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 $90m OPERATIONAL AND FINANCIAL HIGHLIGHTS (for continuing operations)
NEWS RELEASE – LSE & TSX: EDV All amounts in US$
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 OPERATIONAL AND FINANCIAL HIGHLIGHTS (for continuing operations)
- Q1-2022 production of 357koz, up +14% over Q1-2021, while AISC remained relatively flat at $848/oz
- Well positioned to meet FY-2022 guidance of 1,315-1,400koz at an AISC of $880-930/oz
- Adjusted Net Earnings up $22m over Q1-2021 to $122m; up +2% on a per share basis to $0.49/sh
- Operating Cash Flow up $96m over Q1-2021 to $299m; up +23% on a per share basis to $1.21/sh
- Net cash position increased by $90m during the quarter to $167m despite $101m paid in capital returns to shareholders
SHAREHOLDER RETURNS PROGRAMME
- H2-2021 dividend of $70m paid during the quarter, totalling $200m of dividends paid out since early 2021
- Share buybacks continue to supplement shareholder returns with $31m worth of shares repurchased in Q1-2022, totalling $169m since the buyback programme began in April 2021
ORGANIC GROWTH
- Sabodala-Massawa Expansion Project launched in Q2-2022 and DFS underway for Lafigué greenfield project
- Continued strong focus on exploration with $18m spent in Q1-2022, out of the annual budget of $80m
London, 5 May 2022 – Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) (“Endeavour”, the “Group” or the “Company”) is pleased to announce its operating and financial results for Q1-2022, with highlights provided in Table 1 below.
Table 1: Highlights for Continuing Operations1 THREE MONTHS ENDED
| All amounts in US$ million, unless otherwise stated | 31 March 2022 | 31 December 31 March 2021 2021 | Δ Q1-2022 vs. Q1-2021 |
|---|---|---|---|
| OPERATING DATA Gold Production, koz All-in Sustaining Cost2, $/oz Realised Gold Price, $/oz | 378 313 894 837 1,792 1,762 | ||
| 357 | +14% | ||
| 848 | +1% | ||
| 1,911 | +8% | ||
| CASH FLOW Operating Cash Flow before Changes in WC Operating Cash Flow before Changes in WC2, $/sh Operating Cash Flow Operating Cash Flow2, $/sh | 303 233 1.22 1.12 345 204 1.38 0.98 | +59% +33% +47% +23% | |
| 370 | |||
| 1.49 | |||
| 299 | |||
| 1.21 | |||
| PROFITABILITY Net (Loss)/Earnings Attributable to Shareholders Net (Loss)/Earnings per Share, $/sh Adjusted Net Earnings Attributable to Shareholders2 Adjusted Net Earnings per Share2, $/sh EBITDA2 Adjusted EBITDA2 | (87) 85 (0.35) 0.41 148 101 0.59 0.48 128 302 363 325 | ||
| (57) | (167)% (156)% +21% +2% (28)% | ||
| (0.23) | |||
| 122 | |||
| 0.49 | |||
| 218 | |||
| 398 | +22% | ||
| SHAREHOLDER RETURNS Shareholder dividends paid Share buyback (commenced in Q2-2021) | — 60 44 — | ||
| 70 | +17% | ||
| 31 | n.a. | ||
| FINANCIAL POSITION HIGHLIGHTS (Net Cash)/Net Debt2 (Net Cash), Net Debt / Adjusted EBITDA (LTM) ratio2 | (76) 162 (0.05) 0.16 | +203% +169% | |
| (167) | |||
| (0.11) |
1From Continuing Operations excludes the Karma mine which was divested on 10 March 2022 and the Agbaou mine which was divested on 1 March 2021. 2This is a non-GAAP measure. Refer to the non-GAAP measure section in this press release and in the Management Report.
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.”
UPCOMING CATALYSTS
The key upcoming expected catalysts are summarised in the table below.
Table 2: Key Upcoming Catalysts
TIMING CATALYST
Q2-2022 ESG Sustainability report publication Mid-2022 Lafigué deposit - Fetekro property Completion of Definitive Feasibility Study Declaration and payment of H1-2022 dividend Q3-2022 Shareholder returns Mana Wona underground first stope production Q3-2022 H2-2022 Exploration Exploration programme results and resource updates
OPERATING SUMMARY
- Continued strong safety record for the Group, with a Lost Time Injury Frequency Rate (“LTIFR”) of 0.15 for the trailing twelve months ending 31 March 2022.
- Q1-2022 production from continuing operations amounted to 357koz, an increase of 44koz or 14% over Q1-2021, as a result of stronger performances at Houndé, Ity and a full quarter of production from the Sabodala-Massawa and Wahgnion mines that were integrated after the acquisition of Teranga on 10 February 2021. Q1-2022 all-in sustaining costs (“AISC”) from continuing operations increased by $11 per ounce or 1% to $848 per ounce over Q1-2021 due to higher costs at Boungou, Mana and Wahgnion. Inflationary pressures have been partially offset by favourable exchange rate variations, long-term supply contracts, production and cost optimisation initiatives, and the benefit of regulated in-country fuel pricing mechanisms where prices are revised on a monthly or quarterly basis, which shelters Endeavour from paying peak spot international fuel prices.
- Q1-2022 production from continuing operations of 357koz was a decrease of 21koz or 5% over Q4-2021, following a strong Q4-2021 after the rainy season, mainly due to lower production at Sabodala-Massawa and Wahgnion. Q1-2022 AISC from continuing operations decreased by $46 per ounce or 5% over Q4-2021 due to lower AISC at Houndé, Ity, Mana and Sabodala-Massawa as well as lower corporate G&A.
- On 10 March 2022, Endeavour closed the sale of its 90% interest in its non-core Karma mine in Burkina Faso to Néré Mining SA, for consideration of up to $25.0 million plus a 2.5% Net Smelter Return royalty, applicable on production in excess of approximately 160koz of recovered gold from 1 January 2022.
Table 3: Group Production and FY-2022 Guidance THREE MONTHS ENDED
| (All amounts in koz, on a 100% basis) | 31 March 2022 | 31 December 2021 | 31 March 2021 | 2022 FULL-YEAR GUIDANCE | ||
|---|---|---|---|---|---|---|
| Boungou Houndé Ity Mana Sabodala-Massawa1 Wahgnion1 | 34 73 72 | 35 77 60 | 60 | 130 260 255 170 360 140 | — — — — — — | 140 275 270 190 375 150 |
| 66 71 | ||||||
| 53 | 54 52 | |||||
| 96 29 | 105 47 | 39 25 | ||||
| PRODUCTION FROM CONTINUING OPERATIONS | 357 | 378 313 | 1,315 | — | 1,400 | |
| Karma2 Agbaou3 | 10 | 20 | 22 | |||
| — | — 13 | |||||
| GROUP PRODUCTION | 367 | 398 347 |
1Included for the post acquisition period commencing 10 February 2021. 2Divested on 10 March 2022. 3Divested on 1 March 2021.
Table 4: Group All-In Sustaining Costs and FY-2022 Guidance THREE MONTHS ENDED
| 31 March 2022 | 31 December 2021 | 31 March 2021 | 2022 FULL-YEAR GUIDANCE | |||
|---|---|---|---|---|---|---|
| 901 | 825 690 874 839 854 786 | 900 875 850 | — — — | 1,000 925 900 | ||
| 771 | ||||||
| 728 | ||||||
| 1,000 | 1,116 592 1,066 | 954 | 1,000 675 1,050 | — — — 30 | 1,100 725 1,150 | |
| 578 | 749 | |||||
| 1,351 | 780 | |||||
| 39 | 51 33 | |||||
| AISC FROM CONTINUING OPERATIONS | 848 | 894 837 | 880 | — | 930 | |
| 1,504 | 1,300 1,179 | |||||
| — | — 1,132 | |||||
| GROUP AISC | 866 | 915 868 |
1Included for the post acquisition period commencing 10 February 2021. 2Divested on 10 March 2022. 3Divested on 1 March 2021.
- The Group is well positioned to achieve its FY-2022 production and AISC guidance for continuing operations of 1,315-1,400koz at an AISC of $880-930 per ounce.
- Sustaining capital expenditure for FY-2022 is expected to amount to $169.0 million, of which $30.8 million has been incurred in Q1-2022.
- Non-sustaining capital expenditure for FY-2022 is expected to amount to $204.0 million, of which $41.9 million has been incurred in Q1-2022. Given the excess cash flow being generated by the Company due to the strong operational performance and higher gold price environment and the cautious approach taken in staggering the growth projects, Endeavour has accelerated the launch of the construction of a recyanidation circuit at the Ity mine, one of its optimisation initiatives, thereby increasing the FY-2022 non-sustaining capital expenditure from the original guidance of $173.0 million. The additional circuit aims to optimise costs by reducing leaching and detox reagent consumption, improving the quality of the discharge water, and increasing production through higher recovery rates. Given that the recyanidation circuit is expected to result in 87koz of additional gold production and $63.0 million in cost savings over Ity’s current reserve life, the $41.4 million upfront investment, spread over 2022-2023, has screened very well within Endeavour’s capital allocation framework based on both its financial returns and positive ESG impact. Further information is provided in the Ity section below.
- Growth capital expenditure guidance for FY-2022 is expected to amount to $121.0 million, of which $7.9 million has been incurred in Q1-2022, mainly related to the Sabodala-Massawa expansion project.
SHAREHOLDER RETURNS PROGRAMME
- In FY-2021, Endeavour implemented a shareholder returns programme that is composed of a minimum progressive dividend of $125.0 million, $150.0 million and $175.0 million for FY-2021, FY-2022, and FY-2023 respectively, that may be supplemented with additional dividends and share buybacks, provided that the prevailing gold price remains above $1,500 per ounce and that Endeavour’s leverage remains below 0.5x Net Debt/adjusted EBITDA.
- During Q1-2021, Endeavour paid its H2-2021 dividend of $70.0 million or $0.28 per share bringing the FY-2021 dividend to $140.0 million or $0.56 per share, which represents $15.0 million more than the minimum dividend commitment.
- Shareholder returns are being supplemented through the Company’s share buyback programme. A total of $169.0 million, or 7.4 million shares have been repurchased from the start of the buyback programme on 9 April 2021, of which 1.3 million shares were repurchased in Q1-2022 for $31.1 million.
- Endeavour renewed its share buyback programme on 22 March 2022, and is entitled to repurchase up to 5% of its total issued and outstanding shares or 12,458,989 shares, during the 12 month period of the programme, and up to 25% of the average daily trading volume or 195,081 shares during each trading day, excluding purchases made in accordance with the block purchase exemptions under applicable TSX policies. All ordinary shares repurchased under the share repurchase programme will be cancelled.
- As shown in the table below, since the launch of the Company’s shareholder returns programme in early 2021, a cumulative $369.0 million has been delivered to shareholders in the form of dividends and share buybacks.
Table 5: Cumulative Shareholder Returns Delivered
TOTAL SHAREHOLDER RETURNS, $m FY-2020 dividend (paid in Q1-2021) 60 H1-2021 dividend (paid in Q3-2021) 70 H2-2021 dividend (paid in Q1-2022) 70
TOTAL DIVIDENDS 200
Share buyback (bought in FY-2021) 138 Share buyback (bought in Q1-2022) 31
TOTAL SHAREHOLDER RETURNS 369
CASH FLOW AND LIQUIDITY SUMMARY
The table below presents the cash flow and net debt position for Endeavour for the three month period ending 31 March 2022,
Table 6: Cash Flow and Net Debt Position THREE MONTHS ENDED
| In US$ million unless otherwise specified | 31 March 2022 | 31 December 2021 | 31 March 2021 | |
|---|---|---|---|---|
| Net cash from/(used in), as per cash flow statement: Operating cash flows before changes in working capital from continuing operations Changes in working capital Cash generated from/(used by) discontinued operations | 303 233 42 (30) 11 (6) | |||
| 370 | ||||
| (70) | ||||
| 5 | ||||
| Cash generated from operating activities [1] Cash used in investing activities [2] Cash (used in)/generated by financing activities [3] Effect of exchange rate changes on cash | 304 | 356 198 (132) (105) (71) 65 (7) (4) | ||
| (94) | ||||
| (50) | ||||
| (20) | ||||
| INCREASE IN CASH | 140 146 154 | |||
| Cash position at beginning of period | 906 | 760 715 | ||
| CASH POSITION AT END OF PERIOD | [4] | 1,047 906 | 868 | |
| Principal amount of Senior Notes Principal amount of Convertible Notes Drawn portion of corporate loan facilities [5] | (500) | (500) — (330) (330) — (700) | ||
| (330) | ||||
| (50) | ||||
| NET CASH / (NET DEBT) | [6] | 167 | 76 | (162) |
| (Net cash), Net debt / Adjusted EBITDA (LTM) ratio1 [7] | (0.11) x | (0.05) x 0.16 x |
1Net debt and Adjusted EBITDA are Non-GAAP measures. Refer to the non-GAAP measure section in this press release and in the Management Report.
NOTES:
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:
- Working capital was an outflow of $70.2 million in Q1-2022, a decrease of $111.8 million over Q4-2021 mainly due to an increase in stockpiles, a decrease in trade and other payables and an increase in trade and other receivables. Inventories were an outflow of $34.6 million due primarily to an increase in the value of stockpiles at Houndé, Ity, Sabodala-Massawa and Wahgnion which was partially offset by a decrease in finished goods at Boungou and Mana. Trade and other payables was an outflow of $15.7 million which mainly related to a decrease in trade payables at corporate, offset by an increase in trade payables at Wahgnion mine due to the timing of payments. Trade and other receivables were an outflow of $11.9 million mainly due to an increase in VAT receivable at Boungou and Mana and an increase in advanced royalty payments at Houndé. Prepaid expenses and other was an outflow of $8.0 million for Q1-2022 mainly due to an increase in prepayments of $1.6 million at Ity, $2.3 million at Mana and $3.7 million at Wahgnion.
- Gold sales from continuing operations decreased from 370koz in Q4-2021 to 359koz in Q1-2022 due primarily to decreases in production and gold sales at the Sabodala-Massawa and Wahgnion mines. The realised gold price from continuing operations for Q1-2022 was $1,911 per ounce compared to $1,787 per ounce for Q4-2021. Total cash cost per ounce decreased slightly from $727 per ounce in Q4-2021 to $723 per ounce in Q1-2022.
- Income taxes paid decreased by $13.4 million from $42.1 million in Q4-2021 to $28.7 million in Q1-2022, due to the one time payment of $12.1 million related to the settlement of a tax assessment for the Massawa project in Q4-2021. This decrease was partially offset by an increase in taxes paid at Sabodala-Massawa by $5.3 million from $0.7 million in Q4-2021 to $6.0 million in Q1-2022 due to the commencement of mining at the Massawa pits and the timing of tax payments.
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:
- Sustaining capital from continuing operations decreased from $43.1 million in Q4-2021 to $30.8 million in Q1-2022 primarily due to lower capital spends at Ity due to less waste stripping at the Ity, Bakatouo and Walter pits and at Houndé due to less waste capitalisation at Kari Pump and Kari West.
- Non-sustaining capital from continuing operations decreased from $60.5 million in Q4-2021 to $41.9 million in Q1-2022, due to lower spending at Houndé, Ity, Sabodala-Massawa and Wahgnion, and primarily related to the winding down of development activities at Le Plaque and Massawa among other items. This was slightly offset by increased spending at Mana due to the development of the Wona underground declines and the ongoing TSF raise.
- Growth capital spend decreased from $11.8 million in Q4-2021 to $7.9 million in Q1-2022 and primarily relates to work on the definitive feasibility studies (“DFS”) at the Sabodala-Massawa Expansion, Lafigué and Kalana projects.
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.
EARNINGS FROM CONTINUING OPERATIONS
The table below presents the earnings and adjusted earnings for Endeavour for the three month period ending 31 March 2022,
Table 7: Earnings from Continuing Operations
THREE MONTHS ENDED
| 31 March 2022 | 31 December 2021 | 31 March 2021 | ||
|---|---|---|---|---|
| Revenue [8] Operating expenses [9] Depreciation and depletion [9] Royalties [10] | 686 (218) (152) (41) | 663 601 (227) (252) (191) (117) (42) (41) | ||
| Earnings from mine operations | 276 | 203 | 191 | |
| Corporate costs [11] Acquisition and restructuring costs Impairment charge of mining interests Share-based compensation Exploration costs | (14) — — (8) (7) | (20) (14) (1) (12) (248) — (7) (8) (5) (10) | ||
| Earnings/(loss) from mine operations | 247 | (78) | 147 | |
| (Loss)/gain on financial instruments [12] Finance costs Other expense | (179) (15) (2) | 19 42 (25) (12) (3) (3) | ||
| Earnings/(loss) before taxes | 51 | (88) | 173 | |
| Current income tax expense [13] Deferred income tax (expense)/recovery [14] | (75) (11) | (38) (72) 34 7 | ||
| Net comprehensive (loss)/earnings from continuing operations | [15] | (35) | (92) | 108 |
| Add-back adjustments [16] | 180 | 235 23 | ||
| Adjusted net earnings from continuing operations | [17] | 145 | 142 131 | |
| Portion attributable to non-controlling interests | 22 | (6) 31 | ||
| Adjusted net earnings from continuing operations attributable to shareholders of the Company | [17] | 122 | 148 | 101 |
| (Loss)/earnings per share from continuing operations Adjusted net earnings per share from continuing operations | (0.23) | (0.35) 0.41 0.59 0.48 | ||
| 0.49 |
NOTES:
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.
OPERATING ACTIVITIES BY MINE
Boungou Gold Mine, Burkina Faso
Table 8: Boungou Performance Indicators
| For The Period Ended | Q1-2022 | Q4-2021 | Q1-2021 |
|---|---|---|---|
| Tonnes ore mined, kt Total tonnes mined, kt Strip ratio (incl. waste cap) Tonnes milled, kt Grade, g/t Recovery rate, % PRODUCTION, KOZ | 252 | 301 4,294 13.27 352 3.36 95 35 | 246 |
| 6,334 | 6,672 | ||
| 24.13 | 26.11 | ||
| 349 | 315 | ||
| 3.03 | 5.52 | ||
| 95 | 96 | ||
| 34 | 60 | ||
| Total cash cost/oz AISC/OZ | 848 | 778 825 | 619 |
| 901 | 690 |
Q1-2022 vs Q4-2021 Insights
- Production of 34koz remained consistent with the prior quarter as mill throughput and recovery rates remained stable, while processed grade decreased slightly due to the greater emphasis placed on waste extraction.
- Total tonnes mined increased while tonnes of ore mined slightly decreased due to the continued focus on stripping activities at the West pit. Ore extraction decreased at the West pit during the quarter, given the focus on waste extraction, which was offset by the commencement of ore extraction at the East pit.
- Tonnes milled remained consistent with the prior quarter as high throughput rates continue to be driven by the effective fragmentation and processing of crushed ore stockpiles allowing for a more stable ore feed.
- Processed grade decreased as ore was mined in lower grade areas of the East Pit, less high grade ore was mined from the West pit and low grade stockpiles were utilized.
- AISC slightly increased from $825 per ounce in Q4-2021 to $901 per ounce in Q1-2022 due to the increase in strip ratio and the decrease in processed grade in Q1-2022 compared to Q4-2021. This was slightly offset by lower mining and processing unit costs during Q1-2022 due to shorter haulage distances and improved fragmentation.
- Sustaining capital expenditure of $1.9 million was consistent with Q4-2021.
- Non-sustaining capital expenditure of $9.2 million was consistent with Q4-2021 and related primarily to pre-stripping activity at the West pit phase 3.
2022 Outlook
- In line with its full year guidance, Boungou is on track to produce 130—140koz in FY-2022 at an AISC of between $900— 1,000 per ounce.
- In Q2-2022, waste extraction is expected to continue to be a strong focus in the West pit, while ore is mainly sourced from the East pit. Given the strong focus on waste extraction, stockpiles are expected to continue to supplement mill feed. In H2-2022, stripping activities are expected to continue in both pits, while ore will be sourced mainly from the West pit. Mill throughput is expected to slightly increase over the upcoming quarters, while grades are expected to be lower.
- Sustaining capital expenditure is expected to amount to $15.0 million in FY-2022, of which $1.9 million has been incurred in Q1-2022, mainly related to infrastructure work and capitalised waste development.
- Non-sustaining capital expenditure is expected to amount to $19.0 million, of which $9.2 million has been incurred in Q1-2022, primarily related to the Phase 3 cut back at the West pit in H1-2022 and the East pit phase 1 cut back in H2-2022.
Houndé Gold Mine, Burkina Faso
Table 9: Houndé Performance Indicators
| For The Period Ended | Q1-2022 | Q4-2021 | Q1-2021 |
|---|---|---|---|
| Tonnes ore mined, kt Total tonnes mined, kt Strip ratio (incl. waste cap) Tonnes milled, kt Grade, g/t Recovery rate, % PRODUCTION, KOZ | 1,338 | 777 12,297 14.83 1,226 2.05 92 77 | 1,625 |
| 12,686 | 13,937 | ||
| 8.48 | 7.58 | ||
| 1,233 | 1,147 | ||
| 1.94 | 1.89 | ||
| 95 | 91 | ||
| 73 | 66 | ||
| Total cash cost/oz AISC/OZ | 697 | 684 874 | 768 |
| 771 | 839 |
•
| Production slightly | decreased from | 77 | koz in Q4-2021 to | 73 | koz | in Q |
| partially offset by higher recoveries and slightly higher mill throughput |
- Ore tonnes mined in the quarter were significantly higher as the focus shifted away from waste extraction activities at Kari Pump and Kari West to mining primarily oxide material from Kari Pump and Kari West, while waste development activity continued to progress at Vindaloo Main.
- Tonnes milled slightly increased due to higher volumes of soft ore from Kari West and continued good mill availability.
- Average processed grades decreased due to blending of the high grade ore from Kari Pump with the slightly lower grade ore from Kari West.
- Recovery rates improved due to the higher proportion of oxide ore from Kari Pump and Kari West with higher associated gravity recoverable gold and finer grind size contributing to improved leaching efficacy.
- AISC decreased from $874 per ounce in Q4-2021 to $771 per ounce in Q1-2022 primarily due to the lower sustaining capital, lower unit mining and processing costs due to greater oxide contributions, and the lower strip ratio.
- Sustaining capital expenditure decreased from $13.9 million in Q4-2021 to $5.4 million in Q1-2022 due to less waste capitalisation at Kari Pump and Kari West. In Q1-2022, sustaining capital expenditure mainly related to waste capitalisation at the Vindaloo Main pits and mining fleet re-builds.
- Non-sustaining capital expenditure decreased from $6.8 million in Q4-2021 to $3.8 million in Q1-2022 as the Kari West development is being finalised. In Q1-2022, non-sustaining capital expenditure mainly related to infrastructure, resettlement and compensation on the Kari permit area, and the TSF raise.
2022 Outlook
- In line with its full year guidance, Houndé is on track to produce between 260—275koz in 2022 at AISC of $875—925 per ounce.
- In Q2-2022, mining activities are expected to continue to focus on the Vindaloo Main, Kari Pump and Kari West pits, while in H2-2022 ore is expected to be mainly sourced from the Vindaloo Main and Kari West pits as mainly stripping activities are expected to be conducted at Kari Pump, which is expected to yield lower grades in the latter portion of the year. Mill throughput and recovery rates are expected to be slightly lower in the upcoming quarters primarily due to changes in the ore blend.
- Sustaining capital expenditure of $44.0 million is planned for FY-2022, of which $5.4 million has been incurred in Q1-2022, relating mainly to waste extraction and fleet re-builds.
- Non-sustaining capital expenditure of $18.0 million is planned for FY-2022, of which $3.8 million has been incurred in Q1-2022, relating mainly to waste stripping, resettlement and associated mine infrastructure in the Kari area and completion of a TSF wall raise.
Ity Gold Mine, Côte d’Ivoire
Table 10: Ity Performance Indicators
| For The Period Ended | Q1-2022 | Q4-2021 | Q1-2021 |
|---|---|---|---|
| Tonnes ore mined, kt Total tonnes mined, kt Strip ratio (incl. waste cap) Tonnes milled, kt Grade, g/t Recovery rate, % PRODUCTION, KOZ | 2,534 | 2,234 6,624 1.97 1,624 1.50 77 60 | 2,105 |
| 6,951 | 6,816 | ||
| 1.74 | 2.24 | ||
| 1,669 | 1,550 | ||
| 1.70 | 1.76 | ||
| 80 | 79 | ||
| 72 | 71 | ||
| Total cash cost/oz AISC/OZ | 707 | 749 854 | 715 |
| 728 | 786 |
- Production increased from 60koz in Q4-2021 to 72koz in Q1-2022 due to higher grades milled, tonnes milled, and improved recoveries.
- Tonnes of ore mined increased due to the commencement of mining at Le Plaque at the end of 2021 and increased mining at Colline Sud and Ity North following pushbacks, which provided greater mining flexibility in addition to lowering the overall strip ratio. Mining at the current phase of Daapleu was completed during the quarter.
- Tonnes milled slightly increased and continued to perform above nameplate capacity due to the continued use of the surge bin for supplemental feed and SAG mill feed control optimisation improving utilisation.
- Average grade milled increased due to an increased proportion of high grade material from Le Plaque.
- Recovery rates increased due to the lower proportion of Daapleu fresh material in the feed and the higher proportion of Le Plaque oxide ore which has higher associated recoveries.
- AISC decreased from $854 per ounce in Q4-2021 to $728 per ounce in Q1-2022 primarily due to the lower sustaining capital in Q1-2022, lower unit processing costs due to less fresh ore in the feed, and a lower strip ratio as waste stripping activities decreased during the quarter.
- Sustaining capital expenditure decreased from $6.1 million in Q4-2021 to $1.5 million in Q1-2022 and related primarily to waste stripping at the Ity, Bakatouo and Walter pits as well as dewatering equipment and borehole drilling, pit slope monitoring equipment and various other capital replacements.
- Non-sustaining capital expenditure decreased from $10.9 million in Q4-2021 to $5.1 million in Q1-2022 and included the construction of the pre-leach tank and tank spargers, waste dump sterilisation drilling at Le Plaque, construction of the stage 4 TSF lift and engineering and advanced procurement for the addition of a recyanidation circuit as detailed below.
- In line with its full year guidance, Ity is on track to produce between 255—270koz in FY-2022 at an AISC of between $850— 900 per ounce.
- Over the remainder of the year, mill ore feed is expected to continue to be sourced from the Le Plaque, Ity, Bakatouo, Walter and Colline Sud deposits and supplemented by historic stockpiles. As the current mining stage was completed at Daapleu, recovery rates are expected to improve in the upcoming quarters while the average grade is expected to be slightly lower. Throughput is expected to be lower due to the change in the ore blend.
- Sustaining capital of approximately $20.0 million is planned for FY-2022, of which $1.5 million has been incurred in Q1-2022, mainly relating to capitalised waste.
- Non-sustaining capital of approximately $60.0 million is expected in FY-2022, of which $5.1 million has been incurred in Q1-2022, which represents an increase from the initial full year guidance of $29.0 million due to the addition of the recyanidation circuit. Given the excess cash flow being generated by the Company due to the strong operational performance and higher gold price environment and the cautious approach taken in staggering the growth projects, Endeavour has accelerated the launch of the construction of a recyanidation circuit at the Ity mine as part of its optimisation initiatives. The additional circuit aims to optimise costs by reducing leaching and detox reagent consumption, improving the quality of the discharge water, and increasing production through higher recovery rates. The recyanidation process reduces cyanide consumption by capturing free cyanide from the plant tailings and recycling it back into the leach circuit while increasing recovery rates. Given that the project is expected to result in 87koz of additional gold production and $63 million in cost savings over Ity’s current reserve life, the $41 million upfront investment, of which $31 million is expected to be incurred in FY-2022, has screened very well within Endeavour’s capital allocation framework based on both its financial returns and positive ESG impact. The recyanidation circuit is expected to be commissioned in mid-2023.
Mana Gold Mine, Burkina Faso
Table 11: Mana Performance Indicators
| For The Period Ended | Q1-2022 | Q4-2021 | Q1-2021 |
|---|---|---|---|
| OP tonnes ore mined, kt OP total tonnes mined, kt OP strip ratio (incl. waste cap) UG tonnes ore mined, kt Tonnes milled, kt Grade, g/t Recovery rate, % PRODUCTION, KOZ | 470 | 529 2,695 4.09 180 651 2.75 93 54 | 355 |
| 1,644 | 8,532 | ||
| 2.50 | 23.01 | ||
| 199 | 245 | ||
| 622 | 604 | ||
| 2.94 | 2.90 | ||
| 92 | 90 | ||
| 53 | 52 | ||
| Total cash cost/oz AISC/OZ | 948 | 1,070 1,116 | 907 |
| 1,000 | 954 |
Q1-2022 vs Q4-2021 Insights
- Production of 53koz remained consistent with the prior quarter as higher grades processed was largely offset by lower tonnes milled and slightly lower recoveries.
- Open pit tonnes of ore mined decreased, in line with the mine plan, as the Wona open pit is approaching the end of its life. The decrease was partially offset by an increase in tonnes of ore mined from the Wona South pit following completion of its waste stripping activities. Total underground tonnes of ore mined increased as the Wona underground development continues to advance, development progressed 1,452 meters across the two declines during Q1-2022, creating access to more ore zones.
- Tonnes milled decreased primarily due to a higher proportion of fresh, high grade ore fed from the underground mine and schedule maintenance.
- Average grade processed increased as a higher proportion of ore was sourced from the high grade Wona underground development, while recovery rates decreased slightly due to the ore blend.
- AISC decreased from $1,116 per ounce in Q4-2021 to $1,000 per ounce in Q1-2022 due to lower underground mining unit costs and lower haulage costs associated with a smaller amount of tonnes moved from the deeper levels of the Wona open pit.
- Sustaining capital expenditure increased from $2.4 million in Q4-2021 to $2.8 million in Q1-2022 and related primarily to geotechnical engineering studies and plant spares and equipment.
- Non-sustaining capital expenditure increased from $6.9 million in Q4-2021 to $10.4 million in Q1-2022 and was mainly related to the development of the Wona underground declines and the TSF raise.
- In line with its full year guidance, Mana is on track to produce between 170—190koz in FY-2022 at an AISC of $1,000—1,100 per ounce.
- Open pit mining activities at Wona open pit are expected to conclude at the end of Q2-2022 and the Maoula satellite pit is expected to commence in H2-2022. Underground mining activities continue to progress as planned with Siou stope production remaining consistent and Wona underground development continuing with expected first stope production in Q3-2022. In the upcoming quarters, mill throughput is expected to be fairly consistent, recoveries are expected to be lower due to the ore blend, while processed grades are expected to be slightly lower in the latter portion of the year.
- Sustaining capital expenditure of approximately $7.0 million is expected in FY-2022, of which $2.8 million has been incurred in Q1-2022, relating mainly to plant maintenance and equipment re-builds.
- Non-sustaining capital expenditure of approximately $40.0 million in FY-2022 is expected, of which $10.4 million has been incurred in Q1-2022, relating mainly to the Wona underground development and associated infrastructure, Maoula infrastructure, and a TSF wall raise.