EDV – Endeavour Exits Q3 with Record Gold Production, Now Poised for Free Cash Flows in 2014

POSTED ON November 13, 2013 BY Travis McPherson
CATEGORY Endeavour Mining, Finance, Gold, Investing, Mining,

Agbaou is nearly complete construction (Company)

After markets closed yesterday, West African gold producer, Endeavour Mining (EDV:TSX) released significantly improved third quarter results which included record gold production of 88,445 ounces in the quarter which is their largest quarter to date and represents a 17% from second quarter production of 75,421 ounces. The company was able to slightly lower cash costs in the quarter, down from $890/oz to $869/oz but once accounting for royalties, sustaining capital, corporate G&A costs and exploration, the all-in sustaining cost for the quarter increased slightly to $1,057/oz from $1,038/oz. The year-to-date all-in sustaining cost currently sits in the middle of their guidance range of $1,055-$1,155/oz at $1,086/oz.

Underground mining at Tabakoto grew production 48% Q-o-Q (Company)

This increased production came on the back of the first full quarter of production from the expanded Tabakoto mill which saw throughput rise 48% over the second quarter to 4,000tpd. Due to the improved throughput, Tabakoto cash costs dropped from $897/oz to $855/oz which helped drive company-wide cash costs lower. Year-to-date production is now at roughly 236,000 ounces meaning they will need to produce 79,000 ounces in the fourth quarter to meet the bottom of their guidance range of 315-330,000 ounces.

The company had a marginal loss of $2 million in the quarter (or $0.00 loss per share). The company generate $31.3 million in cash from operations but spent $43.1 million in mine investments including $31.5 million in capex for Agbaou which began mining in late October. The fourth quarter should be the last quarter with Agbaou capex which will set the company up to generate significant positive free cash flows in 2014.

EDV exited the quarter with $119 million in cash as they generated $17 million in cash from the closing of the sale of the Finkolo project. These results are very much improved from the second quarter which was full of write-downs. Now the company is set to beat their production guidance and head into 2014 ready to generate positive free cash flows.

This company deserves to be re-rated, with management continuing to beat expectations and with the company growing production to over 400,000 ounces in 2014 on the back of their first annual production at their new Agbaou mine which is a higher grade operation with 2P reserves of 2.5g/t gold which will help to lower all-in sustaining costs per ounce to below $1,000 in 2014.

With regards to the recently released feasibility study on the Hounde project, EDV's President and CEO, Neil Woodyer said: "At $1,300 gold price and without the benefit of leverage, the Hounde project generates an attractive after tax IRR of 22 per cent. Based on these results, we are now evaluating how best to integrate Hounde into Endeavour's production growth plans." We are still waiting for a production decision, but as we do the company continues the permitting phase of the project.

The company is delivering significant growth at improved lower costs, and with most of the question marks answered, especially from the Tabakoto expansion, the market cannot continue to ignore these types of results.

Read: Endeavour Reports Record Q3 Production of 88,445 ounces and All-In Sustaining Cost of $1,057/oz

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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