West African Gold Miner Endeavour Mining Delivers Strong Results Despite Market Headwinds

• Endeavour Mining (EDV), a leading West African gold producer, announced a $100 million dividend and a $38 million share buyback in H1.
• The company operates six mines in West Africa and aims to produce around 1.4 million ounces of gold this year with low all-in sustaining costs.
• Q2 results highlight strong operational performance, aligned with guidance for the 10th consecutive year.
• Despite facing inflationary pressures and increased costs, the company focuses on improving operational efficiency and working capital management.
• Endeavour Mining aims for organic growth, having a significant pipeline of growth projects, while considering opportunistic acquisitions that align with portfolio quality and return targets.

About Endeavour Mining

Endeavour Mining is a leading West African gold producer and one of the top 10 largest gold mining companies globally. With a focus on low-cost, high-margin assets, Endeavour operates 6 mines across Côte d’Ivoire, Burkina Faso and Senegal.

Interview with President & CEO, Sebastien de Montessus

Strong Operational Performance Drives Results

In a recent interview, CEO Sebastien de Montessus highlighted Endeavour's ability to keep costs low and meet guidance for the 10th consecutive year, despite inflationary pressures. The company achieved all-in sustaining costs (AISC) of $900 per oz in H1 2022 and reiterated full year production and cost guidance.

De Montessus credited the results to strong operational performance and continuous improvement across its young asset portfolio. For example, the Sabodala-Massawa mine in Senegal is achieving AISC below $700/oz at over 350koz annual production. The company’s two flagship mines, Houndé in Burkina Faso and Ity in Côte d’Ivoire, are on track to produce around 300koz each in 2022 at low AISC. According to de Montessu, “It’s not about just trying to reduce costs for the sake of costs, it’s really driving better performance across our mining assets.”

Local management teams have also helped drive down costs by $45 million. De Montessus explained that empowering local teams operationally is not only good for stakeholders but realizes material cost savings that offset inflationary pressures.

Strong Cash Flows Fund Attractive Shareholder Returns

The company reported $217 million in net cash at the end of Q2 2022. This enabled Endeavour to increase its H1 dividend by 43% to $100 million, with a minimum $100 million more committed for H2 2022. De Montessus emphasized the focus on sustaining an attractive dividend profile.

In addition to dividends, Endeavour spent $38 million on share buybacks in H1 2022. Despite these shareholder friendly actions, the stock has underperformed peers due to broad sector volatility. For long-term investors, de Montessus believes Endeavour’s consistent ability to meet guidance and maintain low costs will see the market turn in its favor over time.

Disciplined Growth Strategy Based on Organic Pipeline

Looking ahead, de Montessus reiterated the company’s preference for value-accretive organic growth over M&A, given its strong project pipeline. Earlier this year, Endeavour sanctioned its Sabodala-Massawa Phase 1 expansion and construction of the Lafigué project in Côte d’Ivoire.

However, in light of inflation, the company has taken a prudent approach by delaying these projects to exercise strict control over capital expenditures. De Montessus provided examples like sourcing a discounted camp in Turkey to halve costs on one line item. This discipline gives confidence that Endeavour can deliver its development projects within budget.

Sticking to What We Know in Africa

When asked about jurisdiction, de Montessus firmly believes Africa, especially West Africa, offers the best organic growth prospects for gold mining companies. As the world’s second largest gold producing region with the most discoveries in the past decade, it provides prime geology for new projects.

Beyond geology, de Montessus says Endeavour’s local agility and stakeholder expertise enables faster permitting and development compared to other regions facing community challenges. He concludes, “It’s a very, very attractive area for discovering, building and operating.”

Risks & Opportunities

Risks

• Operating in West Africa - potential for political instability, security concerns, power/infrastructure challenges
• Execution risk on development projects - potential for cost overruns, delays
• Gold price volatility - financial performance highly leveraged to gold price fluctuations
• Inflationary pressures - continued rise in input costs could squeeze margins

Opportunities

• Leverage to higher gold prices - high-margin assets enhance operating leverage
• Exploration upside - significant organic growth potential from existing pipeline
• M&A opportunities - well positioned to be opportunistic amid market dislocation
• Strong balance sheet - able to fund growth and weather downturns
• Attractive dividends - sector-leading dividend yields expected to continue
• Value opportunity - undervalued relative to peers with track record of execution

The opportunities lie in Endeavour's strong operating performance, growth prospects, and balance sheet strength providing resilience. But West Africa jurisdiction, execution risks, and gold price volatility present challenges to factor in.

Conclusion

For gold investors seeking value, Endeavour Mining presents an intriguing opportunity. Despite inflationary challenges, the company continues delivering operationally thanks to its low-cost asset base. With sector-leading dividends, buybacks and a healthy growth pipeline, Endeavour offers a complete value proposition trading at a discount. As macro uncertainty persists, adding shares of this West African gold producer could provide some portfolio resilience.

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