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Endeavour Mining shares climbing after it beats production guidance


African gold miner Endeavour Mining [LON:EDV] came out with some impressive numbers this week, beating production guidance. It reported a strong financial position with $833m in its quarter end cash position.

The gold miner reported that its Sabodala-Massawa expansion project is on track in Senegal, with approximately 50% of initial capital committed. Pricing is reported to be in line with expectations. Its Lafigué greenfield project, which was launched in Cote D’Ivoire, is expected to start producing gold in Q3 2024.

There is a continued strong exploration focus with $68m spent year to date, yielding significant near-mine and greenfield success, with a maiden resource for its Tanda-Iguela property in Cote D’Ivoire expected to be published in upcoming weeks.

Robust cash generation

CEO Sebastien de Montessus reported that despite the wet season in West Africa, Q3 performance “was nearly the same” as Q2. “This strong result places us on track to achieve the top end of our production guidance,” he said. “[It] has resulted in robust cash generation.” He said cash generated in this period was equivalent to the capital needed to create a new mine.

One of the key objectives for Endeavour has been to try to limit dilution of shareholders from day one. The company continues to maintain a bullish share buyback program and has also redeemed convertible bonds (see below).

“We are very pleased to be pushing ahead with our growth plans…the expansion of our Sabodala-Massawa mine is progressing on schedule and within budget,” de Montessus said.

Endeavour Mining looks well-positioned to achieve full year guidance for its 10th consecutive year. It is on track to achieve the top end of 1,315-1,400 koz production guidance at AISC within the guided range of $880-930/oz.

Endeavour said that its miss on adjusted EPS was driven by an unusually high income tax expense, which was in turn due to a $48m withholding tax payment linked to upstreaming cash to provide the financial flexibility to redeem its convertible bond, due February 2023, in cash. This was to limit shareholder dilution.

There was also a difference in accounting for the company’s $20m gold hedge as it was adjusting out the hedge gain (most brokers do not adjust for the hedge as they factor that into the realised gold price). There was also higher depreciation to take account of.

Endeavour paid an H1 2022 dividend of $100m, with a minimum full year dividend commitment increased from $150m to $200m. Its share buyback program continued with $37m of shares repurchased in Q3 2022, totalling $75m year to date.

Deshe Analytics rated Endeavour Mining a Buy this week on the strength of its sector-beating revenues, coupled with a strong showing from equity on its balance sheet. Overall, Endeavour Mining is beating its closest competitors across several metrics, including its income statement. Deshe noted that it was scoring better when stacked up against both Barrick Gold Corp TSX:ABX and Teck Resources TSX:TECK.B.

Since the latest set of results we have been shares in Endeavour pick up considerably. The share price has broken north of Bollinger bands at time of writing. Endeavour’s stock is now priced above its 5-day and 50-day, but below its 200-day moving average, while its MACD (moving average convergence divergence) indicates that the stock’s price movement momentum is strengthening. Historically, this is a positive setup in both the short and medium-term.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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