Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Endeavour Mining (TSX, LON: EDV), West Africa’s top gold producer, has unveiled an ambitious five-year plan to add between 15 to 20 million indicated ounces of gold through exploration over the next five years.
The company, which began trading in London in June, said the newly outlined program seeks to extend the life of its seven core assets beyond 10 years. It also aims to discover new greenfield projects.
Endeavour will spend an average of $80 million a year and it expects to add the resources at a cost of less than $25 per ounce, well below West Africa’s producers’ average of $74/oz and the global mean of $83/oz.
Exploration program seeks to extend the life of its core assets beyond 10 years and discover new greenfield projects
The miner, one of the world’s top 10 gold producers, said it sees the most potential at its Ity mine in Cote d’Ivoire, where it is targeting an output of between 3.5-4.5 million ounces of gold by the end of 2025.
The other major contributors will be Houndué in Burkina Faso (3-4 million ounces expected), Sabodala-Massawa in Senegal (2.3-2.7Moz) and Wahignion (1.5-2Moz).
“While we see significant opportunities across our portfolio, we are particularly pleased with the potential defined at our flagship mines — Sabodala-Massawa, Hounde and Ity,” chief executive officer Sebastien de Montessus said in a statement.
“We believe these mines have the potential to be Tier 1 assets with over 10 million ounces resource endowment, inclusive of historical production.”
Endeavour’s boss said the company is also “very pleased” to demonstrate the opportunities identified at its newest assets, which it obtained through the acquisition of Teranga Gold less than a year ago. Montessus said they have the potential to grow Endeavour’s current resources by as much as 60%.
BMO Metals analysts Raj Ray said the target of 15-20 million gold ounces target could potentially translate to 10-14 million gold ounces in reserves, given Endeavour has historically achieved a resource to reserves conversion rate of about 70%.
In a note to investors, Ray described Endeavour’s organic growth plan as “bold”. He added that while it was still early days in terms of hitting its target, BMO sees “significant exploration potential within the company’s asset portfolio.”
Endeavour has added 8.5 million ounces of resources over the past four years. Besides Teranga, the company also bought smaller rival Semafo last year.
In a separate release, the company announced the launch of an offering of fixed-rate senior notes due in 2026, as well as the entry into a new revolving credit facility.
The proceeds of the notes will be used to repay all amounts outstanding under the group’s $370 million bridge term loan facility, which was used to retire higher cost debt facilities acquired upon the acquisition of Teranga Gold; to repay the $130 million drawn under the group’s existing revolving credit facility (RCF), and to pay fees and expenses in connection with the offering of the notes.
