(621,462)

(621,462)

Net Assets

 

 

944,333

1,664,237

3,952,821

4,592,927

5,209,020

5,763,019

CASH FLOW

Operating Cash Flow

 

 

394,984

628,617

1,046,370

1,143,850

1,386,081

1,365,879

Net Interest

(26,734)

(35,413)

(53,774)

(28,502)

244

7,248

Tax

(36,140)

(109,494)

(186,332)

(223,048)

(178,048)

(168,831)

Capex

(689,469)

(401,227)

(335,599)

(568,463)

(371,828)

(352,667)

Acquisitions/disposals

33,179

3,654

(19,000)

20,000

40,000

0

Financing

(7,820)

2,402

100,000

151,000

0

0

Dividends

(1,956)

(6,154)

(88,288)

(147,307)

(176,104)

(204,695)

Net Cash Flow

(333,956)

82,385

463,377

347,529

700,347

646,935

Opening net debt/(cash)*

 

 

218,140

518,607

525,220

323,083

(24,446)

(724,793)

HP finance leases initiated

0

0

0

0

0

0

Other

33,489

(88,998)

(261,240)

0

0

0

Closing net debt/(cash)*

 

 

518,607

525,220

323,083

(24,447)

(724,793)

(1,371,727)

Source: Company sources, Edison Investment Research. Note: Presented on pro forma basis including SEMAFO from FY18 balance sheet and Teranga from FY20 balance sheet. EPS normalised from FY18 to reflect continuing business only. *Excludes restricted cash.


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Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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 research department of Edison 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 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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