May 05, 2022 02:00 ET | Source: Endeavour Mining PLC Endeavour Mining PLC
ENDEAVOUR REPORTS STRONG Q1-2022 RESULTS Production of 357koz at AISC of $848/oz l Operating cash flow of $299m l Net cash position increased by $90m
London, 5 May 2022 – Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) (“Endeavour”, the “Group” or the “Company”) is pleased to announce its operating and financial results for Q1-2022, with highlights provided in Table 1 below.
Table 1: Highlights for Continuing Operations1
Management will host a conference call and webcast today, on Thursday 5 May at 8:30 am EDT / 1:30 pm BST. For instructions on how to participate, please refer to the conference call and webcast section at the end of the news release.
Sebastien de Montessus, President and CEO, commented: “We are pleased to have started the year on a strong footing with both production and all-in sustaining costs well positioned to meet full year guidance.
This performance has resulted in robust cash flow generation during the quarter which, in line with our capital allocation framework, was used to further strengthen our balance sheet, to continue our attractive shareholder returns programme, and to reinvest back into our business. Our net cash position has improved by $90 million to reach $167 million by the end of the quarter, and we also returned more than $100 million to shareholders over the period through dividends and buybacks.
We are focused on continuing to enhance our business resilience by improving the quality of our portfolio through our attractive organic growth opportunities and optimisation initiatives. As such, we have recently begun the expansion of Sabodala-Massawa and the DFS for our Lafigué project is nearing completion. In addition, we are continuously working on improving the efficiency of our operations by identifying and pursuing high priority optimisation initiatives, in an effort to remain a low-cost producer despite the industry-wide inflationary pressures.
Endeavour’s robust operational and financial performance this quarter demonstrates the strong momentum across our business and we look forward to the remainder of the year.”
The key upcoming expected catalysts are summarised in the table below.
Table 3: Group Production and FY-2022 Guidance
Table 4: Group All-In Sustaining Costs and FY-2022 Guidance
Table 5: Cumulative Shareholder Returns Delivered
CASH FLOW AND LIQUIDITY SUMMARY
The table below presents the cash flow and net debt position for Endeavour for the three month period ending 31 March 2022, with accompanying notes below.
Table 6: Cash Flow and Net Debt Position
1) Operating cash flows decreased by $51.6 million from $355.9 million (or $1.43 per share) in Q4-2021 to $304.3 million (or $1.23 per share) in Q1-2022 mainly due to a working capital outflow and a decrease in gold sales. Operating cash flow before working capital increased by $66.5 million from $303.1 million (or $1.22 per share) in Q4-2021 to $369.6 million (or $1.49 per share) in Q1-2022 largely due to the higher realised gold price. Notable variances are summarised below:
2) Cashflows used in investing activities decreased by $38.5 million from $132.3 million in Q4-2021 to $93.8 million in Q1-2022 due to decreased expenditure on mining interests at Houndé, Ity and Sabodala-Massawa which was partially offset by an increase at Mana:
3) Cash flows used in financing decreased by $21.1 million from $71.2 million in Q4-2021 to $50.1 million in Q1-2022. Financing activities for Q1-2022 primarily consisted of a shareholder dividend payment of $69.3 million (net of shares cancelled), payments for the acquisition of the Company’s own shares of $31.1 million, payments of financing and other fees of $6.1 million which includes interest of $5.0 million. Cash flows used by financing activities was partially offset by a drawdown on the revolving credit facility (“RCF”) of $50.0 million and proceeds received from the exercise of warrants of $13.9 million.
4) At quarter-end, Endeavour’s liquidity remained strong with $1,046.6 million of cash on hand and $450.0 million undrawn under the RCF.
5) In Q4-2021, Endeavour restructured its debt replacing its corporate loan facility with $500.0 million fixed rate senior notes and a $500.0 million unsecured RCF, which was undrawn at the end of Q4-2021. At the end of Q1-2022, Endeavour had $50.0 million drawn on the RCF.
6) Endeavour ended Q1-2022 with a net cash financial position of $166.6 million. Net cash increased by $90.4 million during Q1-2022 despite completing $31.1 million of shares buyback and payment of $69.3 million in shareholder dividends.
7) Given the net cash position, the Net Debt / Adjusted EBITDA (LTM) leverage ratio stood at (0.11)x at year-end, down from (0.05)x in Q4-2021, and well below the Company’s target of less than 0.50x. The net cash position provides the flexibility to continue to supplement shareholder returns while maintaining headroom to fund organic growth.
The table below presents the earnings and adjusted earnings for Endeavour for the three month period ending 31 March 2022, with accompanying notes below.
Table 7: Earnings from Continuing Operations
8) Revenue increased by $22.8 million from $663.4 million in Q4-2021 to $686.2 million in Q1-2022 mainly due to the higher realised gold price in Q1-2022 of $1,911 per ounce compared to $1,787 per ounce for Q4-2021, which was offset slightly by lower gold sales from the Sabodala-Massawa, Houndé, and Wahgnion mines.
9) Operating expenses decreased by $9.8 million from $227.3 million in Q4-2021 to $217.5 million in Q1-2022 due in part to decreased levels of production at the Boungou, Houndé, Sabodala-Massawa and Wahgnion mines. Depreciation and depletion decreased by $39.1 million from $191.1 million in Q1-2022 to $152.0 million mainly due to lower levels of production at the Boungou, Houndé, Sabodala-Massawa and Wahgnion mines.
10) Royalties were in line with the prior quarter at $41.0 million in Q1-2022 compared to Q4-2021 with higher realised prices offsetting lower gold sales.
11) Corporate costs were $14.0 million in Q1-2022 compared to $20.3 million in Q4-2021. The decrease in corporate costs is primarily due to the cessation of costs associated with corporate integration and the LSE listing that were previously incurred.
12) The loss on financial instruments was $178.8 million in Q1-2022 compared to a gain of $18.6 million in Q4-2021. The loss in Q1-2022 was mainly due to an unrealised loss on gold forward sales of $79.2 million and an unrealised loss on gold collars of $43.8 million, both of which are detailed below. In addition, the loss included a foreign exchange loss of $19.5 million, an unrealised loss on the revaluation of the conversion option on convertible notes of $18.0 million, a realised loss on gold forward sales of $7.0 million, a loss on change in fair value of the call rights of $4.4 million, a loss on change in the fair value of the early redemption feature of senior notes of $4.0 million, a loss on change in fair value of warrant liabilities of $3.3 million and a loss on other financial instruments of $0.2 million. This was slightly offset by a gain on the fair value of contingent considerations of $0.4 million and a gain in the fair value of receivables of $0.2 million.
As previously disclosed in Endeavour’s FY-2021 operating results announcement on 24 January 2022, Endeavour entered into a revenue protection programme for a portion of its production across FY-2022 and FY-2023, to provide greater cash flow visibility during its investment phase. This was structured as an upfront low premium collar with a put price of $1,750 per ounce and a call price of $2,100 per ounce for 75koz of production per quarter, from Q1-2022 until Q4-2023. In Q1-2022, the realised gold price was was within the gold price range of the collar. In addition, the Company entered into a forward sales contract for approximately 520koz of production in FY-2022 and 120koz of production in FY-2023 at an average gold price of $1,831 per ounce and $1,828 per ounce respectively. In Q1-2022, in order to benefit from the high gold price environment, the forward sales contracts were restructured, whereby 165koz, previously expected to settle in Q1-2022, were deferred to settle later in the year, with an overall higher average price of $1,840 per ounce for FY-2022. As such, only 65koz ounces of forward contracts were settled in Q1-2022, resulting in a loss of $7.0 million in Q1-2022. At quarter-end, the forward sales contracts outstanding for FY-2022 amounted to 574koz, with 99koz, 179koz, and 176koz scheduled to be delivered in Q2-2022, Q3-2022, and Q4-2022, respectively, and the remainder in FY-2023.
13) Current income tax expense increased by $36.5 million from $38.2 million in Q4-2021 to $74.7 million in Q1-2022 due largely to increased tax expenses at Mana and Sabodala-Massawa. Tax expenses at Mana were $8.0 million in Q1-2022 compared to a $3.6 million tax recovery in Q4-2021, largely due to an increase in taxable income in Q1-2022, relative to a reduction in tax provisions recognised in Q4-2021. At Sabodala-Massawa, tax expense was $30.8 million compared to $1.6 million incurred in Q4-2021 with the difference largely attributed to the tax expense related to the start-up of mining at the Massawa pits and the inclusion of a full quarter’s results in Q1-2022.
14) Deferred income tax recovery decreased by $45.3 million from $34.1 million in Q4-2021 to a deferred income tax expense of $11.2 million in Q1-2022. The decrease is primarily due to decreased recoveries at Boungou and Sabodala-Massawa. The deferred tax expense in Q1-2022 is mainly related to the impact of the changes in foreign exchange rates on the deferred tax liabilities in the quarter.
15) A net comprehensive loss from continuing operations of $35.2 million was recorded for Q1-2022 compared to a net comprehensive loss of $92.4 million in Q4-2021. The difference is largely attributed to the impairment recorded last quarter at Boungou, partially offset by lower group operating costs in Q1-2022.
16) For Q1-2022, adjustments mainly included a loss on financial instruments of $178.8 million largely related to the realised loss on forward sales and the unrealised loss on gold collars, other expenses of $2.0 million, positive non-cash adjustments of $1.2 million, and acquisition and restructuring costs of $0.2 million.
17) Adjusted net earnings attributable to shareholders for continuing operations decreased by $25.6 million to $122.3 million (or $0.49 per share) in Q1-2022 compared to $147.9 million (or $0.59 per share) in Q4-2021 due largely to higher margins driven by lower operating expense and depreciation.
Boungou Gold Mine, Burkina Faso
Q1-2022 vs Q4-2021 Insights
Houndé Gold Mine, Burkina Faso
Q1-2022 vs Q4-2021 Insights
Ity Gold Mine, Côte d’Ivoire
Q1-2022 vs Q4-2021 Insights
Mana Gold Mine, Burkina Faso
Q1-2022 vs Q4-2021 Insights
Q1-2022 vs Q4-2021 Insights
Wahgnion Gold Mine, Burkina Faso
Q1-2022 vs Q4-2021 Insights
Karma Gold Mine, Burkina Faso (divested 10 March 2022)
Table 15: Consolidated Q1-2022 exploration expenditures and 2022 guidance1
Lafigué project, on the Fetekro property
CONFERENCE CALL AND LIVE WEBCAST
Management will host a conference call and webcast on Thursday 5 May, at 8:30 am EDT / 1:30 pm BST to discuss the Company's financial results.
The conference call and webcast are scheduled at: 5:30am in Vancouver 8:30am in Toronto and New York 1:30pm in London 8:30pm in Hong Kong and Perth
The webcast can be accessed through the following link: https://edge.media-server.com/mmc/p/55p7fdw4
Analysts and investors are also invited to participate and ask questions using the dial-in numbers below: International: +44 (0) 207 192 8338 North American toll-free: +1 877 870 9135 UK toll-free: +44 (0) 800 279 6619 Confirmation Code: 6960096
The conference call and webcast will be available for playback on Endeavour's website.
Clinton Bennett, Endeavour's VP Metallurgy and Process Improvement - a Fellow of the Australasian Institute of Mining and Metallurgy, is a "Qualified Person" as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and has reviewed and approved the technical information in this news release.
Endeavour Mining is one of the world’s senior gold producers and the largest in West Africa, with operating assets across Senegal, Cote d’Ivoire and Burkina Faso and a strong portfolio of advanced development projects and exploration assets in the highly prospective Birimian Greenstone Belt across West Africa.
A member of the World Gold Council, Endeavour is committed to the principles of responsible mining and delivering sustainable value to its employees, stakeholders and the communities where it operates. Endeavour is admitted to listing and to trading on the London Stock Exchange and the Toronto Stock Exchange, under the symbol EDV.
For more information, please visit www.endeavourmining.com.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This document contains "forward-looking statements" within the meaning of applicable securities laws. All statements, other than statements of historical fact, are “forward-looking statements”, including but not limited to, statements with respect to Endeavour's plans and operating performance, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of future production, future capital expenditures, the success of exploration activities, the expectation that an exploration permit will be received, the anticipated timing for the payment of a shareholder dividend and statements with respect to future dividends payable to the Company’s shareholders, the completion of studies, mine life and any potential extensions, the future price of gold and the share buyback programme. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "expects", "expected", "budgeted", "forecasts", "anticipates", believes”, “plan”, “target”, “opportunities”, “objective”, “assume”, “intention”, “goal”, “continue”, “estimate”, “potential”, “strategy”, “future”, “aim”, “may”, “will”, “can”, “could”, “would” and similar expressions .
Forward-looking statements, while based on management's reasonable estimates, projections and assumptions at the date the statements are made, are subject to risks and uncertainties that may cause actual results to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the successful integration of acquisitions or completion of divestitures; risks related to international operations; risks related to general economic conditions and the impact of credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; Endeavour’s financial results, cash flows and future prospects being consistent with Endeavour expectations in amounts sufficient to permit sustained dividend payments; the completion of studies on the timelines currently expected, and the results of those studies being consistent with Endeavour’s current expectations; actual results of current exploration activities; production and cost of sales forecasts for Endeavour meeting expectations; unanticipated reclamation expenses; changes in project parameters as plans continue to be refined; fluctuations in prices of metals including gold; fluctuations in foreign currency exchange rates; increases in market prices of mining consumables; possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; extreme weather events, natural disasters, supply disruptions, power disruptions, accidents, pit wall slides, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in the completion of development or construction activities; changes in national and local government legislation, regulation of mining operations, tax rules and regulations and changes in the administration of laws, policies and practices in the jurisdictions in which Endeavour operates; disputes, litigation, regulatory proceedings and audits; adverse political and economic developments in countries in which Endeavour operates, including but not limited to acts of war, terrorism, sabotage, civil disturbances, non-renewal of key licenses by government authorities, or the expropriation or nationalization of any of Endeavour’s property; risks associated with illegal and artisanal mining; environmental hazards; and risks associated with new diseases, epidemics and pandemics, including the effects and potential effects of the global Covid-19 pandemic.
Although Endeavour has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Please refer to Endeavour's most recent Annual Information Form filed under its profile at www.sedar.com for further information respecting the risks affecting Endeavour and its business.
The declaration and payment of future dividends and the amount of any such dividends will be subject to the determination of the Board of Directors, in its sole and absolute discretion, taking into account, among other things, economic conditions, business performance, financial condition, growth plans, expected capital requirements, compliance with the Company's constating documents, all applicable laws, including the rules and policies of any applicable stock exchange, as well as any contractual restrictions on such dividends, including any agreements entered into with lenders to the Company, and any other factors that the Board of Directors deems appropriate at the relevant time. There can be no assurance that any dividends will be paid at the intended rate or at all in the future.
Some of the indicators used by Endeavour in this press release represent non-IFRS financial measures, including “all-in margin”, “all-in sustaining cost”, “net cash / net debt”, “EBITDA”, “adjusted EBITDA”, “net cash / net debt to adjusted EBITDA ratio”, “cash flow from continuing operations”, “total cash cost per ounce”, “sustaining and non-sustaining capital”, “net earnings”, “adjusted net earnings”, “operating cash flow per share”, and “return on capital employed”. These measures are presented as they can provide useful information to assist investors with their evaluation of the pro forma performance. Since the non-IFRS performance measures listed herein do not have any standardized definition prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please refer to the non-GAAP measures section in this press release and in the Company’s most recently filed Management Report for a reconciliation of the non-IFRS financial measures used in this press release.
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