WEST African gold producer Endeavour Mining’s production dropped 22% in the quarter to end-March compared with the December 2023 quarter negatively affecting its production metrics and also breaching its stated debt ratio target.
Gold produced fell to 219,151 ounces (December 2023 quarter – 279,785 oz) and all-in sustainable cost (AISC) per oz of gold sold jumped to $1,186/oz from $947/oz.
The reason for the drop in gold output was lower production from the Houndé and Sabodala-Massawa mines which was partially offset by higher production at Ity and Mana.
In 2021 Endeavour implemented a dividend policy “with the goal of supplementing its minimum dividend commitment with additional dividends and share buybacks provided that the prevailing gold price remained above $1,500/oz and its leverage remained below 0.5 times net debt/adjusted EBITDA (earnings before interest, tax, depreciation and amortisation).”
Endeavour’s net debt reached $830.5m at end March compared with $555m at end-December last year and just $50.3m at the end of March 2023. The group’s net debt/adjusted EBITDA ratio jumped to 0.8 at end-March from 0.5 at end-December and just 0.04 at end March last year.
Despite this CEO Ian Cockerill described the group’s net debt ratio of 0.8 as being “healthy” although he promised future action on reducing debt levels with details to be released in the second half of the current financial year.
Endeavour has run up the debt through paying dividends as well as the costs of building the Sabodala-Massawa BIOX treatment plant and Lafigue organic growth projects.
According to Cockerill the group remains “on track to achieve full year 2024 guidance with performance strongly weighted towards the second half of 2024”.
Cockerill added that Endeavour was also “on track to transition the business from a phase focussed on growth to one focussed on cash flow generation and our capital allocation priorities have evolved to reflect this.
“We will prioritise delivering our balance sheet back to a strong position with leverage well below our long-term target of 0.5 times net debt to adjusted EBITDA while increasing our commitment to shareholder returns. That we will discuss further in early H2.”
According to the March quarterly report Endeavour’s board of directors have carried out an assessment on the group’s status as a going concern.
The conclusion was that, “the Board of directors have a reasonable expectation that the group will have adequate resources to continue in operation existence until at least May 2025 and that at this point in time there are no material uncertainties regarding going concern.”
