Endeavour Reports Q3-2023 Results
*ENDEAVOUR REPORTS Q3-2023 RESULTS*
*2023 guidance on track • $240m returned to shareholders YTD • Growth projects on budget and on track*
*OPERATIONAL AND FINANCIAL HIGHLIGHTS* (for continuing operations unless otherwise specified)
· *Strongest quarterly performance this year with 281koz produced in Q3-2023 at an industry-low AISC of $967/oz *
· *792koz produced year-to-date at an AISC of $974/oz, on track to meet guidance with stronger Q4-2023 expected*
· *Net Earnings of $60m (or $0.24/sh) for Q3-2023 and $137m (or $0.55/sh) year-to-date*
· *Operating Cash Flow of $115m (or $0.47/sh) for Q3-2023 and $453m (or $1.83/sh) year-to-date*
· *Healthy financial position at quarter end with leverage ratio of 0.40x Net Debt / Adj. EBITDA (LTM) despite incurring $293m in growth capital spend and delivering $240m in shareholder returns this year*
*ROBUST SHAREHOLDER RETURNS*
· *$100m half-year dividend paid in Q3-2023, totalling $200m paid year-to-date*
· *Share buyback programme continued with $20m worth of shares repurchased in Q3-2023, totalling $40m year-to-date*
· *Shareholder returns total $777m since first payment in Q1-2021, which represents ∼15% of current market capitalization*
*ATTRACTIVE ORGANIC GROWTH*
· *Sabodala-Massawa expansion and the Lafigué development project are on budget and on schedule for start-up in Q2-2024 and Q3-2024 respectively, which will provide further ability to reward shareholders*
· *Strong ongoing exploration efforts with $78m spent year to date across the group; Updated resource estimate for Tanda-Iguela greenfield discovery expected to be published in late 2023*
*London, 9 November 2023 *– Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) (“Endeavour”, the “Group” or the “Company”) announces its operating and financial results for Q3-2023, with highlights provided in Table 1 below.
*Table 1: Q3-2023 and YTD-2023 Highlights from continuing operations*^*1*
All amounts in US$ million unless otherwise specified *THREE MONTHS ENDED* *NINE MONTHS ENDED*
30 September 2023 30 June
2023 30 September 2022 30 September 2023 30 September 2022 Δ YTD-2023 vs. YTD-2022
*OPERATING DATA*
Gold Production, koz 281 268 281 792 867 (9)%
Gold sold, koz 278 269 277 799 860 (7)%
All-in Sustaining Cost^2, $/oz 967 1,000 856 974 838 +16%
Realised Gold Price, $/oz 1,903 1,947 1,748 1,910 1,824 +5%
*CASH FLOW*
Operating Cash Flow before changes in working capital 121 161 185 500 738 (32)%
Operating Cash Flow before changes in working capital^2, $/sh 0.49 0.65 0.75 2.02 2.98 (32)%
Operating Cash Flow 115 147 144 453 622 (27)%
Operating Cash Flow^2, $/sh 0.47 0.59 0.58 1.83 2.51 (27)%
*PROFITABILITY*
Net Earnings Attributable to Shareholders 60 78 86 137 203 (33)%
Net Earnings, $/sh 0.24 0.32 0.34 0.55 0.82 (33)%
Adj. Net Earnings Attributable to Shareholders^2 70 54 64 188 280 (33)%
Adj. Net Earnings^2, $/sh 0.28 0.22 0.26 0.76 1.13 (33)%
EBITDA^2 262 273 294 704 839 (16)%
Adj. EBITDA^2 263 253 253 755 878 (14)%
*SHAREHOLDER RETURNS*
Shareholder dividends paid 100 — 100 200 170 +18%
Share buybacks 20 9 37 40 75 (47)%
*ORGANIC GROWTH *
Growth capital spend^2 116 104 30 293 72 +307%
Exploration spend 27 30 21 78 59 +32%
*FINANCIAL POSITION HIGHLIGHTS*
Net Debt, (Net Cash)^2 445 171 (3) 445 (3) n.a.
Net Debt, (Net Cash) / LTM Trailing adj. EBITDA^3 0.40 0.15 — 0.40 — n.a.
^1 Continuing Operations excludes the non-core Boungou and Wahgnion mines which were divested on 30 June 2023 and the Karma mine which was divested on 10 March 2022. ^2This is a non-GAAP measure, refer to the non-GAAP Measures section for further details. ^3Last Twelve Months (“LTM”) Trailing EBITDA adj includes EBITDA generated by discontinued operations
Management will host a conference call and webcast today, 9 November 2023, at 8:30 am EST / 1:30 pm GMT. For instructions on how to participate, please refer to the conference call and webcast section at the end of the news release. A copy of the Management Report and Financial Statements have been submitted to the National Storage Mechanism. The documents will shortly be available for inspection on the Company’s website and at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Sebastien de Montessus, President and CEO, commented: “We are pleased with our performance over the first nine months of the year, which leaves us well positioned to deliver against our strategic objectives.
On the operational front, in light of the efforts made over the first half of the year, our third quarter saw the strongest performance so far this year, and we expect Q4 performance to be even stronger, which positions us well to meet full-year production guidance for the eleventh consecutive year and maintain our status as one of the lowest cost gold producers in the sector. Looking ahead, we expect 2024 to be a strong year for Endeavour, as the brownfield expansion of Sabodala-Massawa and the Lafigué development project both remain on budget and on track to be commissioned next year.
Alongside this year's investments in our organic pipeline, we are pleased to continue to offer attractive shareholder returns, delivering $240 million to shareholders over the first nine months of the year. Since we paid our first dividend in Q1-2021, we are proud to have returned over three quarters of a billion dollars to shareholders in the form of dividends and buybacks, which represents $354 million more than our minimum commitment for the period. Looking ahead, our goal is to increase our shareholder returns program, once our two ongoing organic growth projects are complete, to ensure that our efforts to unlock growth benefit all stakeholders.
Lastly, we are very excited by our exploration program, which continues to provide a strong platform for organic growth. Further drilling at our recent Tanda-Iguela discovery in Côte d'Ivoire has exceeded expectations, extending the mineralised trend by 50% and delineating several potential satellite deposits. We are continuing to advance this year's 180,000 meter drill campaign and look forward to publishing an updated resource estimate later this year.
I would like to thank our team for their continued strong contributions. I look forward to 2024 and beyond as we will benefit from the efforts undertaken over recent years to improve the quality of our portfolio and strengthen the resilience of our business.”
*OPERATING SUMMARY *
· Strong safety performance for the Group, with a Lost Time Injury Frequency Rate (“LTIFR”) from continuing operations of 0.08 for the trailing twelve months ending 30 September 2023.
· In line with its guided trend, Q3-2023 was Endeavour’s strongest quarter this year while Q4-2023 is expected to be even stronger. As such, the Group remains on track to achieve its FY-2023 production guidance from continuing operations of 1,060 – 1,135koz with the group AISC expected to be near the top-end of the guided $895 – 950/oz range.
· Q3-2023 production from continuing operations amounted to 281koz, an increase of 13koz or 5% over Q2-2023, despite the impact of the wet season, due to increased production from Houndé (as a result of higher grade ore sourced from Kari Pump), which was partially offset by a decrease in production across Ity and Sabodala-Massawa (due to lower throughputs and lower average grades), while production at Mana was largely consistent with the prior quarter. Q3-2023 AISC from continuing operations amounted to an industry-low of $967/oz, which marks a decrease of $33/oz or 3% over Q2-2023 due largely to lower costs at Houndé (due to higher grades processed and volumes sold) which was partially offset by increased costs at Ity (due to the impacts of the wet season), Sabodala-Massawa (due to lower volumes of gold sold) and at Mana (due to higher open pit mining and processing unit costs).
· YTD-2023 production from continuing operations amounted to 792koz, a decrease of 75koz or 9% over YTD-2022 as a result of decreased production at Sabodala-Massawa (due to lower grade oxide ores processed as per the mine schedule), and at Mana (due to the slower than expected ramp up of the new Wona Underground mining contractor resulting in lower processing grades). This was partially offset by increased production at Ity due to improved throughput and recoveries, while Houndé remained consistent. YTD-2023 AISC from continuing operations amounted to $974/oz, an increase of $136/oz or 16% over YTD-2022, due to increases across Mana, Sabodala-Massawa, and Houndé.
*Table 2: Group Production*
*THREE MONTHS ENDED* *NINE MONTHS ENDED*
All amounts in koz, on a 100% basis 30 September
2023 30 June
2023 30 September
2022 30 September
2023 30 September
2022
Houndé 109 72 72 228 232
Ity 73 86 81 250 230
Mana 30 31 42 106 149
Sabodala-Massawa 69 79 86 209 256
*PRODUCTION FROM CONTINUING OPERATIONS* *281* *268* *281* *792* *867*
Boungou^1 — 14 29 33 90
Wahgnion^1 — 30 32 68 88
Karma^2 — — — — 10
*GROUP PRODUCTION* *281* *311* *343* *893* *1,055*
^1The Boungou and Wahgnion mines were divested on 30 June 2023 ^2The Karma mine was divested on 10 March 2022
*Table 3: Group All-In Sustaining Costs*
All amounts in US$/oz
*THREE MONTHS ENDED* *NINE MONTHS ENDED*
30 September
2023 30 June
2023 30 September
2022 30 September
2023 30 September
2022
Houndé 787 1,085 716 959 767
Ity 864 797 773 793 799
Mana 1,734 1,481 1,098 1,408 993
Sabodala-Massawa 840 762 779 795 703
Corporate G&A 40 56 47 50 40
*AISC FROM CONTINUING OPERATIONS* *967* *1,000* *856* *974* *838*
Boungou^1 — 2,147 1,219 1,639 1,051
Wahgnion^1 — 1,817 1,647 1,566 1,590
Karma^2 — — — — 1,504
*GROUP AISC*^*3* *967* *1,136* *960* *1,045* *926*
^1The Boungou and Wahgnion mines were divested on 30 June 2023 ^2The Karma mine was divested on 10 March 2022 ^3This is a non-GAAP measure, refer to the non-GAAP Measures section for further details
· Total sustaining and non-sustaining capital expenditure for FY-2023 is expected to amount to approximately $327.0 million, which represents a 2% increase over the previously guided amount of $320.0 million, as detailed below.
· Total sustaining capital expenditure of $71.8 million was incurred in YTD-2023, of which $22.5 million has been incurred in Q3-2023, primarily related to waste development and mining equipment upgrades at Houndé, Ity and Sabodala-Massawa as well as new infrastructure at Mana. The FY-2023 sustaining capital expenditure for continuing operations is expected to amount to $100.0 million compared to the previously provided outlook of $110.0 million due to a $10.0 million reduction at Sabodala-Massawa in line with the production profile and due to the acceleration of the Niakafiri East and Sofia North Extension pits into the mine plan which allows stripping activity initially planned in the Massawa zone to be deferred until next year.
· Total non-sustaining capital expenditure of $192.8 million was incurred in YTD-2023, of which, $49.5 million has been incurred in Q3-2023, primarily related to waste stripping activities at Houndé; TSF construction, embankment raises and the Recyn and Mineral Sizer optimisation initiatives at Ity; the solar power plant construction at Sabodala-Massawa; and ongoing underground development at Mana. The FY-2023 non-sustaining capital expenditure for continuing operations is expected to amount to $227.0 million compared to the previously provided outlook of $210.0 million due to a $10.0 million increase at Mana (related to increased underground development costs associated with the slower than expected ramp-up of the Wona Underground mining contractor) and a $7.0 million increase at Ity (as the Tailings Storage Facility (“TSF”) embankment raise and the construction of a new TSF have been accelerated) due to its strong performance this year.
· The growth capital expenditure outlook for FY-2023 remains unchanged at $400.0 million, with $292.5 million incurred in YTD-2023, of which $116.2 million has been incurred in Q3-2023. In Q3-2023, a total of $50.4 million was incurred for the Sabodala-Massawa BIOX® expansion project, $63.8 million was incurred for the Lafigué development project, and $2.0 million was incurred for the Kalana project.
*SHAREHOLDER RETURNS PROGRAMME*
· The Company is pleased to continue to deliver attractive shareholder returns, despite the significant growth capital investments being undertaken this year. Endeavour paid its H1-2023 dividend of $100.0 million, or $0.40 per share, on 26 September 2023, to shareholders of record on 1 September 2023. On an annualised basis, the H1-2023 dividend represents $25.0 million, or 14%, more than the minimum dividend commitment for the year of $175.0 million.
· In addition, shareholder returns continued to be supplemented with share buybacks as $40.0 million or 1.8 million shares were repurchased in YTD-2023, of which $20.0 million or 1.0 million shares were repurchased in Q3-2023. Since the commencement of the buyback programme on 9 April 2021, a total of $277.0 million, or 12.4 million shares have been repurchased as at 30 September 2023.
· As shown in the table below, Endeavour has returned $777.0 million to shareholders in the form of dividends and buybacks, equivalent to $202/oz produced from all operations, since its shareholder returns programme began in late 2020 (first dividend payment in Q1-2021), which represents $354.0 million more than its minimum commitment for the period.
*Table 4: Actual Shareholder Returns vs. Minimum Commitment*
All amounts in US$ million
*MINIMUM TARGET*
*ACTUAL SHAREHOLDER RETURNS* *SUPPLEMENTAL SHAREHOLDER RETURNS*
*DIVIDENDS*
*PAID* *BUYBACKS*
*COMPLETED* *TOTAL*
*RETURNS*
FY-2020 60 60 — 60 —
FY-2021 125 140 138 278 +153
FY-2022 150 200 99 299 +149
YTD-2023^1 88 100 40 140 +52
*Total* *423* *500* *277* *777* *+354*
^1Minimum Target is presented on a semi-annual basis as, Endeavour has outlined a minimum dividend commitment of $175 million for FY-2023
*CASH FLOW SUMMARY*
The table below presents the cash flow and net debt position for Endeavour for the three month period ended 30 September 2023, 30 June 2023, and 30 September 2022, and the nine month periods ended 30 September 2023 and 30 September 2022 with accompanying explanations below.
*Table 5: Cash Flow and Net Debt*
*THREE MONTHS ENDED* *NINE MONTHS ENDED*
All amounts in US$ million unless otherwise specified Notes 30 September 2023 30 June
2023 30 September 2022 30 September 2023 30 September 2022
*Net cash from/(used in), as per cash flow statement:*
Operating cash flows before changes in working capital^1 121 161 185 500 738
Changes in working capital^1 (5) (14) (41) (47) (116)
Cash generated from discontinued operations^2 — 13 8 27 85
Cash generated from operating activities [1] 115 159 152 480 706
Cash used in investing activities [2] (195) (214) (111) (610) (349)
Cash (used)/generated in financing activities [3] (125) 83 (254) (198) (327)
Effect of exchange rate changes on cash (15) 7 (52) 2 (104)
*(DECREASE)/INCREASE IN CASH* *(219)* *35* *(264)* *(326)* *(74)*
Cash and cash equivalent position at beginning of period 845 810 1,097 951 906
*CASH AND CASH EQUIVALENT POSITION AT END OF PERIOD* *[4]* *625* *845* *833* *625* *833*
Principal amount of $500m Senior Notes (500) (500) (500) (500) (500)
Principal amount of $330m Convertible Notes — — (330) — (330)
Drawn portion of $167m Lafigué Term Loan (35) — — (35) —
Drawn portion of $645m Revolving Credit Facility (535) (515) — (535) —
*NET DEBT* *[5]* *(445)* *(171)* *3* *(445)* *3*
Trailing twelve month adjusted EBITDA^3 1,113 1,284 1,488 1,138 1,488
*Net Debt / Adjusted EBITDA (LTM) ratio*^*3* *0.40x* *0.15x* *0.00x* *0.40x* *0.00x*
^1 From continuing operations
^2Discontinued operations includes the non-core Boungou and Wahgnion mines which were divested on 30 June 2023 and the Karma mine which was divested on 10 March 2022
^3Last Twelve Months (“LTM”) Trailing EBITDA adj includes EBITDA generated by discontinued operations
*NOTES:*
1) Operating cash flows decreased by $44.4 million from $159.3 million (or $0.64 per share) in Q2-2023 to $114.9 million (or $0.47 per share) in Q3-2023 due to a lower realised gold price and higher taxes paid related to the timing of withholding tax payments and the prior period incorporating operating cashflow generated by the divested Boungou and Wahgnion mines.
Operating cash flows decreased by $226.5 million from $706.3 million (or $2.85 per share) in YTD-2022 to $479.8 million (or $1.94 per share) in YTD-2023 due to lower production, increased operating and exploration costs, higher tax payments and the prior period containing significant cashflow generated by discontinued operations, which was partially offset by a decrease in working capital outflows.
Notable variances are summarised below:
· Working capital was an outflow of $5.2 million in Q3-2023, a decrease of $9.0 million over the Q2-2023 outflow of $14.2 million. The outflow in Q3-2023 was largely driven by a prepaid expenses and other outflow of $8.6 million related to advanced insurance and security payments, and a trade and other payables outflow of $1.2 million related to the timing of payments. The outflow was partially offset by an inflow of inventories of $6.8 million mainly related to decreased warehouse inventory at Sabodala-Massawa, Ity, and Houndé and an increase in stockpiles at Sabodala-Massawa, and an outflow in trade and other receivables of $2.2 million related to the timing of VAT receipts.
Working capital was an outflow of $47.4 million in YTD-2023, a decrease of $68.5 million over the YTD-2022 outflow of $115.9 million, largely driven by a decrease in outflows related to trade and other payables due to the timing of supplier and royalty payments in YTD-2022.
· Gold sales from continuing operations increased from 269koz in Q2-2023 to 278koz in Q3-2023 following increased production at Houndé, which was partially offset by decreased production at Ity and Sabodala-Massawa. The realised gold price from continuing operations for Q3-2023 was $1,898 per ounce compared to $1,943 per ounce for Q2-2023. Inclusive of the Group’s Revenue Protection Programme, the realised gold price for Q3-2023 was $1,903 per ounce compared to $1,947 per ounce for Q2-2023.
Gold sales from continuing operations decreased from 860koz in YTD-2022 to 799koz in YTD-2023, following lower Group production in YTD-2023. The realised gold price from continuing operations for YTD-2023 was $1,915 per ounce compared to $1,808 per ounce for YTD-2022. Inclusive of the Group’s Revenue Protection Programme, the realised gold price for YTD-2023 was $1,910 per ounce compared to $1,824 per ounce for YTD-2022.
· Total cash cost per ounce decreased from $868 per ounce in Q2-2023 to $848 per ounce in Q3-2023, primarily due to increased gold sold at a Group level and lower processing unit costs at Houndé, which was partially offset by increased cash costs at Ity due to lower gold volumes sold and wet season impacts, at Mana due to an increase in waste mining, and at Sabodala-Massawa due to higher processing costs associated with higher fuel and consumable prices.
Total cash cost per ounce increased from $716 per ounce in YTD-2022 to $837 per ounce in YTD-2023 due to lower production and gold sold at Sabodala-Massawa and Mana in addition to increases in fuel and consumable costs across the Group.
· As shown in the table below, income taxes paid increased by $38.4 million from $103.6 million in Q2-2023 to $142.0 million in Q3-2023 due largely to a $44.1 million withholding tax payment linked to a portion of the cash expected to be upstreamed from operating entities this year, in addition to higher corporate taxes paid at Sabodala-Massawa linked to the timing of provisional payments, which was partially offset by lower corporate taxes paid at Ity, Mana, and Houndé.
Income taxes paid increased by $124.2 million from $145.8 million in YTD-2022 to $270.0 million in YTD-2023 due largely to the increase in taxes paid at Sabodala-Massawa as provisional tax payments made in the YTD-2022 period were based off of the 2021 tax base which benefited from a tax holiday at the Massawa permit which expired at the end of 2021 in addition to higher provisional payments made at Ity and Sabodala-Massawa in the YTD-2023 period based on the higher tax base of those assets in 2022, following the start of production on the Floleu permit which carries a higher tax rate and the above mentioned expiry of the tax holiday on the Massawa permit respectively.
*Table 6: Tax Payments*
*THREE MONTHS ENDED* *NINE MONTHS ENDED*
All amounts in US$ million 30 September
2023 30 June
2023 30 September
2022 30 September
2023 30 September
2022
Houndé 11.3 13.0 10.4 35.2 37.0
Ity 9.3 32.3 10.3 42.9 30.5
Mana 5.4 12.9 3.1 21.3 10.3
Sabodala-Massawa 65.3 45.5 — 116.4 16.8
Other^1 50.7 (0.1) 48.3 54.2 51.2
*Taxes paid by continuing operations* *142.0* *103.6* *72.1* *270.0* *145.8*^1Included in the “Other” category is income and withholding taxes paid by Corporate and Exploration entities.
2) Cashflows used in investing activities decreased by $19.3 million from $214.4 million in Q2-2023 to $195.1 million in Q3-2023 due to a decrease in non-sustaining capital spend related to reduced capitalised development at Mana and Sabodala-Massawa as access to ore increased, while the prior period included investing cashflows related to divested assets. In addition an investment of $10.0 million in marketable securities in Allied Merger Corporation (“Allied”) was completed during Q3-2023, resulting in Endeavour now owning 14.1 million shares, equivalent to 3.4% of Allied’s total shares outstanding. The decrease in cashflows used in investing activities was partially offset by accelerated growth capital spend in Q3-2023 at the Sabodala-Massawa expansion and the Lafigué development project.
Cashflows used in investing activities increased by $260.6 million from $349.2 million in YTD-2022 to $609.8 million in YTD-2023 largely due to the increases in growth capital incurred at the Sabodala-Massawa expansion, which was launched in Q2-2022, and the Lafigué development project, which was launched in Q4-2022.
· Sustaining capital from continuing operations of $22.5 million in Q3-2023 was largely in-line with the prior quarter as increased sustaining capital expenditure at Sabodala-Massawa (related to waste capitalisation at Bambaraya and mining equipment upgrades) was largely offset by decreased expenditure at Houndé and Ity due to less waste capitalisation.
Sustaining capital from continuing operations of $71.8 million in YTD-2023 was largely in-line with the prior period as increased sustaining capital expenditure at Houndé (related to waste development activities at the Vindaloo and Kari Pump pits), and at Mana (related to infrastructure and underground development) was offset by decreased sustaining capital expenditure at Sabodala-Massawa (as waste development in existing pits moved to focus on new pits), and at Ity (due to less waste development).
· Non-sustaining capital from continuing operations decreased from $60.6 million in Q2-2023 to $49.5 million in Q3-2023, largely due to a decrease in non-sustaining capital at Mana (as spend on underground development was reduced as more stoping commenced), and at Sabodala-Massawa (as spend on new deposits decreased as they advanced into production), and at Houndé and Ity (due to a decrease in pre-stripping activities).
Non-sustaining capital from continuing operations increased from $131.8 million in YTD-2022 to $192.8 million in YTD-2023 due to increased non-sustaining capital expenditure at Ity (related to ongoing construction of the Recyn and Mineral Sizer optimisation initiatives, the embankment raise at TSF 1 and the construction of TSF 2), at Sabodala-Massawa and Houndé (due to increased pre-stripping activities as new pits and new phases of existing pits were opened), and at Mana (due to increased underground development and the ongoing TSF embankment raise).
· Growth capital increased from $104.1 million in Q2-2023 to $116.2 million in Q3-2023, as construction activities at the Sabodala-Massawa expansion and the Lafigué development project accelerated. Growth capital expenditure during the quarter also included $2.0 million for work related to the Kalana project.
Growth capital increased from $71.9 million in YTD-2022 to $292.5 million million in YTD-2023 largely due to the acceleration of construction activities at the Sabodala-Massawa expansion, which was launched in Q2-2022, and the launch of construction at the Lafigué development project, which was launched in Q4-2022.
3) Cash flows used in financing activities increased by $207.3 million from an inflow of $82.7 million in Q2-2023 to an outflow of $124.6 million in Q3-2023 largely due to the timing of dividend payments to shareholders and minorities. Financing cash outflows in Q3-2023 included payment of the H1-2023 dividend to shareholders of $99.0 million, payment of dividends to minorities of $55.3 million, payments for the acquisition of the Company’s own shares through its share buyback programme of $16.7 million, payments of financing and other fees of $4.7 million related to the coupon payments for the senior notes and the RCF and repayment of finance and lease obligations of $4.0 million. Outflows were partially offset by a $55.1 million drawdown on the Company’s $645.0 million RCF to manage short term offshore cash flow requirements.
Cash flows used in financing activities decreased by $129.0 million from an outflow of $326.6 million in YTD-2022 to $197.6 million in YTD-2023 largely due to drawing on the company’s RCF during the current period.
4) At quarter end, Endeavour’s liquidity remained strong at $867.1 million, consisting of $625.1 million of cash and cash equivalents, $110.0 million available through the Company’s RCF, and $132.0 million available through the Lafigué Term Loan. In addition, Endeavour expects to receive proceeds of $97.0 million for the divestment of the non-core Boungou and Wahgnion mines before year-end, as described in section “Non-core Asset Divestment” below.5) Endeavour’s net debt position has increased by $274.5 million, from $170.5 million at the end of Q2-2023 to $445.0 million at the end of Q3-2023 due to the Company’s ongoing focus on completing its growth projects, timing of tax payments and timing of dividend payments. The Company’s net debt / Adjusted EBITDA (LTM) leverage ratio remains healthy at 0.40x at the end of Q3-2023 despite the strong focus on investing in its organic growth.
*EARNINGS FROM CONTINUING OPERATIONS*
The table below presents the earnings and adjusted earnings for Endeavour for the three month periods ended 30 September 2023, 30 June 2023, and 30 September 2022 and the nine month periods ended 30 September 2023 and 30 September 2022 with accompanying explanations below.
*Table 7: Earnings from Continuing Operations*
*THREE MONTHS ENDED* *NINE MONTHS ENDED*
All amounts in US$ million unless otherwise specified Notes 30 September
2023 30 June
2023 30 September
2022 30 September
2023 30 September
2022
Revenue [6] 530 524 467 1,535 1,562
Operating expenses [7] (205) (202) (176) (579) (534)
Depreciation and depletion (114) (100) (118) (316) (339)
Royalties [8] (32) (32) (29) (93) (93)
*Gross earnings from operations* *178* *191* *145* *548* *595*
Corporate costs [9] (10) (14) (12) (38) (33)
Impairment of mining interests and goodwill — (15) — (15) —
Share-based compensation (5) (8) (4) (22) (15)
Other expense (7) 3 (2) (10) (16)
Exploration costs [10] (15) (15) (12) (42) (27)
*Earnings from operations* *141* *142* *114* *421* *504*
Gain/(loss) on financial instruments [11] 7 31 62 (34) (4)
Finance costs (19) (18) (17) (52) (47)
*Earnings before taxes* *129* *155* *159* *336* *453*
Current income tax expense [12] (54) (91) (74) (193) (210)
Deferred income tax (expense)/recovery [13] (2) 37 11 47 7
*Net comprehensive earnings from continuing operations* *[14]* *74* *101* *96* *190* *250*
Add-back adjustments [15] 13 (22) (18) 58 90
*Adjusted net earnings from continuing operations* *87* *79* *78* *248* *341*
Portion attributable to non-controlling interests 17 26 14 60 60
*Adjusted net earnings from continuing operations attributable to shareholders of the Company* *[16]* *69* *54* *64* *188* *280*
*Adjusted net earnings per share from continuing operations* *0.28* *0.22* *0.26* *0.76* *1.13*
*NOTES:*
6) Revenue increased by $5.9 million from $524.1 million in Q2-2023 to $530.0 million in Q3-2023 due to an increase in gold sales from continuing operations from 269koz in Q2-2023 to 278koz in Q3-2023, following higher production at Houndé, partially offset by a $45 per ounce decrease in the realised gold price from $1,943 per ounce in Q2-2023 to $1,898 per ounce in Q3-2023, exclusive of the Company’s Revenue Protection Programme.
Revenue decreased by $26.3 million from $1,561.6 million in YTD-2022 to $1,535.3 million in YTD-2023 due to a decrease in gold sales from continuing operations from 860koz in YTD-2022 to 799koz in YTD-2023, partly offset by a higher realised gold price for YTD-2023 of $1,915 per ounce compared to $1,808 per ounce for YTD-2022, exclusive of the Company’s Revenue Protection Programme.
7) Operating expenses increased by $3.5 million from $201.8 million in Q2-2023 to $205.3 million in Q3-2023 largely due to increased operating costs at Houndé and Mana as a result of higher strip ratios in current ore mining areas and increases in fuel and consumable costs. Depreciation and depletion increased by $14.9 million from $99.5 million in Q2-2023 to $114.4 million in Q3-2023 mainly due to increased depletion at Houndé as a result of higher quarterly production.
Operating expenses increased by $44.8 million from $533.7 million in YTD-2022 to $578.5 million in YTD-2023 largely due to increased volumes mined and processed at Ity and Houndé in addition to increases in fuel and consumable costs. Depreciation and depletion decreased by $23.6 million from $339.4 million in YTD-2022 to $315.8 million in YTD-2023 due to lower production volumes across Sabodala-Massawa and Mana.
8) Royalties of $31.9 million in Q3-2023 were largely consistent with the prior quarter as higher gold sales were offset by a lower realised gold price.
Royalties of $93.4 million in YTD-2023 were largely consistent with the prior quarter as higher gold sales were offset be a lower realised gold price.
9) Corporate costs decreased from $14.0 million in Q2-2023 to $10.4 million in Q3-2023 due to lower employee costs incurred.
Corporate costs increased from $33.2 million in YTD-2022 to $37.9 million in YTD-2023 due to higher employee costs in the first half of the year and higher professional service costs.
10) Exploration costs of $14.9 million in Q3-2023 were largely consistent with the prior quarter as spending continued at an accelerated pace on the Tanda-Iguela greenfield property in Côte d’Ivoire.
Exploration costs increased significantly from $26.9 million in YTD-2022 to $41.9 million in YTD-2023 largely due to the increased expense at the Tanda-Iguela property, following the maiden resource announcement in Q4-2022.
11) The gain on financial instruments decreased from a gain of $31.1 million in Q2-2023 to a gain of $7.2 million in Q3-2023 largely due to an increases on unrealised foreign exchange losses and a decrease in the unrealised gains on gold collars. The gain on financial instruments included unrealised gains on the gold collars and forward sales of $24.4 million, realised gains on gold collars and forward contracts of $1.2 million, realised gains on foreign currency contracts of $0.9 million and unrealised gains on Net Smelter Return (“NSRs”) and deferred compensation related to asset sales of $0.2 million, partially offset by unrealised foreign exchange losses of $16.0 million, an unrealised loss on foreign currency contracts of $2.4 million and realised losses on other financial instruments of $7.7 million.
The loss on financial instruments increased from a loss of $4.1 million in YTD-2022 to a loss of $33.7 million in YTD-2023 and comprised of unrealised foreign exchange losses of $21.3 million, a fair value loss on the conversion option of convertible notes of $14.9 million, a loss on the fair value of call rights of $9.0 million, unrealised losses on foreign currency contracts of $4.9 million, realised losses on gold collars and forward contracts of $3.5 million, a loss on the change in fair value of contingent considerations of $0.6 million and a loss on other financial instruments of $7.6 million partially offset by unrealised gains on gold collars and forward contracts of $17.7 million, a realised gain on foreign currency contracts of $3.6 million and unrealised gains on NSRs and deferred consideration related to asset sales of $0.2 million.
As previously disclosed, in order to increase cash flow visibility during its construction and de-leveraging phases, Endeavour entered into a Revenue Protection Programme, using a combination of zero premium gold collars and forward sales contracts, to cover a portion of its 2023 and 2024 production. Furthermore, during Q4-2023 Endeavour entered into additional zero premium gold collars for a portion of its 2025 production.
· During Q3-2023, 30koz were settled into forward sales contracts for an average gold price of $1,828/oz. For Q4-2023, approximately 75koz are expected to be delivered into a collar with an average call price of $2,100/oz and an average put price of $1,750/oz. In addition, approximately 30koz are scheduled to be settled during Q4-2023 in forward sales contracts at an average gold price of $1,828/oz.
· For FY-2024, approximately 450koz are expected to be delivered into a collar with an average call price of $2,400/oz and an average put price of $1,807/oz. In addition, during H1-2024, a total of approximately 70koz (approximately 35koz per quarter) are expected to be settled in forward sales contracts with an average gold price of $2,033/oz.
· For FY-2025, approximately 200koz are expected to be delivered into a collar with an average call price of $2,400/oz and an average put price of $1,992/oz.
As previously disclosed, Endeavour entered into a Growth Capital Protection Programme designed to enhance cost certainty for a portion of its growth capital expenditure at its Sabodala-Massawa expansion and Lafigué growth projects. The Group had entered into various foreign exchange forward contracts across both the Euro and the Australian Dollar over 2023 and 2024.
· During Q3-2023, €18.8 million was delivered into forward contracts at a blended rate of 1.02 EUR:USD and AU$9.4 million was delivered into forward contracts at a blended rate of 0.69 AUD:USD.
· The total outstanding notional forward contracted quantum is approximately €26.5 million at a blended rate of 1.04 EUR:USD split over 2023 and 2024 at approximately 51% and 49% respectively and approximately AU$12.2 million at a blended rate of 0.69 AUD:USD split approximately 69% and 31% respectively over the same period.
12) Current income tax expense decreased by $37.9 million from $91.4 million in Q2-2023 to $53.5 million in Q3-2023 largely due to the prior period recognising withholding tax expenses of $46.7 million following local board approvals for cash upstreaming, which was partially offset by increased corporate taxes following higher earnings.
Current income tax expense decreased by $16.7 million from $209.8 million in YTD-2022 to $193.1 million in YTD-2023 largely due to lower taxable earnings in YTD-2023, which was partly offset by higher withholding tax expenses.
13) Deferred income tax expense increased by $38.8 million from the deferred tax recovery of $37.2 million in Q2-2023 to a deferred income tax expense of $1.6 million in Q3-2023 as the prior period included the de-recognition of the withholding tax liability related to local dividends declared in Q2-2023.
Deferred income tax recovery increased by $40.7 million from a deferred income tax recovery of $6.7 million in YTD-2022 to a deferred income tax recovery of $47.4 million in YTD-2023 largely due to the effect of foreign exchange remeasurements on deferred tax balances recognised in the YTD-2022 period.
14) Net comprehensive earnings from continuing operations decreased by $27.6 million from $101.2 million in Q2-2023 to $73.6 million in Q3-2023. The decrease in earnings is largely driven by increased depreciation expense and a decrease in the gain on financial instruments following the mark-to-market of gold collars, forward contracts and changes in foreign exchange rates.
Net comprehensive earnings from continuing operations decreased by $60.1 million from $250.3 million in YTD-2022 to $190.2 million in YTD-2023. The decrease in earnings is largely driven by lower earnings from mine operations due to lower production at the Sabodala-Massawa and Mana mines and higher operating expenses
15) For Q3-2023, adjustments included a loss on non-cash, tax and other adjustments of $12.1 million that mainly relate to the impact of foreign exchange remeasurements of deferred tax balances, and other expenses of $7.2 million, partially offset by a net gain on financial instruments of $6.0 million largely related to the unrealised gain on forward sales and collars.
For YTD-2023, adjustments included a net loss on financial instruments of $30.2 million, largely related to the fair value loss on the convertible option of convertible notes, an impairment charge of $14.8 million related to the Group’s exploration permit portfolio and other expenses of $9.7 million, partly offset by a gain on non-cash, tax and other adjustments of $3.0 million that mainly relate to the impact of the foreign exchange remeasurement of deferred tax balance.
16) Adjusted net earnings attributable to shareholders for continuing operations increased by $15.8 million from $53.7 million (or $0.22 per share) in Q2-2023 to $69.5 million (or $0.28 per share) in Q3-2023, due to higher gold volumes sold, lower earnings attributable to non-controlling interests, lower tax expenses and decreased corporate costs, partly offset by decreased.
Adjusted net earnings attributable to shareholders for continuing operations decreased by $92.3 million from $280.4 million (or $1.13 per share) in YTD-2022 to $188.0 million (or $0.76 per share) in YTD-2023 due to lower operating margins, higher exploration costs, higher corporate costs and higher share-based compensation.
*NON-CORE ASSET DIVESTMENT*
· On 30 June 2023, Endeavour closed the divestment of its 90% interests in its non-core Boungou and Wahgnion mines in Burkina Faso to Lilium Mining, a subsidiary of Lilium Capital which is an African and frontier markets focused strategic investment vehicle led by West African entrepreneurs.
· The total consideration for the divestment is expected to exceed $300.0 million and is comprised of an upfront cash payment of $130.0 million (which was structured through the reimbursement of historical shareholder loans), deferred cash considerations, and net smelter return royalties (“NSR”).
· A total of $33.0 million was received to date, of which $17.0 million was received in Q3-2023, while the outstanding $97.0 million is expected to be received by year-end. The delay in receiving the payment is due to Lilium Mining’s unexpected delays in syndicating the historical shareholder loan, which has now been resolved with final legal documentation being finalised.
*OPERATING ACTIVITIES BY MINE*
*Houndé Gold Mine, Burkina Faso*
*Table 8: Houndé Performance Indicators*
*For The Period Ended* *Q3-2023* *Q2-2023* *Q3-2022* *YTD-2023* *YTD-2022*
Tonnes ore mined, kt 1,209 1,479 1,174 3,921 3,842
Total tonnes mined, kt 10,603 11,837 9,178 35,687 32,589
Strip ratio (incl. waste cap) 7.77 7.00 6.82 8.10 7.48
Tonnes milled, kt 1,400 1,419 1,234 4,189 3,684
Grade, g/t 2.68 1.66 1.83 1.84 2.06
Recovery rate, % 91 94 92 92 93
*Production, koz* *109* *72* *72* *228* *232*
Total cash cost/oz 704 955 631 834 676
*AISC/oz* *787* *1,085* *716* *959* *767*
*Q3-2023 vs Q2-2023 Insights*
· Production increased from 72,065 ounces in Q2-2023 to 109,381 ounces in Q3-2023, a quarterly production record, due to the higher grades mined and processed, which was partially offset by lower recovery rates.
· Total tonnes mined decreased due to the wet season slightly impacting mining activities in the Kari Pump pits, which were the primary source of ore during the period.
· Tonnes milled decreased slightly due to an increased proportion of harder fresh and transitional ore from the Kari Pump and Vindaloo Main pits in the mill feed in line with the plan for wet season, as well as slightly lower mill availability due to planned maintenance.
· Average processed grades increased, following the completion of the latest phase of stripping activity in the Kari Pump pit during H1-2023, which provided access to high-grade ore in late Q2-2023 and throughout Q3-2023.
· Recovery rates decreased due to a higher proportion of fresh and transitional ore from the Kari Pump pit in the mill feed, combined with a low retention time.
· AISC decreased from $1,085/oz in Q2-2023 to $787/oz in Q3-2023 primarily due to the higher grades processed and higher volumes of gold sold during the quarter, which was partially offset by higher mining unit costs due to lower overall tonnes mined and higher heavy mining equipment maintenance costs in the quarter.
· Sustaining capital expenditure decreased slightly from $9.3 million in Q2-2023 to $9.0 million in Q3-2023 primarily related to ongoing waste development at the Vindaloo Main pit, plant equipment upgrades and heavy mining equipment maintenance.
· Non-sustaining capital expenditure decreased from $6.3 million in Q2-2023 to $3.3 million in Q3-2023 primarily related to waste development at the Kari Pump pit.
*YTD-2023 vs YTD-2022 Insights*
· Production decreased slightly from 232koz in YTD-2022 to 228koz in YTD-2023 due to the lower grade ore from the Kari West pit contributing a greater proportion of the mill feed in H1-2023, while waste development activities were prioritised at the Kari Pump and Vindaloo Main pits.
· AISC increased from $767/oz in YTD-2022 to $959/oz in YTD-2023 due to the lower grade and higher strip ratio ore mined and processed, at higher unit mining and processing costs due to fuel and consumable cost increases, as well as increased sustaining capital due to more waste development activities at the Vindaloo Main pit.
*2023 Outlook*
· Given a stronger than anticipated performance in Q3-2023, Houndé is now expected to achieve near the top-end of its FY-2023 production guidance of 270 - 285koz and, as previously disclosed, AISC is expected to be near the top-end of the guided $850 - $925/oz range.
· In Q4-2023, ore is expected to be mainly sourced from the Kari Pump and Vindaloo Main pits. Lower mill throughput and processed grades are expected in Q4-2023, due to a lower proportion of high-grade material from Kari Pump in the mill feed, while recovery rates are expected to remain consistent as fresh and transitional material is expected to comprise a similar proportion of the ore blend.
· Sustaining capital expenditure outlook for FY-2023 is unchanged compared to the previously disclosed guidance of $40.0 million, of which $28.5 million has been incurred in YTD-2023. In Q4-2023, sustaining capital expenditure is expected to mainly relate to continued waste stripping activity at the Vindaloo Main pit, plant and mine equipment upgrades.
· Non-sustaining capital expenditure outlook for FY-2023 is unchanged compared to the previously disclosed guidance of $35.0 million, of which $30.7 million has been incurred in YTD-2023, which was associated with stripping activity at the Kari Pump pit that was completed in Q2-2023. In Q4-2023, non-sustaining capital expenditure is expected to mainly relate to waste capitalisation at the Kari Pump pit and the stage 8 and 9 embankment wall raises at TSF 1.
*Ity Gold Mine, Côte d’Ivoire*
*Table 9: Ity Performance Indicators*
*For The Period Ended* *Q3-2023* *Q2-2023* *Q3-2022* *YTD-2023* *YTD-2022*
Tonnes ore mined, kt 1,246 1,887 1,180 5,069 5,382
Total tonnes mined, kt 6,020 7,156 4,925 20,542 17,902
Strip ratio (incl. waste cap) 3.83 2.79 3.17 3.05 2.33
Tonnes milled, kt 1,494 1,808 1,375 5,121 4,641
Grade, g/t 1.60 1.61 2.04 1.63 1.82
Recovery rate, % 93 92 87 93 84
*Production, koz* *73* *86* *81* *250* *230*
Total cash cost/oz 826 761 741 762 751
*AISC/oz* *864* *797* *773* *793* *799*
*Q3-2023 vs Q2-2023 Insights*
· Production decreased from 86koz in Q2-2023 to 73koz in Q3-2023, due to the lower tonnes of ore milled, which was partially offset by a slight increase in recovery rates.
· Total tonnes mined decreased, as anticipated, as mining and haulage activities were slightly impacted by wet ground conditions due to the rainy season. Mining activities continued to focus on the Ity, Walter, Bakatouo, Verse Ouest and Le Plaque pits with additional contributions from stockpiles, while significant waste development was focussed on the Walter cut back and Ity pit. Ore tonnes mined decreased as ore sourced from the Bakatouo and Le Plaque pits decreased in line with the mining sequence during the wet season, which was partially offset by increased ore sourced from the Walter pit.
· Tonnes milled decreased due to a higher proportion of fresh ore in the mill feed, in addition to the impact of the wet season increasing the moisture content in the ore and lowering throughput rates.
· Average processed grades were consistent with the prior period as an increased proportion of higher-grade ore from the Walter and Ity pits offset the lower proportion of high-grade ore from the Le Plaque pit in the mill feed.
· Recovery rates increased slightly due to the reduction in throughput supporting increased CIL residence time.
· AISC increased from $797/oz in Q2-2023 to $864/oz in Q3-2023 primarily due to lower volumes of gold sold, as well as increases in mining and processing unit costs as a result of the wet season, which impacted overall tonnage volumes and increased dewatering costs.
· Sustaining capital expenditure decreased from $3.2 million in Q2-2023 to $2.7 million in Q3-2023 and primarily related to waste stripping at the Ity pit and dewatering borehole drilling.
· Non-sustaining capital expenditure slightly increased from $22.5 million in Q2-2023 to $23.3 million in Q3-2023 and primarily related to cut back activities at the Walter and Bakatouo pits, stage 5 of the TSF 1 raise, TSF 2 construction and development of the Mineral Sizer and Recyn optimisation initiatives.
*YTD-2023 vs YTD-2022 Insights*
· Production increased from 230koz in YTD-2022 to 250koz in YTD-2023 due to an increase in tonnes milled as a result of continued use of the surge bin in addition to higher recovery rates due to the cessation of processing ore from the Daapleu pit in 2022 and the addition of the pre-leach tank in Q2-2022. The increase was partially offset by a decrease in average processed grades following the completion of mining at the higher grade Daapleu pit in Q2-2022.
· AISC decreased from $799/oz in YTD-2022 to $793/oz in YTD-2023 due to the increase in the volume of gold sold, a decrease in mining unit costs as a result of higher overall volumes mined, greater volumes of oxide ore mined from the Le Plaque pit with associated lower comparative haulage costs and lower sustaining capital.
*2023 **Outlook*
· Given the strong YTD-2023 performance, Ity is on track to achieve above the top-end of its FY-2023 production guidance of between 285 - 300koz at its AISC guidance of $840 - $915/oz.
· In Q4-2023, ore is expected to be sourced mainly from the Le Plaque, Walter, Bakatouo and Ity pits with supplemental mill feed sourced from stockpiles. Mining and mill throughput rates are expected to increase, while milled grades are expected to decrease as lower grade mining areas are mined across the Walter and Le Plaque pits.
· Sustaining capital expenditure outlook for FY-2023 remains unchanged compared to the previously disclosed guidance of $10.0 million, of which $7.7 million has been incurred in YTD-2023. In Q4-2023, sustaining capital expenditure is expected to mainly relate to waste-stripping activities and borehole drilling.
· Non-sustaining capital expenditure for FY-2023 is expected to be above the previously guided $80.0 million as $76.8 million has already been incurred in YTD-2023 and approximately $10.0 million is expected to be incurred in Q4-2023. The increase is due to the construction of the TSF2, which will support the higher mill throughput over the coming years, and is progressing ahead of schedule. Non-sustaining capital expenditure in Q4-2023 is also expected to relate to the construction of the Mineral Sizer ‘front end’ optimisation initiative, which was launched in Q2-2023, and the completion of the Recyn optimisation initiative.
*Mana Gold Mine, Burkina Faso*
*Table 10: Mana Performance Indicators*
*For The Period Ended* *Q3-2023* *Q2-2023* *Q3-2022* *YTD-2023* *YTD-2022*
OP tonnes ore mined, kt 297 409 76 1,129 922
OP total tonnes mined, kt 1,508 1,904 76 5,194 2,557
OP strip ratio (incl. waste cap) 4.08 3.65 0.00 3.60 1.77
UG tonnes ore mined, kt 349 280 250 882 645
Tonnes milled, kt 643 671 691 1,928 1,964
Grade, g/t 1.66 1.61 1.90 1.86 2.54
Recovery rate, % 88 91 92 92 91
*Production, koz* *30* *31* *42* *106* *149*
Total cash cost/oz 1,599 1,403 1,023 1,311 944
*AISC/oz* *1,734* *1,481* *1,098* *1,408* *993*
*Q3-2023 vs Q2-2023 Insights*
· Production remained consistent with the prior quarter at 30koz in Q3-2023 as lower tonnes of ore milled and lower recovery rates, were partially offset by higher average grades processed.
· Total open pit tonnes mined decreased as mining rates at the Maoula open pit decreased as the pit approaches the end of its economic mine life, which is expected in early 2024.
· Total underground tonnes of ore mined increased as stope production accelerated at the Wona and Siou Underground deposits. Underground development continued to ramp-up with 2,685 metres of development completed across both Siou and Wona compared to 2,217 metres of development completed in the prior quarter.
· Tonnes milled decreased due to maintenance downtime and lower throughput rates as a result of the wet season increasing the moisture content in the oxide ore from the Maoula open pit in addition to the increased proportion of fresh underground ore in the mill feed.
· Average grades processed increased due to a higher proportion of higher-grade ore from stope production at the Wona and Siou underground deposits in the mill feed offsetting the decrease in lower grade ore from the Maoula open pit.
· Recovery rates decreased due to a higher proportion of fresh ore from the Wona underground deposit in the mill feed, as well as the impact of stopping and restarting the processing plant after maintenance downtime.
· AISC increased from $1,481/oz in Q2-2023 to $1,734/oz in Q3-2023 due to higher open pit mining unit costs as lower volumes were mined from the open pit, higher processing unit costs due to a higher proportion of harder ore from the Siou and Wona underground deposits in the mill feed as well as higher fuel prices and lower volumes of gold sold, which was partially offset by lower underground mining costs.
· Sustaining capital expenditure remained stable at $4.2 million in Q3-2023 and primarily related to infrastructure improvements.
· Non-sustaining capital expenditure decreased from $17.3 million in Q2-2023 to $11.6 million in Q3-2023 and primarily related to underground development, underground infrastructure and the stage 5 TSF embankment raise.
*YTD-2023 vs YTD-2022 Insights*
· Production decreased from 149koz in YTD-2022 to 106koz in YTD-2023 largely due to lower grades milled as lower grade ore sourced from the Maoula open pit supplemented the mill feed and due to lower underground grades as the Wona Underground deposit continues to ramp up.
· AISC increased from $993/oz in YTD-2022 to $1,408/oz in YTD-2023 due to lower volumes of gold sold, higher open pit strip ratio, higher underground mining unit costs, and higher fuel and consumable costs.
*2023 Outlook*
· As previously disclosed, due to the slower than expected ramp up of the new underground mining contractor at the Wona Underground deposit, production at Mana is expected to be below the guided 190 - 210koz range at an AISC above the guided $950 - $1,050/oz range.
· In Q4-2023, production is expected to increase as development continues to ramp-up to enable increased stope production at the Wona Underground, supplemented by continued stope production from the Siou Underground. The proportion of ore sourced from the Maoula open pit is expected to decrease as the pit reaches the end of its mine life. Average processed grades are expected to increase as greater volumes of higher grade underground ore is expected in the mill feed, offsetting the decrease in open pit ore feed.
· Sustaining capital expenditure outlook for FY-2023 remains unchanged compared to the previously disclosed guidance of $15.0 million, of which $10.5 million has been incurred as of YTD-2023. In Q4-2023 sustaining capital expenditure is expected to mainly relate to underground infrastructure and processing plant upgrades.
· Non-Sustaining capital expenditure outlook for FY-2023 is expected to be slightly above the previously disclosed guidance of $45.0 million as $44.8 million has been incurred in YTD-2023 and approximately $10.0 million is expected to be incurred in Q4-2023. The increase is due to increased underground development costs associated with the slower than expected ramp-up of the Wona Underground contractor, resulting in a greater focus on underground development, which is largely classified as non-sustaining capital. In Q4-2023, non-sustaining capital expenditure is expected to mainly relate to capitalised underground development and the stage 5 TSF lift.
*Sabodala-Massawa Gold Mine, Senegal*
*Table 11: Sabodala-Massawa Performance Indicators*
*For The Period Ended* *Q3-2023* *Q2-2023* *Q3-2022* *YTD-2023* *YTD-2022*
Tonnes ore mined, kt 1,745 1,341 1,297 4,321 4,722
Total tonnes mined, kt 11,989 11,428 11,761 34,624 36,614
Strip ratio (incl. waste cap) 5.87 7.52 8.07 7.01 6.75
Tonnes milled, kt 1,175 1,201 1,034 3,500 3,136
Grade, g/t 2.06 2.17 2.84 2.09 2.78
Recovery rate, % 91 90 88 90 89
*Production, koz* *69* *79* *86* *209* *256*
Total cash cost/oz 758 689 665 688 584
*AISC/oz* *840* *762* *779* *795* *703*
*Q3-2023 vs Q2-2023 Insights*
· Production decreased from 79koz in Q2-2023 to 69koz in Q3-2023 due to lower average grades processed and lower tonnes milled, which was partially offset by a slight increase in recovery rates.
· Total tonnes mined increased due to improvements in the fleet capacity following the purchase of two additional dump trucks in the prior period as well as continued stripping activity in the Sabodala pit to provide access to the final phase of ore. Tonnes of ore mined increased as mining started at two new pits, Niakafiri East and the Sofia North Extension. In addition, supplementary ore continued to be sourced from the Massawa North Zone and Central Zones pits and the Bambaraya pit.
· Tonnes milled decreased slightly due to planned maintenance associated with a scheduled mill reline and the connection of the additional generators to the existing power plant as part of the power plant expansion associated with the Sabodala-Massawa BIOX® expansion.
· Average processed grades decreased due to a higher proportion of lower grade oxide ore from the Niakafiri East, Bambaraya and Sofia North Extension pits, which displaced higher grade transitional ore from the Massawa North Zone in the mill feed.
· Recovery rates increased due to the reduced volumes of Sofia North fresh material and Massawa North Zone transitional material in the mill feed given their lower associated recovery rates.
· AISC increased from $762/oz in Q2-2023 to $840/oz in Q3-2023 due to a decrease in gold sales, an increase in processing unit costs due to higher fuel and consumables costs and higher sustaining capital, which was partially offset by lower open pit mining unit costs as an increased proportion of soft oxide ore was sourced from the new pits.
· Sustaining capital expenditure decreased slightly from $5.7 million in Q2-2023 to $5.5 million in Q3-2023 and primarily related to waste capitalisation at the Bambaraya pit as well as purchases of heavy mining equipment and mining equipment rebuilds.
· Non-sustaining capital expenditure decreased from $14.0 million in Q2-2023 to $10.9 million in Q3-2023 and primarily related to infrastructure and capitalised drilling at the new Niakafiri East pit and the Samina deposit, as well as development activities in the Massawa area, capitalised waste at the Sabodala pit and the start of the solar power plant construction.
*YTD-2023 vs YTD-2022 Insights*
· Production decreased from 256koz in YTD-2022 to 209koz in YTD-2023 due to lower average grades milled as a result of reduced volumes of high-grade ore from the Sofia North, Bambaraya and Sabodala pits, which was partially offset by an increase in tonnes milled.
· AISC increased from $703/oz in YTD-2022 to $795/oz in YTD-2023 due to lower volumes of gold sales and an increase in mining unit costs due to increases in fuel and consumable costs, which was partially offset by lower processing unit costs and lower sustaining capital.
*2023 Outlook*
· Sabodala-Massawa is expected to achieve near the bottom end of its FY-2023 production guidance of 315 - 340koz at the guided AISC of $760 - $810/oz.
· In Q4-2023, ore is expected to be sourced from the Sabodala, Niakafiri East, Sofia North extension and Bambaraya pits supplemented by high-grade ore from the Massawa North Zone pit. Processed grades are expected to improve with higher grade ore expected from the Sabodala and Massawa North Zone pits. Recoveries are expected to improve with an increased proportion of oxide ore from the Niakafiri East and Sofia North extension pits in the mill feed.
· Sustaining capital expenditure outlook for FY-2023 is expected to be slightly below the previously disclosed guidance of $45.0 million as $22.5 million has been incurred in YTD-2023 and approximately $12.0 million is expected to be incurred in Q4-2023. Sustaining capital expenditure is expected to be lower than previously guided, in line with the production profile and due to the acceleration of the Niakafiri East and Sofia North Extension pits into the mine plan, which allows stripping activity initially planned in the Massawa pits to be deferred until next year. In Q4-2023 sustaining capital expenditure is expected to mainly relate to heavy mining equipment maintenance and equipment upgrades.
· Non-sustaining capital expenditure for FY-2023 is unchanged compared to the previously disclosed guidance of $45.0 million, of which $37.9 million has been incurred in YTD-2023. In Q4-2023, non-sustaining capital expenditure is expected to mainly relate to the purchase of long lead items for the solar project construction, stripping activity in the Sabodala pit and livelihood compensation costs at Delya, Niakafiri and Bambaraya.
· Growth capital expenditure outlook for FY-2023 remains unchanged at $170.0 million for FY-2023, of which $114.4 million was incurred in YTD-2023 related to the BIOX® expansion project. Further detail on the project is provided in the Plant Expansion section below.
*Plant Expansion*
· Construction of the Sabodala-Massawa expansion project was launched in April 2022 and remains on budget and on schedule for completion in late Q2-2024.
· Growth capital expenditure for the expansion project is $290.0 million, of which $242.9 million, or 84%, has now been committed with pricing in line with expectations. In FY-2023, $170.0 million is expected to be incurred, mainly related to construction of the process plant, power plant extension and TSF-1B.
· Since the project launch, $166.6 million has been incurred, of which $114.4 million was incurred in YTD-2023 with $50.4 million incurred in Q3-2023. The YTD-2023 incurred spend is mainly related to detailed engineering, earthworks, civil works and process plant construction activities.
· The progress regarding the critical path items is detailed below:
· Processing plant construction is progressing in line with the schedule, with all contractors now on site. The key structural components of the plant are either complete or nearing completion with activities now focused on advancing the ancillary processing plant infrastructure including electrical and piping.
· The primary crusher and the ball and SAG mills have been installed.
· The CIL and elution circuits’ civil and concrete construction works are complete and tankage has been erected to allow the top-of-tank steel work to commence.
· The BIOX® reactors, neutralisation tanks and BIOX® Counter Current Detoxification (“CCD”) Thickener tankage and pipe racks have all been erected and the top-of-tank steelwork is underway. Furthermore the first populations of BIOX material is on site and growing in the pilot plant.
· Electrical works, piping and instrumentation within the process plant are now being installed.
· The 18MW power plant expansion is on schedule with the 11kV switchboard on track to be energised in Q4-2023 and completed by year end. The civil works at the power plant expansion are nearly complete and the electrical conduits between the switch room and power station are being installed.
· TSF-1B construction is on schedule with over two thirds of the earthworks now constructed and the first cell is currently being lined with HDPE.
*Solar Power Plant Construction *
· As announced on 2 August 2023, Endeavour launched the construction of a 37MWp photovoltaic (“PV”) solar facility and a 16MW battery system at the Sabodala-Massawa mine, in order t