Doug
Reddy
SVP Business Development
Doug Reddy, the Senior Vice President of Business
Development with Endeavour Mining (TSX: EDV, ASX:EVR), spent some time talking
to Metals News about the progress they have made in their West African gold
mines. He said, “I have been working as
a geologist in the industry since 1986 and with Endeavour for eight years working
mostly on technical services but more recently on business development and
investor relations.”
Q3 2014 Highlights
•Strong gold production:
−Produced 117,612 ounces in Q3 and 346,041 YTD
−3 of 4 mines exceeding mid-point guidance
•Achieved stated goal of AISC/oz below $1,000 in Q3
−Adjusted EBITDA of $37.6 million
−AISC of $991/oz1
−All-in sustaining margin of $32.1 million
•Agbaou continues to be strongest performer
−9-month production already exceeds original guidance for the
year
•Investments in Tabakoto’s optimization nearing completion
and set for improved margins in Q4 2014
−Segala ramped up to 1,500 tonnes per day milestone in
September
−Good progress on road construction to Kofi C deposit with
pre-stripping to begin in December and production in January 2015
•Transitioning out of capital investment programs and into
free cash flow generation
1 Includes mine level cash costs, royalties, corporate costs
and sustaining capital
Underground Mining at Tabakoto
The company has had rapid growth. According to
Reddy, “We made the switch from a project finance company to become a mining
company in 2010 when we acquired Etruscan Resources and the Youga Mine and
Agbaou Project, which we subsequently built.
In the following two years we acquired two more companies each of which
brought along a mine, Adamus with the Nzema Mine, and Avion with the Tabakoto
Mine. Last year the company focused on
organic growth. We built the Agbaou mine,
expanded the Tabakoto mill from 2000 to 4000 tons of processing capacity per
day, and also developed the Segala underground mine.”
As the Endeavour team has been working on developing
and improving their mines, the team has specific goals in mind. Reddy said, “The focus has been first and
foremost to deliver on our guidance and then also to optimize the operations through
increases in production and also reductions in costs. It looks like we will exceed our production
guidance this year and through our cost cutting efforts we will be in the lower
half of our guidance for costs.”
The company was active on many fronts during the
last year. Said Reddy, “Our Construction
Services team worked hard to bring the Agbaou mine on-line ahead of schedule
and under budget. The mine declared
commercial production at the start of 2014 and the operation has proven to be a
low cost producer at a cash cost of $561/oz year to date. It also has a higher gold
output than originally anticipated.”
“The Tabakoto plant capacity was doubled during 2013
and this year we have been working on securing the additional ore feed for the
plant from the underground mines at Tabakoto and Segala and also open pit ore
from Kofi C. We have ongoing drilling programs
for delineating the underground resources and reserves.”
“We completed a
feasibility study on the Kofi C deposit on the Kofi property which is next to the
Tabakoto mine permit. We submitted the
feasibility study for approval from the Mali Ministry of Mines and we now have
the mine permit. Road construction is
near completion and mining will commence in early 2015. There are several more deposits on the Kofi
property which are covered by the mine permit and we will continue working on adding
those to the production schedule, where possible.”
Houndé
Update
2014 exploration program focused on strike extensions of known
zones such as Vindaloo and Madras as well as targets considered to have
potential for delineation of additional resources, including Bouéré and Dohoun
(both within 14 km of proposed plant)
•The drilling program began in June 2014 and is nearing completion
•Assay results are currently being tabulated and updated mineral resources
and reserves will be completed for the year end and reported in Q1 2015
Financially, the company does not need to raise any
capital at the moment. According to Reddy,
“We had a cash balance of $55 million at the end of the third quarter. We have a credit facility of $350 million, of
which $300 million is drawn. We expanded
it from $200 million to $350 million in mid-2013 which was prudent given the drop
in the gold price in 2013 at a time when we were in the midst of the Agbaou construction
and the expansion of the Tabakoto plant.”
The stock for the company is actively traded in the
markets. Said Reddy, “The number of
shares issued is 413 million. There are
about 26 million options outstanding.
Fully diluted it would be 439 million shares. We are 60 to 65 percent institutional
and around 3 percent insiders. We trade
in Canada and on the ASX. In Canada, we
were trading about 2.0 million shares per day.
We are listed on the OTCQX as well.”
The company has four mines in four different
countries: Burkina Faso, Mali, Côte d'Ivoire and
Ghana. “There are distinct benefits to
working in Côte d'Ivoire, they have
really good highways and have established good hydroelectric power. We get an industrial rate of $0.085/kWhr on
the electricity. Politically, we find Côte d'Ivoire to be the most supportive and
their royalty and taxation rates are competitive. Burkina Faso is also very good and that is
evidenced by the fact that they have had seven mines come online in seven years. Mali has been good for us in spite of the
overall problems that the country has been experiencing. None of the mining companies in Mali have had
problems. Ghana used to be very
supportive, but it seems that they are now more focused on the oil and gas
sector.” Stated Reddy.
Ebola
•For the past several months, Endeavour has conducted education
programs at our mine sites and in the host communities
•An Ebola Management Steering Group is coordinating and managing
Endeavour’s efforts across all sites
•An Ebola Preparedness Plan is in place at each of the mines that
includes temperature screening for all employees and visitors; and liaising
with local, regional and national medical authorities
Unrest in Burkina Faso
•Protests against President Blaise Compaore started on October 28
and he resigned on October 31
•Burkina Faso's military dissolved parliament
Lt Col Isaac Zida declared himself head of the West African state
and pledged to hand over power to a civilian authority
•On November 16, political and military leaders chose a former
foreign minister, Michel Kafando, to be the country's interim president
•Youga, located 180 km from Ouagadougou, has not been impacted
“These
events have not impacted our operations”
As with most companies operating in West Africa, Endeavour
has been taking the Ebola outbreak seriously.
Said Reddy, “There have been no Ebola cases reported near where we
operate. Nonetheless, we have been very
focused on education of people on our sites and in the communities near our
sites. We have stepped up the level of
security on our sites. We will want to
know where visitors to site are coming from.
And in the case of our employees who have their home base in Guinea,
Liberia or Sierra Leone, we have encouraged them to remain at home or to stay
on site. For everyone who comes to site, they have their temperature taken and
wash their hands in a sterilizing solution.
We use a no-contact type of thermometer.
We have had a third party medical provider come through and audit our
sites to review our level of preparation and training.”
Why should potential investors look carefully at
Endeavour? According to Reddy, “We have
an overall track record of delivering on our guidance and on growth. We have done three years of acquisitions
followed by one of organic growth and now have a group of four mines that
provide diversification, we are not dependent on just one operation. A one mine company can be more vulnerable to particular
any event or operational difficulty.“
“Cost wise, we have been able to bring our costs
down through controlling or reducing costs for some consumables and also by
re-tendering our mining rates at some operations. We anticipate the fourth quarter will realize
the benefits of our cost cutting efforts at Tabakoto.”
The company continues to invest in exploration at
Houndé and at several of the mines. “At Tabakoto we have been working on delineating
resources and reserves and replacing depletion.
At Houndé we are focused on strike extensions of known zones such as
Vindaloo and Madras as well as targets considered to have potential for
delineation of additional resources, including Bouéré and Dohoun.”
“We recently reported some very good intercepts at Agbaou. The majority of that drilling was concentrated
on oxide mineralization and that is particularly relevant given that Agbaou has
been operating so well due to the soft nature of the oxide ore. We have been able to produce about 55% more
than we anticipated. Agbaou is an
excellent mine to have in our portfolio.”
Conclusions:
Strong production in Q3 and YTD
•Achieved below $1,000 AISC/oz in Q3; approx. 1 year after goal
was set
•Tabakoto optimization plan on track with increase in volumes
mined & milled and decrease in operating costs –milled grade to improve as
Segala underground mining flexibility expands and have access Kofi C open pit
ore
•Transitioning out of capital investment programs and into free
cash flow generation
•Anticipate using a portion of free cash flow to reduce
outstanding debt balances
Mining at Agbaou
Contact
Information:
CORPORATE OFFICE - Vancouver, Canada
Suite 3123, Three Bentall Centre
595 Burrard Street, PO Box 49139
Vancouver, B.C.
Canada V7X 1J1