Valuation US$27.58; potential 32% upside

Endeavour Mining 3 October 2019 Update
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Endeavour Mining

Valuation US$27.58; potential 32% upside

Q3 results forecast adjustments

Metals & mining

3 October 2019

Price

C$25.43

Market cap

C$2,795m

C$1.3245/US$

Net debt (US$m) at end June 2019

653.2

Shares in issue (thousands)

109,925

Free float

70.1%

Code

EDV

Primary exchange

TSX

Secondary exchange

US OTC

Share price performance

%

1m

3m

12m

Abs

(2.0)

17.5

25.3

Rel (local)

(1.2)

18.7

23.1

52-week high/low

C$28.79

C$16.36

Business description

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.

Next events

Ity expansion to 5Mtpa completed

Q419

Kari West and Center maiden resource

Q419

Le Plaque resource and maiden reserve

Q419

Q319 results

November 2019

Q419 cost & production results

January 2020

Kalana feasibility study

Q120

Analyst

Charles Gibson

+44 (0)20 3077 5724

Endeavour Mining is a research client of Edison Investment Research Limited

Following the end of Q3, we have revised our earnings forecasts for Endeavour to reflect a higher gold price (a likely quarterly average of US$1,474/oz cf a previous forecast US$1,416/oz), a slightly more disruptive rainy season than expected (at Houndé in particular) and the estimated impact of the company’s gold revenue protection strategy. Once these factors have been adjusted for, our estimate for FY19 adjusted net EPS rises by 19.0%, from 44.3cps to 52.7cps.

Year
end

Revenue (US$m)

EBITDA (US$m)

PBT*
(US$m)

Operating cash flow
per share (US$)

Capex (US$m)

Net debt**
(US$m)

12/17

652.1

201.2

49.3

2.25

441.4

216.8

12/18

752.0

264.8

70.5

2.33

486.5

517.5

12/19e

895.3

403.2

140.1

2.70

245.6

523.3

12/20e

979.2

504.0

246.0

3.76

185.9

348.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. **Includes restricted cash.

More Fetekro exploration success

In addition to its forthcoming Q3 financial results, on 3 September Endeavour announced it had increased its indicated resources at the Lafigué target at Fetekro in Côte d’Ivoire by 141%, to 1.19Moz at a cost of c US$9 per indicated ounce. The Lafigué resource now encompasses a mineralised area of 1.32km2 (equating to 947koz/km2) and, as such, is comparable in size and grade to Endeavour’s Agbaou mine when it started production in 2014. Pro-rata to Endeavour’s prior resource multiple, we estimate that Fetekro’s resource increase could be worth up to US$55.7m, or US$0.33 per EDV share (attributable).

Exploration momentum building

Endeavour’s exploration success comes within the context of its programme to spend c US$45m per year to discover an additional c 10–15Moz of indicated resources over five years at a discovery cost of c US$15/oz. While its 531koz resource increase therefore equates to 3.3% of Endeavour’s prior, global resource, or 2.5% on an attributable basis, the increase in its indicated component equates to a rather more significant 4.6–7.0% of its 10–15Moz target. To date, Endeavour has delineated c 4.1Moz at Fetekro, Greater Ity and Kari-Pump as a result of its exploration programme, or 27-41% of its target in a little over a quarter of its timeframe, with more to come later in the year from Kari West and Kari Center.

Valuation: Homing in on US$27.58/share

In valuing Endeavour, we have opted to discount potential cash flows back over four years from FY19 then apply an ex-growth, ad infinitum terminal multiple of 10x (consistent with a discount rate of 10%) to the forecast cash flow in that year (FY22). For Endeavour, our estimate of cash flow in FY22 is US$3.23 per share (including exploration expenditure), in which case our terminal valuation of the company at end-FY22 is US$32.33/share. In conjunction with forecast intervening cash flows, this discounts back to a value of US$27.58/share.

Q319 results preview

Following the end of Q3, we have revised our earnings forecasts for Endeavour to reflect a higher gold price (a quarterly average of US$1,474/oz cf previous forecast US$1,416/oz), a slightly more disruptive rainy season (at Houndé in particular) than expected and the estimated impact of the company’s gold revenue protection strategy that was put in place on 1 July.

Gold price

Edison’s Q3 gold price forecast of US$1,416/oz was made in the aftermath of Endeavour’s Q2 results (which were released on 1 August) and reflected the price of gold at the time of writing, albeit erring to the side of the relatively conservative. In the event, the gold price began to rise relatively strongly from 2 August and remained around the US$1,500/oz level from 7 August until almost the end of the quarter such that, for Q319, it averaged approximately US$1,474/oz, or 4.0% above our original number.

Exhibit 1: Gold price and forecast gold price received by EDV* (US$/oz), Q319

Source: Refinitiv, Edison Investment Research. Note: *See ‘Gold Revenue Protection Strategy’ below for explanation.

Although we had was already forecast it at the time of our last note (see Endeavour Mining, Tipping point, published on 9 August 2019), the higher gold price nevertheless triggered higher government royalty rates for Enedavour’s mines relative to the first two quarters of the year, as follows:

Exhibit 2: Forecast government royalty rate changes, Q3 and Q419 vs H119

Mine

New government royalty rate

Previous government royalty rate

Change
(percentage points)

Agbaou

4.0% between US$1,300-1,600/oz

3.5% below US$1,300/oz

+0.5

Ity

4.0% between US$1,300-1,600/oz

3.5% below US$1,300/oz

+0.5

Karma

5.0% above US$1,300/oz

4.0% below US$1,300/oz

+1.0

Houndé

5.0% above US$1,300/oz

4.0% below US$1,300/oz

+1.0

Source: Endeavour Mining, Edison Investment Research.

Operations in the rainy season

Operations at Houndé in H2 have continued to benefit from access to high-grade ore from the Bouéré deposit, where pre-stripping was completed in Q219 and from which ore began to be processed early in Q319. However, we believe that milling operations will have been slightly disrupted by the more inclement rainy season than anticipated.

Operations at Karma have similarly benefit from the stacking of higher-grade oxide ore from the Kao North pit, which started in Q219. In this case, however, we expect the weather will have affected the mining, rather than the processing, operation.

Readers are cautioned that forecasting results on a quarterly basis is prone to large variations between actual and forecast numbers. Nevertheless, the consequences of all of the above effects are shown in the table below, relative to our prior forecasts:

Exhibit 3: Endeavour Mining FY19 earnings forecasts, by quarter


(US$000s unless otherwise indicated)

FY18

Q119

Q219

Q319e
(previous)

Q419e
(previous)

FY19e
(previous)

Q319e
(current)

Q419e
(current)

FY19e
(current)

Houndé production (koz)

277.2

55.4

58.2

61.8

68.6

244.0

58.2

68.6

240.4

Agbaou production (koz)

141.3

31.8

34.6

32.2

29.5

128.1

32.2

29.5

128.1

Karma production (koz)

108.7

22.1

21.0

25.9

35.9

105.0

23.5

35.9

102.5

Ity production (koz)

84.8

11.5

57.3

60.8

55.3

185.1

60.8

55.3

185.1

Tabakoto production (koz)

115.2

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Total gold produced (koz)

612.1

120.8

171.3

180.8

189.3

662.2

174.7

189.3

656.0

Total gold sold (koz)

612.1

120.9

170.7

180.8

189.3

661.7

174.7

189.3

655.6

Gold price (US$/oz)

1,199

1,304

1,285

1,416

1,418

*1,335

1,474

1,474

*1,365

Mine level cash costs (US$/oz)

579

659

632

590

497

587

605

497

591

Mine level AISC (US$/oz)

744

827

790

804

685

763

856

688

769

Revenue

– Gold revenue

751,957

151,310

219,371

250,344

262,696

883,721

251,582

273,071

895,334

Cost of sales

– Operating expenses

386,926

88,363

103,318

106,651

94,134

392,465

105,631

94,134

391,446

– Royalties

41,068

8,989

11,032

13,759

15,054

48,834

13,669

15,649

49,339

Gross profit

323,963

53,958

105,021

129,934

153,508

442,422

132,282

163,288

454,549

Depreciation

(169,069)

(36,132)

(51,970)

(63,534)

(66,760)

(218,396)

(60,757)

(66,841)

(215,699)

Expenses

– Corporate costs

(26,573)

(6,061)

(5,143)

(5,957)

(7,943)

(25,104)

(5,957)

(7,943)

(25,104)

– Impairments

0

0

0

0

0

0

0

0

0

– Acquisition etc costs

0

0

0

0

0

0

0

0

0

– Share based compensation

(24,931)

(2,600)

(4,385)

(5,333)

(5,333)

(17,651)

(5,333)

(5,333)

(17,651)

– Exploration costs

(7,621)

(4,361)

(1,674)

(1,271)

(1,271)

(8,577)

(1,271)

(1,271)

(8,577)

Total expenses

(59,125)

(13,022)

(11,202)

(12,561)

(14,547)

(51,332)

(12,561)

(14,547)

(51,332)

Earnings from operations

95,769

4,804

41,849

53,839

72,202

172,694

58,964

81,901

187,518

Interest income

0

0

0

Interest expense

(23,671)

(4,919)

(12,386)

(17,224)

(17,224)

(51,753)

(20,224)

(14,224)

(51,753)

Net interest

(23,671)

(4,919)

(12,386)

(17,224)

(17,224)

(51,753)

(20,224)

(14,224)

(51,753)

Loss on financial instruments

8,035

1,123

(11,757)

(10,634)

(1,445)

(12,079)

Other expenses

(1,558)

(197)

4,574

0

0

4,377

0

0

4,377

Profit before tax

78,575

811

22,280

36,615

54,978

114,684

37,295

67,677

128,063

Current income tax

66,522

13,478

13,845

17,302

19,766

64,391

18,667

21,785

67,775

Deferred income tax

(5,007)

(1,224)

1,531

0

0

307

0

0

307

Total tax

61,515

12,254

15,376

17,302

19,766

64,698

18,667

21,785

68,082

Marginal tax rate

78.3

1,511.0

69.0

47.3

36.0

56.4

50.1

32.2

53.2

Profit after tax

17,060

(11,443)

6,904

19,313

35,212

49,986

18,629

45,892

59,982

Net profit from discontinued ops.

(154,795)

0

0

0

0

0

0

0

0

Total net and comprehensive loss

(137,735)

(11,443)

6,904

19,313

35,212

49,986

18,629

45,892

59,982

Minority interest

7,121

3,224

6,193

7,666

9,045

26,128

8,197

9,985

27,599

Minority interest (%)

(5.2)

(28.2)

89.7

39.7

25.7

52.3

44.0

21.8

46.0

Profit attributable to shareholders

(144,856)

(14,667)

711

11,648

26,167

23,858

10,432

35,907

32,383

Basic EPS from continuing ops (US$)

(0.001)

(0.136)

0.006

0.106

0.238

0.217

0.095

0.327

0.295

Diluted EPS from continuing ops (US$)

(0.001)

(0.131)

0.006

0.102

0.229

0.209

0.091

0.315

0.284

Basic EPS (US$)

(1.344)

(0.136)

0.006

0.106

0.238

0.217

0.095

0.327

0.295

Diluted EPS (US$)

(1.342)

(0.131)

0.006

0.102

0.229

0.209

0.091

0.315

0.284

Norm. basic EPS from continuing ops (US$)

(0.075)

(0.146)

0.113

0.106

0.238

0.314

0.108

0.327

0.405

Norm. diluted EPS from continuing ops (US$)

(0.075)

(0.141)

0.113

0.102

0.229

0.302

0.104

0.315

0.390

Adj net earnings attributable (US$000s)

53,132

(4,910)

8,519

14,864

30,130

48,602

14,227

40,080

57,916

Adj net EPS from continuing ops (US$)

0.493

(0.045)

0.078

0.135

0.274

0.443

0.129

0.365

0.527

Source: Endeavour Mining, Edison Investment Research. Note: Company reported basis. *Includes adjustment for Karma stream.

In addition to the immediate effects of the above considerations, on 1 July 2019 Endeavour entered into a short-term Gold Revenue Protection Strategy to maximise cash-flow certainty during its debt reimbursement phase. Similar to the strategy it put in place during its recent construction phases, this comprises a deferred premium collar strategy using written (sold) call option and bought put option contracts to (effectively) create a synthetic short position. The programme began on 1 July 2019 and will end on 30 June 2020 and will cover a total of 360,000oz (approximately 50% of Endeavour’s total estimated production over the period), with a floor price of US$1,358/oz and a ceiling price of US$1,500/oz. The total premium payable for entering into these transactions was US$9.2m, which has been deferred and is settled as monthly contracts mature.

As a result of the programme, we estimate that Endeavour will not have fully benefitted from the gold price being above US$1,500/oz over the past quarter and that the written calls over an estimated 90,000oz (a quarter of the total programme) will have been exercised at US$1,500/oz, resulting in a paper contract loss of US$16.05/oz, or US$1,445k in total, which we have included in our forecast for ‘Loss on financial instruments’ in Exhibit 3, above.

Updated forecasts within the context of guidance

Historically, Endeavour has a good record of meeting its production and cost guidance targets. In the light of the above changes, we have revised our forecasts for FY19 as follows for each of its mines for the year:

Exhibit 4: Current Endeavour production and AISC cost guidance, by mine, FY19 vs FY18 and Edison forecast

Production

All-in sustaining costs (AISC)

Mine

FY19e guidance (koz)

Edison FY19e forecast (koz)

Previous FY19 forecast (koz)

FY19e guidance (US$/oz)

Edison FY19e forecast (US$/oz)

Previous FY19 forecast (US$/oz)

Houndé

230–250

240.4

244.0

720–790

798

790

Agbaou

120–130

128.1

128.1

850–900

852

851

Karma

105–115

102.5

105.0

860–910

892

872

Ity*

160–200

185.1

185.1

525–590

591

590

Group total

615–695

656.0

662.2

**760–810

**808

**801

Source: Endeavour Mining, Edison Investment Research. Note: *Ity production is Ity CIL and residual Ity heap leach operation combined; Ity AISC is CIL only; **Includes corporate general & administrative costs.

To date, we have given no credit to Endeavour’s plan to increase the Ity CIL plant nameplate capacity by 1Mtpa to 5Mtpa (which is expected to be completed in Q419). These plant upgrades are expected to be completed during scheduled maintenance shut-downs over the next two months. However, if the process is completed by the end of Q3, then we estimate it would have the potential to increase quarterly Ity CIL production from 55.3koz to 69.1koz in Q4 and group adjusted net earnings attributable (see Exhibit 3, above) from 36.5c per share to 45.1c per share (all other things being equal) in Q419 and from 52.7c/share to 61.4c/share for FY19.

Within this context, it is worth noting that the top end of Endeavour’s production guidance is 39.0koz gold above our updated forecast for the year, which is worth a material US$54.3m in additional revenue to the company (at US$1,474/oz) net of royalties and therefore has the ability to increase Endeavour’s full year profit before tax by 42.4% (post-royalties) relative to our forecasts (all other things being equal).

Fetekro exploration

In addition to its forthcoming Q3 financial results, on 3 September Endeavour announced it had increased its indicated resources at the Lafigué target at Fetekro in Côte d’Ivoire by 141%, to 1.19Moz.

The initial resource at Lafigué was based on 312 reverse circulation (RC) and diamond (DD) holes, totalling 32,000m, or 22.5oz per metre drilled. Owing to the high quality of the initial exploration results, an additional 201 additional RC and DD holes were drilled between Q318 and the end of Q219, totalling 35,000m (equating to 15.2oz per metre drilled) and resulting in the following updated resource:

Exhibit 5: Feteko/Lafigué mineral resource estimate, August 2019 vs December 2018

Tonnage
(Mt)

Grade
(g/t)

Contained gold
(koz)

Fetekro ( 31 August 2019)

Measured

0.0

0.00

0

Indicated

14.6

2.54

1,190

Inferred

0.9

2.17

60

Total

15.5

2.51

1,250

Fetekro (31 December 2018)

Measured

0.0

0.00

0

Indicated

6.8

2.25

494

Inferred

3.0

2.25

225

Total

9.8

2.28

719

Change (units)

Measured

0.0

N/A

0

Indicated

7.8

2.78

696

Inferred

-2.1

2.45

-165

Total

5.7

2.90

531

Change (%)

Measured

N/A

N/A

N/A

Indicated

114.7

12.9

141.0

Inferred

-70.0

-3.6

-73.4

Total

58.2

9.9

73.9

Source: Endeavour Mining

The Lafigué resource now encompasses a mineralised area of 1.32km2 (equating to 947koz per square kilometre) and remains open at depth and towards the southeast and, as such, is comparable in size and grade to Endeavour’s Agbaou mine (currently 711koz at 2.15g/t) when it started production in 2014. At least 30,000m of additional drilling is therefore scheduled to begin in Q419 with the intention of publishing an updated resource in Q220.

More than 90% of the drill holes intersected at least 2m of mineralisation at grades in excess of 0.5g/t. Moreover, since the mineralisation starts at surface, the deposit will be amenable to open pit mining, while preliminary metallurgical results suggest high gold recovery rates above 95%, with a ‘significant portion’ recoverable by gravity.

Exploration investment in the project to date has been approximately US$10m, or c US$9 per indicated ounce delineated. Of particular note is the increase in the resource grade since December 2018 and the fact that the resource is relatively invariant with respect to the gold price (indicating that the gold mineralisation exists within discrete geological structures).

Exploration success to date

Endeavour’s exploration success comes within the context of its programme to spend c US$45m per year to discover an additional c 10–15Moz of indicated resources over five years at a discovery cost of c US$15/oz. To date, it has delineated resources at Fetekro, Le Plaque and Kari-Pump and aims to publish maiden resource and reserve estimates for both Kari West and Kari Center in Q419:

Exhibit 6: Endeavour exploration programme tangible resources delineated to date (Moz)

Deposit

Indicated category contained gold
(Moz)

Fetekro

1.2

Greater Ity

1.9

Kari-Pump (Houndé)

1.0

Total

4.1

Deposit

Fetekro

Greater Ity

Kari-Pump (Houndé)

Total

Indicated category contained gold
(Moz)

1.2

1.9

1.0

4.1

Source: Edison Investment Research, Endeavour Mining

As such, Endeavour has delineated a little over a quarter of its target resource in approximately a quarter of its stipulated timeframe (ie a little over a year). Once maiden resources and reserves have been published at Kari West and Kari Center, an updated mine plan and technical report, integrating Kari Pump, Kari Center and Kari West, is also expected to be released.

Potential Fetekro valuation

Fetekro’s 531koz resource increase equates to 3.3% of Endeavour’s prior, global resource (on a 100% basis, including the Le Plaque upgrade), or 2.5% on an attributable basis. However, the indicated category increase equates to a rather more significant 4.6–7.0% of Endeavour’s 10.0–15.0Moz exploration target over five years.

Immediately prior to the Fekero resource upgrade, Endeavour’s enterprise value (EV) equated to a resource multiple of US$202.56 per attributable resource oz. On this basis, Fetekro’s 1.25Moz resource immediately after the upgrade would be valued at US$253.2m (or US$1.50/share, attributable for EDV’s 65% interest). Given that almost all of Endeavour’s other resources relate to assets in which development (as well as exploration) capital has already been sunk, however, such an estimate is likely to be an over-estimation, except in the event that ore derived from the resource could be transported to other, nearby processing facilities. Within this context, investors should note that Endeavour’s balance sheet value of its ‘Mining interests’ as at 31 December 2018 (a measure of Endeavour’s investment into its resources in order to achieve their US$202.56/oz valuation) equated to US$97.77 per resource ounce on a 100% basis, which suggests a pre-investment valuation of Endeavour’s resources of US$104.79/oz (being 202.56 – 97.77 = 104.79), on which basis Fetekro would be worth US$131.0m (or US$0.77/share). Adopting a similar methodology, its 531koz resource upgrade would be likely to be worth in the order of US$55.7m, or US$0.33/share (attributable).

Alternatively, in our report, Gold stars and black holes, published in January 2019, we calculated average values for pure in situ resources, differentiated both by the markets in which they were listed and also by category of resources (as well as on a blended average basis). The results of this process for London- and Canada-listed companies (as well as the global average) plus their implications for the valuation of Fetekro are provided in Exhibit 7, below.

Exhibit 7: Fetekro maiden resource valuation range

Resource multiples

Implied Fetekro valuation

Category

Fetekro resource (Moz Au)

London
(US$/oz)

Canada
(US$/oz)

Geometric global mean (US$/oz)

London*
(US$m)

Canada*
(US$m)

Geometric global mean (US$m)

Measured

0

61.19

29.12

32.78

0.0

0.0

0.0

Indicated

1,190

8.68

13.82

12.33

10.3

16.4

14.7

Inferred

60

7.87

7.87

11.07

0.5

0.5

0.7

Total resource

1,250

9.88

13.83

14.95

12.4

17.3

18.7

Source: Edison Investment Research, Endeavour Mining. Note: *See our report, Gold stars and black holes, published in January 2019.

On the basis of this analysis, a minimum value for the Fetekro maiden resource is US$10.8m (third last column, 10.3 + 0.5 = 10.8), or US$8.64/oz, or US$0.06/share (attributable), derived from applying London resource multiples differentiated by category. A maximum value for the Fetekro maiden resource (valued purely as an in situ resource) may otherwise be seen to be US$18.7m (or US$0.11/share, attributable), derived by applying a geometric, global mean rating of US$14.95/oz to the resource in its entirety. Note that these US dollar per resource ounce valuations accord closely with the reported investment in the drilling programme to define the resource, but may understate Fetekro’s valuation to Endeavour in that the benchmarks used to calculate the valuation are derived from pre-production junior mining companies. As such, these valuations may be more appropriate to Fetekro in the event that it were to be spun off into a separately quoted vehicle (excluding cash), rather than being retained within the Endeavour portfolio.

Endeavour valuation

In valuing Endeavour, we have opted to discount potential cash flows back over four years from FY19 then apply an ex-growth terminal multiple of 10x (consistent with using a standardised discount rate of 10%) to the forecast cash flow per share in that year (ie FY22) to reflect the fact that Endeavour is a multi-asset company that has shown a willingness and desire to trade assets, maintain production, reduce costs and maximise returns to shareholders (eg the sales of Tabakoto in FY18, Nzema in FY17 and Youga in FY16). Note that, given exploration success at Houndé and its increasing reserve and resource profile, management has confirmed that a review of the plant will be conducted during Q319 with a view to increasing its capacity. Nevertheless, in recognition of the fact that exploration expenditure may be required to maintain cash flows at their FY22 level, we have also opted to include this investment in our cash flow analysis on the grounds that it may be a critical component of ongoing business performance in its ability to continually extend the lives of the company’s assets, instead of excluding it (as would be our normal practice).

After our gold price etc adjustments above, our estimate of Endeavour’s cash flow remains broadly unchanged at US$3.23 per share in FY22 (cf US$3.24/sh previously), on which basis our terminal valuation of the company at end-FY22 is US$32.33/share. In conjunction with forecast intervening cash flows, this discounts back to a value of US$27.58/share at the start of FY19 (cf US$27.66/sh previously). Note that, over the past three months, Endeavour’s share price has risen from c C$21/share during H119, when the gold price averaged US$1,304/oz, to c C$26.50/share now that it is c US$1,474/oz – ie Endeavour has risen c 26% over the same period that the gold price has risen by c 13%. At the same time, the value of the Canadian unit of currency has failed to strengthen materially against the US dollar (unusually, at a time of higher gold prices), while the value of the euro (to which Endeavour’s margins are inversely related) has fallen by approximately 3.5%.

Exhibit 8: Endeavour forecast cash-flow/sh and cash-flow/sh valuation, FY19-22e (US$/sh)

Source: Edison Investment Research

To this may now be added our estimate of the potential range of values for the Fekekro resource upgrade of US$0.06-0.77/sh (attributable).

Exhibit 9: Financial summary

US$'000s

2016

2017

2018

2019e

2020e

December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

566,486

652,079

751,957

895,334

979,241

Cost of Sales

(376,794)

(597,528)

(487,119)

(492,116)

(475,231)

Gross Profit

189,692

54,551

264,838

403,218

504,009

EBITDA

 

 

213,916

201,166

264,838

403,218

504,009

Operating Profit (before amort. and except.)

127,981

70,379

95,769

187,518

298,372

Intangible Amortisation

0

0

0

0

0

Exceptionals

(36,272)

(149,942)

8,035

(12,079)

0

Other

(1,989)

(2,242)

(1,558)

4,377

0

Operating Profit

89,720

(81,805)

102,246

179,817

298,372

Net Interest

(24,593)

(18,789)

(23,671)

(51,753)

(52,334)

Profit Before Tax (norm)

 

 

101,399

49,348

70,540

140,142

246,039

Profit Before Tax (FRS 3)

 

 

65,127

(100,594)

78,575

128,063

246,039

Tax

(27,643)

(32,945)

(61,515)

(68,082)

(78,028)

Profit After Tax (norm)

73,756

16,403

9,025

72,060

168,011

Profit After Tax (FRS 3)

37,484

(133,539)

17,060

59,982

168,011

Net loss from discontinued operations

(154,795)

0

0

Minority interests

7,121

27,599

35,616

Net profit

(137,735)

59,982

168,011

Net attrib. to shareholders contg. businesses (norm)

(8,100)

44,462

132,395

Net attrib.to shareholders contg. businesses

(65)

32,383

132,395

Average Number of Shares Outstanding (m)

80.6

98.5

107.7

109.8

109.9

EPS - normalised ($)

 

 

(0.38)

(0.06)

(0.08)

0.40

1.20

EPS - normalised and fully diluted ($)

 

(0.38)

(0.06)

(0.08)

0.39

1.16

EPS - (IFRS) ($)

 

 

(0.83)

(1.59)

(1.34)

0.29

1.20

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

33.5

8.4

35.2

45.0

51.5

EBITDA Margin (%)

37.8

30.8

35.2

45.0

51.5

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

22.6

10.8

12.7

20.9

30.5

BALANCE SHEET

Fixed Assets

 

 

1,073,562

1,331,745

1,594,202

1,629,094

1,609,390

Intangible Assets

29,978

6,267

4,186

4,186

4,186

Tangible Assets

1,039,529

1,317,952

1,543,842

1,578,734

1,559,030

Investments

4,055

7,526

46,174

46,174

46,174

Current Assets

 

 

283,536

361,766

327,841

371,595

569,670

Stocks

110,404

141,898

126,353

172,180

188,316

Debtors

36,572

95,212

74,757

90,564

97,461

Cash

124,294

122,702

124,022

118,221

293,263

Other

12,266

1,954

2,709

(9,370)

(9,370)

Current Liabilities

 

 

(149,626)

(241,185)

(248,420)

(249,432)

(238,461)

Creditors

(145,311)

(223,527)

(224,386)

(225,398)

(214,427)

Short term borrowings

(4,315)

(17,658)

(24,034)

(24,034)

(24,034)

Long Term Liabilities

 

 

(246,811)

(451,705)

(729,290)

(729,290)

(729,290)

Long term borrowings

(146,651)

(323,184)

(618,595)

(618,595)

(618,595)

Other long term liabilities

(100,160)

(128,521)

(110,695)

(110,695)

(110,695)

Net Assets

 

 

960,661

1,000,621

944,333

1,021,966

1,211,309

CASH FLOW

Operating Cash Flow

 

 

164,522

244,092

274,938

364,318

491,338

Net Interest

(19,626)

(15,212)

(26,734)

(51,753)

(52,334)

Tax

(10,625)

(22,301)

(24,018)

(67,775)

(78,028)

Capex

(212,275)

(441,396)

(486,498)

(245,591)

(185,934)

Acquisitions/disposals

32,098

(37,332)

33,179

(5,000)

0

Financing

174,702

116,536

(6,231)

(0)

0

Dividends

(2,612)

(5,177)

(1,956)

0

0

Net Cash Flow

126,184

(160,790)

(237,320)

(5,801)

175,043

Opening net debt/(cash)

 

 

152,856

26,672

218,140

518,607

524,408

HP finance leases initiated

0

0

0

0

0

Other

0

(30,678)

(63,147)

0

0

Closing net debt/(cash)

 

 

26,672

218,140

518,607

524,408

349,366

Source: Company sources, Edison Investment Research. Note: *Excludes restricted cash. EPS normalised from 2018 to reflect continuing business only. 2017 is shown as previously reported (ie not restated).


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.

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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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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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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.

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The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

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New York +1 646 653 7026

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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

1,185 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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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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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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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