Endeavour increases gold resources by 14% at Hounde

Endeavour Mining (TSX: EDV) has announced an increase of 554,000 oz. of gold resources at its Hounde mine in Burkina Faso, located approximately 250 km southwest of the capital Ouagadougou.

The updated mineral resources now stand at 74.6 million tonnes grading 1.85 grams gold per tonne for 4.45 million oz. contained gold in the measured and indicated category. Inferred resources also increased to 7.9 million tonnes grading 1.9 grams gold for 481,000 oz. of gold, up 24,000 oz. of gold from the previous estimate, the company reports.

The increase followed further resource delineation at the Kari Area. It included extensions for the Kari West and Kari Centre deposits plus maiden resources for the adjacent Kari Gap, Kari South, and Kari Pump NE deposits.

“We are very excited to announce this resource update as it continues to demonstrate the Hounde mine’s potential,” Sebastien de Montessus, the company’s CEO said in a press release.

“Over 2.5 million ounces of indicated resources have now been discovered in the Kari Area, ranking it as the largest resource in the Hounde mine complex.”

The Kari Area, the company says, includes a 5 km by 4 km wide area that hosts numerous deposits located about 7 km to 10 km northwest of the Hounde processing plant.

The area has been the focus for extensive exploration since 2017, with over 400,000 metres drilled and six discoveries made: Kari Pump, Kari Center, Kari West, Kari Gap, Kari Pump NE, and Kari South. The company estimates that approximately 20% of the anomaly remains untested.

Around 55% of drilling in the first quarter of 2020, the company says, focussed on extending and delineating the Kari Center trend, with 15% directed towards delineating Kari Pump NE, and the remaining 30% consisting of infill drilling at Kari West to convert inferred resources into indicated resources and to test deeper extensions of the deposit.

“Last year, the 1 million oz. indicated resource delineated at Kari Pump led to a reserve conversion of over 700,000 ounces. We now look forward to quickly completing the work to convert the additional 1.5 million oz. of indicated resources delineated for the other deposits,” de Montessus said.

“With 84% of the Kari Area resource grading above 2 grams gold per tonne, we are confident we will achieve our goal of producing 250,000 oz. a year over a 10 plus year mine life at Hounde by displacing lower grade material.”

The infill program has led to 88% of the total resource for Kari West, Kari Center, Kari Gap, Kari South, and Kari Pump NE classified in the indicated category, with the potential to convert additional resources through further drilling, the company reports.

Endeavour has recently been awarded an exploitation licence for the Kari Area, and mining has commenced at the Kari Pump deposit. Maiden reserves for Kari West and an updated mine plan for Hounde will be published in the third quarter of this year, the company says, followed by maiden reserves for Kari Center and Kari Gap slated for release in the fourth quarter.

Next, the company plans to drill an additional 20,000 metres on the Kari Area and is slated to start after the rainy season in the fourth quarter of this year.

“As we continue to drill in the Kari Area later this year and into 2021, we are confident that we will continue to delineate resources along the Kari Center trend, which remains open,” Patrick Bouisset, executive vice president exploration and growth said in the same press release.

“In addition, we are keen to start drilling other high priority targets close to the Houndé mill after spending three years focusing mainly on the Kari Area.”

Raj Ray, a mining analyst at BMO Capital Markets, has an outperform rating on the company and a price target of $45 per share.

“With the company expected to announce updated reserves for Houndé in quarter three of 2020 and additional exploration upside still remaining, we see potential for Houndé reserves to grow to greater than 3 million oz. versus 2.2 million oz. of current reserves. Houndé accounts for about 24% of our production and valuation estimate for Endeavour,” Ray said.

Haywood Capital Markets’ Geordie Mark has forecast a target price of $44 per share and recommends purchasing shares at the current price as “Endeavour’s shares continue to offer shareholder value in a higher gold price environment given the now larger and more diverse asset base,” he said.

At press time in Toronto, Endeavour was trading at C$34.57 per share within a 52-week trading range of C$15.69 and C$36.62.

The company has around 110 million common shares outstanding for a C$3.8-billion market capitalization.

(Carl A. Williams – This article first appeared in The Northern Miner on July 22)