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Endeavour Mining firing on all cylinders, eyes topping guidance

Endeavour Mining firing on all cylinders, eyes topping guidance

Photo by Bloomberg

17th September 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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DENVER, Colorado (miningweekly.com) – West Africa-focused gold miner Endeavour Mining is chasing the top-end of its 2014 production guidance, expecting to beat it and continue to lower costs – all while adding new sources of gold-bearing ore to its production profile.

Founder and 30-year veteran of the mining industry Neil Woodyer on Wednesday morning told Mining Weekly Online that achieving record output from its four mines in the region had set the company up to achieve its output objectives.

The ASX- and TSX-listed company achieved record first-half output of 228 000 oz, with second-quarter output rising 16% year-on-year.

“This year we benefitted from two main things, namely completing Agbaou, in Côte d'Ivoire last year, which came into production in January and increased the company’s ounces, while simultaneously being a lower-cost mine than the rest of our mines.

“We’ve also been benefitting from the work we’ve been doing through our optimisation programmes at all of our mines over the last couple of years, to make sure they not only operate efficiently but also operate as economically as we can get them, which is why we were able to, this year, forecast 450 000 oz at an all-in sustaining cost (AISC) of about $1 000/oz,” he said on the sidelines of the Denver Gold Forum.

Looking forward to next year, Endeavour expected marginally higher output and a lower-than-$1 000/oz AISC, as a result of the work it has been doing.

Woodyer reported that Agbaou came in below budget and earlier than expected, and was now performing better than planned. “We could have just under 120 000 oz from the mine alone this year,” he affirmed.

The mine produced 56 000 oz in the first half of the year, at cash costs of $638/oz. He noted that the company had started a resource-definition drilling programme targeting three priority targets that could potentially extend the West pit, and mine life.

Meanwhile, Endeavour had also been improving its Tabakoto operations in Mali, which would also result in increased output and reduced costs.

The Tabakoto mine, Woodyer said, was transitioning to sources of cheaper, high-grade ore. During the second half of the year, the company was busy ramping up the Segala underground mine, which started production in the second quarter.

Woodyer pointed out that, during the second quarter, Endeavour converted the mine to owner-operated.

The company was now turning its gaze to the nearby Kofi project, which comprised eight deposits. Endeavour was building a 35 km road to the site, which was expected to “add an attractive third source of ore” during next year.

With permits in hand for all eight Kofi deposits, the company expected to start mining Kofi C early next year. The Kofi C openpit had a reserve of 223 000 oz at a grade of 4.13 g/t.

Endeavour’s next project comprised the Houndé project, in Burkina Faso, which had a reserve of about 25-million tonnes grading 1.95 g/t containing 1.55-million ounces. The $315-million project would produce about 180 000 oz/y at AISC of about $800/oz. Woodyer expected to receive the mining permit by the end of the year. He said that a construction decision that would maximise shareholder value would be made at the “appropriate time”.

For the full year, the company’s official production guidance stood at between 400 000 oz and 440 000 oz of gold at AISC of between $985/oz to $1 070/oz. Including the Houndé project, the company was targeting output of 680 000 oz by 2017.

IMPROVED Q2

Endeavour last month said it had swung to a profit during the June quarter, on the back of record gold output from its mines in Africa.

During the second quarter, Endeavour reported earnings before interest, taxes, depreciation and amortisation (Ebitda) of $40.2-million, compared with an adjusted net loss of $11.6-million in the previous corresponding period.

The previous year’s net loss incorporated an after-tax impairment charge of $225.4-million, resulting largely from a $141.8-million charge associated with the Nzema mine, in south-western Ghana.

Endeavour reported that its higher second-quarter earnings were driven by record gold production of 122 517 oz, which pushed half-year production to a record 228 429 oz.

Ebitda for the half-year period reached $76.3-million.

During the quarter ended June, revenue generated from gold sales increased to $153.4-million, compared with the $101.1-million reported in the previous corresponding period, boosting half-year revenue to $290.6-million, compared with the $218-million reported in the previous corresponding period.

The Tabakoto mine produced some 36 408 oz of gold during the three months to June, while the Agbaou mine produced 31 878 oz. The Nzema mine, in Ghana, produced a further 35 946 oz during the quarter, while the Youga mine, in Burkina Faso, produced the balance of 18 285 oz.

WEST AFRICAN MILIEU

Woodyer said that, through managing its four mines in four countries in West Africa from a central office in Accra, Ghana, the company had a good snapshot of what was going on in the region. He noted that he had not found anything but support for its projects from the governments and communities they operate in, and the operating mines were a testament to those positive relationships.

However, the deadly Ebola virus had resulted in Endeavour implementing “sensible precautions” to prevent an outbreak at any of its operations. The company had launched education campaigns not only for its employees, but also in the surrounding villages regarding hygiene, spreading information on how the virus was transmitted and how to avoid it, and had in some cases also been able to get more fresh water to villages that helped reduce transmission risks.

“We’ve also put in place emergency procedures at the mines and like everyone else in the area, we are taking essential precautions by restricting access to the sites, and making sure we know where people have come from. These precautions are not expected to impact output in any way,” he said.

Edited by Creamer Media Reporter

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