Endeavour Mining (EDV:TSX) which operates four mines in Western Africa has continued their track record of delivering projects on time and on budget. Late yesterday, the company announced the completion of development at their Segala underground mine (part of their Tabakoto project) which allows Endeavour miners to access higher-grade ore and process it through the existing 4,000tpd plant. The average planned grade is 3.70g/t gold.
Tabakoto in southwestern Mali, was restarted in 2009 and is Endeavour's second oldest mine. It is operated as an open pit and underground operation.
Neil Woodyer, CEO stated: "Segala provides the Tabakoto plant with another source of higher grade ore. Add to that the commencement of owner mining at the Tabakoto underground mine and we are well on the way to finishing the production improvement program that we set in motion a year ago when we doubled the plant capacity."
Segala is accessed by a spiral decline that extends from the mined-out Segala open pit and follows the footwall of the steeply dipping orebody and is over 1,290m long and stretches to a depth of 200m. As part of the Segala operation, 8 stopes will be active during full commercial production and will be hauled to a run-of-mine pad and then the Tabakoto plant.
Endeavour also made progress on the permitting front by receiving permits for all of the Kofi mineral deposits. These 8 mineral deposits host a total indicated resource of 8.065Mt at 2.31g/t gold (599,100 contained ounces) and 10.5Mt at 1.71g/t gold (577,000 contained ounces).
"The Kofi Nord property is currently known to host eight deposits, so we see significant potential for this property to be a long-term feed source for our Tabakoto mill," stated Mr. Woodyer in the release.
One of the deposits, Kofi C has 213,000 ounces at over 4.2g/t gold in probably reserves which the company hopes to incorporate into the Tabakoto production schedule. The company expects to spend $13 million to develop these deposits by constructing a 38km haul road with the intention of bringing ore online by early 2015.
Endeavour expects to produce between 400 and 440,000 ounces of gold this year at an all-in sustaining cash cost of between $985 and $1,070 per ounce. The company has over 4 million ounces in reserves and the potential to add another 180,000 ounces at a low all-in sustaining cost with their Hounde development project (capex of $315 million).
As of the last quarter, the company had just over $67 million in cash and $300 million drawn from a $350 million credit facility. It is likely that you will see the company continue to use their roughly $100 million in annual cash flow to pay down the debt in order to increase their capacity to grow (either with the development of Hounde or by acquisition).
Here's the chart which shows a strong correlation with the GDXJ (junior gold miners) Index:
Read: Endeavour Mining Reports Commencement Of Production From Segala Underground Mine