Endeavour Reports Q2-2023 Results
*ENDEAVOUR REPORTS Q2-2023 RESULTS*
*2023 guidance on track • $100m dividend declared for H1-2023 • Growth projects on budget & on schedule*
*OPERATIONAL AND FINANCIAL HIGHLIGHTS* (for continuing operations unless otherwise specified)
· *Q2-2023 production of 268koz at an AISC of $1,000/oz; H1-2023 production of 511koz at an AISC of $978/oz*
· *On track to achieve FY-2023 production guidance of 1,060-1,135koz at an AISC of $895-950/oz *
· *EBITDA of $273m for Q2-2023, up 62% over Q1-2023; Adjusted EBITDA of $253m for Q2-2023, up 5% over Q1-2023 *
· *Net Earnings of $78m for Q2-2023, compared to a $1m loss in Q1-2023; Adjusted Net Earnings down 17% over Q1-2023 to $54m for Q2-2023 *
· *Operating Cash Flow before WC from all operations of $175m (or $0.71/sh) for Q2-2023, down 28% over Q1-2023*
· *Healthy financial position at quarter end with low leverage of 0.15x Net Debt / Adj. EBITDA (LTM) despite incurring $176m of growth capital spend during H1-2023*
*ROBUST SHAREHOLDER RETURNS*
· *$100m dividend declared, equivalent to $0.40/sh, for H1-2023; $20m worth of shares repurchased in H1-2023*
· *Shareholder returns total $757m since first payment in Q1-2021*
*ORGANIC GROWTH*
· *Sabodala-Massawa expansion and the Lafigué greenfield project are both on budget, with 75% and 59% of the initial capital committed respectively, and on schedule for Q2-2024 and Q3-2024 respectively *
· *Strong Group exploration effort with $51m spent in H1-2023 and FY-2023 guidance increased by $15m to $80m; Tanda-Iguela FY-2023 drilling programme increased by 157% to 180,000 meters with updated resource scheduled for late 2023.*
*London, 2 August 2023 *– Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) (“Endeavour”, the “Group” or the “Company”) is pleased to announce its operating and financial results for Q2-2023, with highlights provided in Table 1 below.
*Table 1: Q2-2023 and H1-2023 Highlights*
All amounts in US$ million unless otherwise specified *THREE MONTHS ENDED* *SIX MONTHS ENDED*
30 June 2023 31 March 2023 30 June 2022 30 June 2023 30 June 2022 Δ H1-2023 vs. H2-2022
*OPERATING DATA** (from continuing operations^1)*
Gold Production, koz 268 243 292 511 586 (13)%
Gold sold, koz 269 252 289 521 583 (11)%
All-in Sustaining Cost^2, $/oz 1,000 955 866 978 828 +18%
Realised Gold Price, $/oz 1,947 1,879 1,835 1,914 1,861 +3%
*CASH FLOW **(from all operations)*
Operating Cash Flow before changes in working capital 175 242 253 417 622 (33)%
Operating Cash Flow before changes in working capital^2, $/sh 0.71 0.98 1.02 1.69 2.50 (32)%
Operating Cash Flow 159 206 252 365 554 (34)%
Operating Cash Flow^2, $/sh 0.64 0.83 1.01 1.48 2.23 (34)%
*PROFITABILITY **(from continuing operations^1)*
Net Earnings/(Loss) Attributable to Shareholders 78 (1) 191 77 119 (35)%
Net Earnings/(Loss), $/sh 0.32 0.00 0.77 0.31 0.48 (35)%
Adj. Net Earnings Attributable to Shareholders^2 54 65 109 119 218 (45)%
Adj. Net Earnings^2, $/sh 0.22 0.26 0.44 0.48 0.88 (45)%
EBITDA^2 273 169 389 441 546 (19)%
Adj. EBITDA^2 253 240 295 493 625 (21)%
*SHAREHOLDER RETURNS*
Shareholder dividends paid — 100 — 100 70 +43%
Share buybacks 9 11 7 20 38 (47)%
*ORGANIC GROWTH *
Growth capital spend^2 104 72 34 176 42 +319%
Exploration spend (from continuing operations^1) 30 21 22 51 37 +38%
*FINANCIAL POSITION HIGHLIGHTS*
Net Debt, (Net Cash)^2 171 50 (217) 171 (217) n.a.
Net Debt, (Net Cash) / LTM Trailing adj. EBITDA^3 0.15 0.04 (0.14) 0.15 (0.14) 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, 2 August 2023, at 8:30 am EST / 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.
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 our website and at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Sebastien de Montessus, President and CEO, commented: “We are pleased with our achievements over the first half of the year. We have continued to deliver against our strategic objectives, leaving us well positioned to unlock near-term value for all of our stakeholders.
In line with our strategy of actively managing our portfolio to focus on higher quality assets, we closed the sale of our non-core Boungou and Wahgnion mines during the period. This focus on quality will be further enhanced by the brownfield expansion of Sabodala-Massawa and the Lafigué greenfield project, both of which remain on budget and on track to be commissioned next year, and will deliver significant growth.
Alongside this year’s investments in our organic pipeline, we are pleased to continue to deliver attractive shareholder returns and have declared a H1-2023 dividend of $100 million, which on an annualized basis represents $25 million more than the minimum dividend commitment for the year. Looking ahead, our goal is to increase our shareholder returns programme further once our organic growth projects are complete, to ensure that our efforts to unlock growth benefit all stakeholders.
On the operational front, we are on track to meet our full year guidance for the eleventh consecutive year with our performance expected to increase into the second half of the year in light of the efforts over the past six months. Our relentless focus on cost and efficiency improvements has continued to identify optimization opportunities across the portfolio leading to our decision to move forward with the 37MWp PV solar facility at our Sabodala-Massawa mine, thereby redeploying a portion of the proceeds obtained from the sale of our non-core mines. This will significantly lower fuel consumption and power costs while reducing greenhouse gas emissions once commissioned in early 2025.
Looking further ahead, our exploration programme continues to provide a strong platform for organic growth. Further drilling at last year’s Tanda-Iguela discovery in Côte d’Ivoire has exceeded expectations. With over 95,000 meters already drilling during the first half of the year, we have decided to increase the full year drill programme to 180,000 meters and remain on track to publish a resource update later this year.
I’d like to thank our team for their continued strong contributions over the first half of the year and look forward to progressing our strategy for the remainder of 2023.”
*OPERATING SUMMARY*
· Strong safety performance for the Group, with a Lost Time Injury Frequency Rate (“LTIFR”) from continuing operations of 0.06 for the trailing twelve months ending 30 June 2023.
· Following the sale of the Boungou and Wahgnion mines, as announced on the 30 June 2023 and detailed below in the Asset Divestment of Non-Core Boungou and Wahgnion Mines section, Endeavour updated its 2023 full year production and all in sustaining cost (“AISC”) guidance to account for the removal of guided production from the Boungou mine of 115 – 125koz at an AISC of $985 – 1,075/oz and from the Wahgnion mine of 150 – 165koz at an AISC of $1,250 – 1,350/oz. As a result, the full year 2023 production guidance for continuing operations decreased from 1,325 – 1,425koz to 1,060 – 1,135koz, while AISC guidance from continuing operations improved by $45/oz to $895 – 950/oz.
· The Group remains on track to achieve its updated FY-2023 production guidance from continuing operations, with performance weighted towards H2-2023 as previously guided.
· Q2-2023 production from continuing operations amounted to 268koz, an increase of 24koz or 10% over Q1-2023 due to increased production from Houndé and Sabodala-Massawa as higher grade ore was mined and processed, which was partially offset by a decrease in production at Ity, due to slightly lower grade, throughput and recovery rates, and at Mana due to the increased focus on underground development. Q2-2023 AISC from continuing operations amounted to $1,000/oz, an increase of $45/oz or 5% over Q1-2023 due to higher costs at Ity due to the increased use of self-generated power, and at Mana due to the higher open pit strip ratio and an increased focus on underground development, which was partially offset by lower costs at Houndé and Sabodala-Massawa.
· H1-2023 production from continuing operations amounted to 511koz, a decrease of 75koz or 13% over H1-2022 due to decreased production at Houndé and Sabodala-Massawa as an increased focus on stripping activity resulted in lower grade ore being processed during the period, and at Mana due to an increased focus on underground development with supplemental ore being sourced from the lower grade Maoula open pit, which was partly offset by increased production at Ity due to improved throughput and recoveries. H1-2023 AISC from continuing operations amounted to $978/oz, an increase of $150/oz or 18% over H1-2022 due to higher AISC as a result of the lower production at Houndé, Mana and Sabodala-Massawa, which was partly offset by improved costs at Ity.
*Table 2: Group Production*
*THREE **MONTHS ENDED* *SIX MONTHS ENDED*
All amounts in koz, on a 100% basis 30 June
2023 31 March
2023 30 June
2022 30 June
2023 30 June
2022
Houndé 72 47 87 119 160
Ity 86 91 77 177 149
Mana 31 44 55 75 107
Sabodala-Massawa 79 61 73 140 169
*PRODUCTION FROM CONTINUING OPERATIONS*^*1* *268* *243* *292* *511* *585*
Boungou 14 19 27 33 61
Wahgnion 30 39 27 68 55
Karma — — — — 10
*GROUP PRODUCTION* *311* *301* *345* *612* *712*
^1 Continuing Operations excludes non-core Boungou and Wahgnion mines which were divested on 30 June 2023 and the Karma mine divested on 10 March 2022.
*Table 3: Group All-In Sustaining Costs*
All amounts in US$/oz
*THREE MONTHS ENDED* *SIX MONTHS ENDED*
30 June
2023 31 March
2023 30 June
2022 30 June
2023 30 June
2022
Houndé 1,085 1,154 807 1,113 791
Ity 797 732 895 764 813
Mana 1,481 1,130 905 1,277 953
Sabodala-Massawa 762 787 779 774 666
Corporate G&A 56 56 25 56 37
*AISC FROM CONTINUING OPERATIONS*^*1, 2* *1,000* *955* *866* *978* *828*
Boungou 2,147 1,252 1,062 1,639 971
Wahgnion 1,817 1,354 1,788 1,566 1,558
Karma — — — — 1,504
*GROUP AISC*^*2* *1,136* *1,022* *954* *1,080* *908*
^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
· A total sustaining capital expenditure of $49.3 million was incurred in H1-2023, of which $21.6 million has been incurred in Q2-2023, primarily related to waste development and mining equipment upgrades at Houndé and Sabodala-Massawa. The FY-2023 sustaining capital expenditure outlook for continuing operations has been reduced from $135.0 million to $110.0 million due to a $15.0 million reduction at Ity due to lower required plant maintenance, and a $10.0 million reduction at Mana as the ramp up of the new mining contractor at Wona underground is progressing slower than expected.
· A total non-sustaining capital expenditure of $143.3 million was incurred in H1-2023, of which, $60.6 million has been incurred in Q2-2023, primarily related to pre-stripping activity at Houndé and Sabodala-Massawa, underground development at Mana and TSF construction, embankment raises and the Recyn project at Ity. The FY-2023 non-sustaining capital expenditure outlook for continuing operations has been increased from $160.0 million to $210.0 million due to a $40.0 million increase at Ity as its sustained strong performance and above nameplate throughput requires bringing forward and accelerating the Tailings Storage Facility (“TSF”) embankment raise and the construction of a new TSF. In addition, to further optimize Ity’s processing plant and support an increase in mill-feed, the construction of the mineral sizer has been launched. The increase in non-sustaining capital spend also includes $10 million for the construction of the solar power plant at Sabodala-Massawa, which was recently launched and is expected to be commissioned in early 2025.
· A total growth capital expenditure of $176.3 million was incurred as of H1-2023, of which $104.1 million has been incurred in Q2-2023, with $37.6 million incurred at Sabodala-Massawa, $53.8 million incurred at Lafigué, $7.9 million incurred for exploration permits and $4.8 million incurred at the Kalana project. Growth capital expenditure outlook for FY-2023 remains unchanged at $400.0 million.
*ASSET DIVESTMENT OF NON-CORE BOUNGOU AND WAHGNION MINES*
· On 30 June 2023, Endeavour closed the sale of its 90% interests in its Boungou and Wahgnion non-core 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 is expected to exceed $300 million and is comprised of upfront and deferred cash considerations and net smelter return royalties (“NSR”), as detailed below.
· $130 million in the form of a reimbursement of historical shareholder loans.
· $25 million in deferred cash consideration payable in two instalments of $10 million and $15 million by end of Q4-2023 and end of Q1-2024, respectively.
· Deferred cash consideration comprised of 50% of the net free cashflow generated by the Boungou mine until $55 million has been paid, which is expected to occur by Q4-2024 based on the current gold price environment and mine plan.
· An NSR on Boungou commencing immediately for 4.0% of gold sold. Endeavour expects the NSR on Boungou to generate approximately $52 million of cash over its life of mine based on current reserves, assuming a gold price of $1,850/oz, with further exploration upside and potential to convert resources to reserves.
· An NSR on Wahgnion commencing immediately for 4.0% of gold sold. Endeavour expects the NSR on Wahgnion to generate approximately $41 million of cash over its life of mine based on current reserves, assuming a gold price of $1,850/oz, with further exploration upside and potential to convert resources to reserves.
*SHAREHOLDER RETURNS PROGRAMME*
· In line with Endeavour’s capital allocation framework, the Company is pleased to continue to deliver attractive shareholder returns, despite the significant growth capital investments being undertaken this year, by declaring a H1-2023 dividend of $100 million, or approximately $0.40 per share. On an annualized basis, the H1-2023 dividend represents $25 million more than the minimum dividend commitment for the year of $175 million. Endeavour’s goal is to increase its shareholder returns programme once its organic growth projects are completed in 2024, thereby ensuring that its efforts to unlock growth immediately benefit all its stakeholders.
· Endeavour’s H1-2023 dividend will be paid on 26 September 2023, with an ex-dividend date of 31 August 2023, to shareholders of record on 1 September 2023. The last day for currency election and DRIP elections will be 5 September 2023.
· In addition, shareholder returns continued to be supplemented with share buybacks, with $9.2 million or 0.4 million shares repurchased in Q2-2023 and $20.1 million or 0.8 million shares in H1-2023. Since the commencement of the buyback programme on 9 April 2021, a total of $257.0 million, or 11.5 million shares have been repurchased as at 30 June 2023.
· As shown in the table below, Endeavour has returned $757.0 million to shareholders in the form of dividends and buybacks since its shareholder returns programme began in late 2020 (first dividend payment in Q1-2021), inclusive of the H1-2023 dividend, which represents $334.0 million more than its minimum commitment for the period.
*Table 4: Actual Shareholder Returns vs. Minimum Commitment*
All amounts in US$ million
*MINIMUM TARGET* *ACTUAL SHAREHOLDER RETURNS* *SUPPLEMENTAL SHAREHOLDER RETURNS*
*DIVIDENDS*
*DECLARED* *BUYBACKS*
*COMPLETED* *TOTAL*
*RETURNS*
FY-2020 60 60 60 —
FY-2021 125 140 138 278 +153
FY-2022 150 200 99 299 +149
H1-2023 88 100 20 120 +32
*Total* *423* *500* *257* *757* *+334*
*CASH FLOW SUMMARY*
The table below presents the cash flow and net debt position for Endeavour for the three month periods ended 30 June 2023, 31 March 2023, and 30 June 2022, and the six month periods ended 30 June 2023 and 30 June 2022 with accompanying explanations below.
*Table 5: Cash Flow and Net Debt*
*THREE MONTHS ENDED* *SIX MONTHS ENDED*
All amounts in US$ million unless otherwise specified Notes *30 June 2023* *31 March*
*2023* *30 June 2022* *30 June 2023* *30 June 2022*
*Net cash from/(used in), as per cash flow statement:*
Operating cash flows before changes in working capital^1 161 219 227 380 542
Changes in working capital^1 (14) (28) (3) (42) (65)
Cash generated from discontinued operations^2 13 15 28 28 77
Cash generated from operating activities [1] 159 206 252 365 554
Cash used in investing activities [2] (214) (200) (145) (415) (238)
Cash generated/(used) in financing activities [3] 83 (156) (25) (73) (73)
Effect of exchange rate changes on cash 7 9 (33) 16 (53)
*INCREASE/(DECREASE) IN CASH* *35* *(141)* *50* *(107)* *191*
Cash position at beginning of period 810 951 1,047 951 906
*CASH POSITION AT END OF PERIOD* *845* *810* *1,097* *845* *1,097*
^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.
*NOTES:*
1) Operating cash flows decreased by $46.5 million from $205.8 million (or $0.83 per share) in Q1-2023 to $159.3 million (or $0.64 per share) in Q2-2023 due to higher taxes paid across the portfolio, related to the timing of final tax payments for the 2022 tax year and provisional payments for the 2023 tax year.
Operating cash flows decreased by $189.1 million from $554.0 million (or $2.23 per share) in H1-2022 to $364.9 million (or $1.48 per share) in H1-2023 due to lower production, increased operating and exploration costs incurred, and higher tax payments.
Notable variances are summarised below:
· Working capital was an outflow of $14.2 million in Q2-2023, a decrease of $13.8 million over the Q1-2023 outflow of $28.0 million. The outflow in Q2-2023 was largely driven by an inventories outflow of $20.9 million mainly related to an increase in stockpile inventories at Sabodala-Massawa, Ity and Houndé and the timing of purchases of supplies at Mana and Houndé. Trade and other payables were an outflow of $3.8 million in Q2-2023, related to the timing of payments. This was partially offset by an inflow in prepaid expenses and other of $8.3 million following the realisation of supplier prepayments at Sabodala-Massawa and trade and other receivables were an inflow of $2.2 million for Q2-2023 due to a decrease in VAT receivables.
Working capital was an outflow of $42.2 million in H1-2023, a decrease of $22.6 million over the H1-2022 outflow of $64.8 million. The outflow in Q2-2023 was largely driven by increased outflows in inventory at the Mana and Houndé mines which was offset by the timing of payments, and in particular minority interest dividend payables and the realisation of supplier pre-payments at Sabodala-Massawa.
· Gold sales from continuing operations increased from 252koz in Q1-2023 to 269koz in Q2-2023 following increased production at Houndé and Sabodala-Massawa, partially offset by decreased production at Mana and Ity. Gold sales were largely in-line with the quarter’s production of 268koz. The realised gold price from continuing operations for Q2-2023 was $1,943 per ounce compared to $1,902 per ounce for Q1-2023. Including the impact of the Group’s Revenue Protection Programme, the realised gold price for Q2-2023 was $1,947 per ounce compared to $1,879 per ounce for Q1-2023.
Gold sales from continuing operations decreased from 583koz in H1-2022 to 521koz in H1-2023, following the lower production in H1-2023. The realised gold price from continuing operations for H1-2023 was $1,923 per ounce compared to $1,870 per ounce for H1-2022. Including the impact of the Group’s Revenue Protection Programme, the realised gold price for H1-2023 was $1,914 per ounce compared to $1,861 per ounce for H1-2022.
· Total cash cost per ounce increased from $792 per ounce in Q1-2023 to $868 per ounce in Q2-2023, primarily related to higher operating expenses at Ity, Sabodala-Massawa and Mana.
Total cash cost per ounce increased from $709 per ounce in H1-2022 to $831 per ounce in H1-2023 due to lower production and gold sold and increases in mining unit costs at Houndé, Sabodala-Massawa, and Mana.
· Income taxes paid increased by $79.2 million from $24.4 million in Q1-2023 to $103.6 million in Q2-2023 due to increased tax payments across the portfolio related to the timing of final tax payments in relation to 2022, in addition to increased 2023 provisional tax payments due to a higher tax base at Ity following the start of production at Le Plaque on the Floleu permit, and at Sabodala-Massawa due to the end of the tax holiday on the Massawa license.
Income taxes paid increased by $54.3 million from $73.7 million in H1-2022 to $128.0 million in H1-2023 due largely to the increases in FY-2023 provisional tax payments and higher FY-2022 taxable income due to the higher tax bases at Ity and Sabodala-Massawa as detailed above.
2) Cashflows used in investing activities increased by $14.1 million from $200.3 million in Q1-2023 to $214.4 million in Q2-2023 as growth capital spend at the Sabodala-Massawa expansion and the Lafigué development project accelerated. Cashflows used in investing activities at quarter end for the divestment of the non-core Boungou and Wahgnion mines, net of cash disposed at the assets, amounted to $3.6 million.
Cashflows used in investing activities increased by $176.3 million from $238.4 million in H1-2022 to $414.7 million in H1-2023 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 decreased from $27.7 million in Q1-2023 to $21.6 million in Q2-2023 due to decreased sustaining capital expenditure at Sabodala-Massawa, Houndé and Mana, partially offset by increased sustaining capital expenditure at Ity. Sustaining capital from discontinued operations increased from $5.6 million in Q1-2023 to $11.5 million in Q2-2023 due to increased waste stripping activities at the divested non-core Boungou and Wahgnion mines.
Sustaining capital from continuing operations increased from $48.4 million in H1-2022 to $49.3 million in H1-2023 largely due to increased sustaining capital expenditure at Houndé, related to waste development activities at the Vindaloo and Kari Pump pits. Sustaining capital from discontinued operations decreased from $20.4 million in H1-2022 to $17.1 million in H1-2023 due to a relative decrease in waste stripping activities and mine fleet rebuilds at the divested non-core Boungou and Wahgnion mines.
· Non-sustaining capital from continuing operations decreased from $82.7 million in Q1-2023 to $60.6 million in Q2-2023, largely due to a decrease at Houndé due to the completion of pre-stripping activities at the Kari Pump pit during the quarter and a decrease at Ity related to lower spending on the Recyn project as it nears completion, which were partially offset by increased spending at Sabodala-Massawa related to capitalised drilling across the Niakifiri East, Delya and Bambaraya deposits, and at Mana related to underground development. Non-sustaining capital from discontinued operations increased from $11.8 million in Q1-2023 to $14.6 million in Q2-2023 due to increased waste stripping activities at the divested non-core Boungou and Wahgnion mines.
Non-sustaining capital from continuing operations increased from $66.2 million in H1-2022 to $143.3 million in H1-2023 due to increased non-sustaining capital expenditure at Ity, related to ongoing construction of the Recyn project, and due to increased pre-stripping activities across Sabodala-Massawa and Houndé, increased underground development at Mana, and ongoing TSF raises across Houndé, Ity and Mana. Non-sustaining capital from discontinued operations decreased from $28.9 million in H1-2022 to $26.4 million in H1-2023 due to the prior period including a TSF raise and resettlement costs at Wahgnion, partially offset by increased waste stripping activities across the divested non-core Boungou and Wahgnion mines in H1-2023.
· Growth capital increased from $72.2 million in Q1-2023 to $104.1 million in Q2-2023, as construction activities at the Sabodala-Massawa expansion and the Lafigué project accelerated. Growth capital expenditure during the quarter also included $7.9 million for exploration permits and $4.8 million for the Kalana project.
Growth capital increased from $42.2 million in H1-2022 to $176.3 million million in H1-2023 largely due to the ramp-up 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 decreased by $238.4 million from an outflow of $155.7 million in Q1-2023 to an inflow of $82.7 million in Q2-2023 as the company drew down $155.0 million on the Company’s $645.0 million RCF to manage short term offshore cash flow requirements during the quarter. Financing cash outflows in Q2-2023 included cash settlement of call-rights of $28.5 million that was paid to Taurus in lieu of the call options received as part of the Teranga transaction, payments of financing and other fees of $18.6 million related to the coupon payments for the senior notes and the RCF, payments for the acquisition of the Company’s own shares through its share buyback programme of $9.2 million, payments for the settlement of shares of $6.1 million, repayment of finance and lease obligations of $5.3 million, settlement of the contingent consideration of $3.7 million and lease payments at the divested Boungou and Wahgnion mines of $0.9 million.
Cash flows used in financing activities were outflow of $73.0 million in H1-2023 which was largely consistent with the prior period.
*EARNINGS FROM CONTINUING OPERATIONS*
The table below presents the earnings and adjusted earnings for Endeavour for the three month periods ended 30 June 2023, 31 March 2023, and 30 June 2022 and the six month periods ended 30 June 2023 and 30 June 2022 with accompanying explanations below.
*T**able 6: Earnings from Continuing Operations*
*THREE MONTHS ENDED* *SIX MONTHS ENDED*
All amounts in US$ million unless otherwise specified Notes 30 June
2023 31 March
2023 30 June
2022 30 June
2023 30 June
2022
Revenue [4] 524 481 532 1,005 1,095
Operating expenses [5] (202) (171) (193) (373) (358)
Depreciation and depletion [5] (100) (102) (108) (201) (222)
Royalties [6] (32) (30) (32) (62) (65)
*Earnings from continuing operations* *191* *178* *200* *369* *451*
Corporate costs [7] (14) (14) (7) (27) (21)
Impairment of mining interests and goodwill [8] (15) — — (15) —
Share-based compensation (8) (8) (3) (17) (11)
Other expense 3 (5) (12) (3) (14)
Exploration costs [9] (15) (13) (8) (27) (15)
*Earnings from operations* *142* *139* *170* *281* *390*
Gain/(loss) on financial instruments [10] 31 (72) 111 (41) (66)
Finance costs (18) (15) (15) (33) (30)
*Earnings before taxes* *155* *52* *266* *207* *294*
Current income tax expense [11] (91) (48) (71) (140) (135)
Deferred income tax recovery [12] 37 12 11 49 (4)
*Net comprehensive earnings from continuing operations* *[13]* *101* *15* *206* *117* *154*
Add-back adjustments [14] (22) 66 (75) 44 108
*Adjusted net earnings from continuing operations* *79* *82* *131* *161* *262*
Portion attributable to non-controlling interests [15] 26 17 22 42 44
*Adjusted net earnings from continuing operations attributable to shareholders of the Company* *[16]* *54* *65* *109* *119* *218*
*Adjusted net earnings per share from continuing operations* *0.22* *0.26* *0.44* *0.48* *0.88*
*NOTES:*
4) Revenue increased by $42.9 million from $481.2 million in Q1-2023 to $524.1 million in Q2-2023 due to a higher realised gold price in Q2-2023 of $1,943 per ounce compared to $1,902 per ounce for Q1-2023, exclusive of the Company’s Revenue Protection Programme, and an increase in gold sales from 252koz in Q1-2023 to 269koz in Q2-2023, following higher production at the Houndé and Sabodala-Massawa mines.
Revenue decreased by $89.6 million from $1,094.9 million in H1-2022 to $1,005.3 million in H1-2023 due to a decrease in gold sales from 583koz in H1-2022 to 521koz in H1-2023 lower gold sales volumes, partly offset by a higher realised gold price for H1-2023 of $1,923 per ounce compared to $1,870 per ounce for H1-2022.5) Operating expenses increased by $30.4 million from $171.4 million in Q1-2023 to $201.8 million in Q2-2023 largely due to increased mining costs at Houndé and Sabodala-Massawa as more waste was expensed during the quarter following the restart of ore mining at Kari Pump and the start of mining at Niakifiri East, in addition to higher processing costs across the group as higher tonnes were milled during the quarter. Depreciation and depletion of $99.5 million in Q2-2023 was largely in line with the prior quarter as increased depletion at Houndé and Sabodala-Massawa due to increased quarterly production was largely offset by decreased depletion at Ity and Mana due to lower quarterly production.
Operating expenses increased by $15.2 million from $358.0 million in H1-2022 to $373.2 million in H1-2023 largely due to increased volumes mined and processed at Ity and Houndé and increases in fuel and key consumable costs as well as foreign exchange impacts associated with the Euro strengthening against the dollar. Depreciation and depletion decreased by $20.3 million from $221.7 million in H1-2022 to $201.4 million in H1-2023 due to lower production volumes at Houndé, Sabodala-Massawa, and Mana.
6) Royalties increased from $29.7 million in Q1-2023 to $31.8 million in Q2-2023 due to higher gold sales.
Royalties decreased from $64.7 million in H1-2022 to $61.5 million in H1-2023 due to lower gold sales.
7) Corporate costs of $14.0 million in Q2-2023 were largely consistent with the prior period.
Corporate costs increased from $20.8 million in H1-2022 to $27.5 million in H1-2023 due to higher employee and professional service costs, which were impacted by foreign exchange movements as the GBP strengthened against the USD.
8) Impairments of mining interest and goodwill of $14.8 million was recognised against the Afema exploration properties in Côte d’Ivoire, in Q2-2023, as no near-term activity is planned on the permits.9) Exploration costs increased from $12.5 million in Q1-2023 to $14.5 million in Q2-2023 due to increased exploration expense at the Tanda-Iguela greenfield property in Côte d’Ivoire.
Exploration costs increased from $15.1 million in H1-2022 to $27.0 million in H1-2023 largely due to the increased expense at the Tanda-Iguela property, which was discovered in Q4-2022.
10) The gain on financial instruments increased from a loss of $72.0 million in Q1-2022 to a gain of $31.1 million in Q2-2023 largely due to unrealised gains on gold collars, gold forwards and foreign currency contracts. The gain on financial instruments included unrealised gains on the gold collars and forward sales of $33.9 million, realised gains on foreign currency contracts of $1.4 million, realised gains on other financial instruments of $1.2 million and realised gains on gold collars and forward contracts of $1.1 million, partially offset by a loss on the fair value of call rights of $4.7 million, an unrealised loss on foreign currency contracts of $1.4 million and foreign exchange losses of $0.4 million.
The loss on financial instruments decreased from a loss of $66.0 million in H1-2022 to a loss of $40.9 million in H1-2023 and comprised of 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 gold collars and forward contracts of $6.7 million, foreign exchange losses of $5.3 million, realised losses on gold collars and forward contracts of $4.7 million, unrealised losses on foreign currency contracts of $2.5 million and a loss on the change in fair value of contingent considerations of $0.6 million partially offset by a realised gain on foreign currency contracts of $2.7 million and a gain in other financial instruments of $0.1 million.
As previously disclosed, in order to increase cash flow visibility during its construction phase, 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.
· During Q2-2023, 30koz were settled into forward sales contracts for an average gold price of $1,828/oz. For H2-2023, approximately 150koz (75koz per quarter) are expected to be delivered into a collar with a call price of $2,100/oz and a put price of $1,750/oz. In addition, approximately 60koz (30koz per quarter) are scheduled to be settled during H2-2023 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 a call price of $2,400/oz and a 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.
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 Q2-2023, €22.4 million was delivered into forward contracts at a blended rate of 1.02 EUR:USD and AU$10.0 million was delivered into forward contracts at a blended rate of 0.69 AUD:USD.
· The total outstanding notional forward contracted quantum is approximately €45.3 million at a blended rate of 1.03 EUR:USD split over 2023 and 2024 at approximately 71% and 29% respectively and approximately AU$21.6 million at a blended rate of 0.69 AUD:USD split approximately 74% and 26% respectively over the same period.
11) Current income tax expense increased by $43.2 million from $48.2 million in Q1-2023 to $91.4 million in Q2-2023 largely due to withholding taxes of $46.7 million recognised following local board approvals for cash upstreaming, and an increase in taxable earnings from the Sabodala-Massawa and Houndé mines.
Current income tax expense increased by $4.2 million from $135.4 million in H1-2022 to $139.6 million in H1-2023 largely due to higher withholding tax expenses recognised in H1-2023 following the approval of dividends at Sabodala-Massawa in Q3-2022, which was partially offset by lower taxable earnings in H1-2023.12) Deferred income tax recovery increased by $25.4 million from $11.8 million in Q1-2023 to $37.2 million in Q2-2023 largely due to the recognition of the decreased deferred tax liability related to withholding taxes accrued in Q4-2022 of $35.1 million which were recognised as current tax expenses this period. This was partly offset by higher deferred tax charges in relation to inventory.
Deferred income tax recovery increased by $53.4 million from a deferred income tax expense of $4.4 million in H1-2022 to a deferred income tax recovery of $49.0 million in H1-2023 largely due to the timing of additional withholding taxes accrued in Q2-2022 in relation to Sabodala-Massawa and the impact of foreign exchange rate movements on deferred tax balances recognised in H1-2022.13) Net comprehensive earnings from continuing operations increased by $85.8 million from $15.4 million in Q1-2023 to $101.2 million in Q2-2023. The increase in earnings is largely driven by the mark-to-market of gold collars and forward contracts resulting in an unrealised gain compared to the unrealised loss in the prior quarter.
Net comprehensive earnings from continuing operations decreased by $37.6 million from $154.2 million in H1-2022 to $116.6 million in H1-2023. The decrease in earnings is largely driven by lower earnings from mine operations due to lower production at the Houndé and Mana mines and higher operating expenses.
Net comprehensive loss from all operations (as shown in the table below) decreased by $107.8 million from a gain of $20.4 million in Q1-2023 to a loss of $87.4 million in Q2-2023 largely due to a net loss from discontinued operations of $188.0 million, which includes a loss on disposal of $177.8 million that was realised during Q2-2023 following the sale of the Boungou and Wahgnion non-core mines.
*Table 7: Earnings from All Operations*
*THREE MONTHS **ENDED* *SIX MONTHS ENDED*
All amounts in US$ million unless otherwise specified 30 June
2023 31 March
2023 30 June
2022 30 June
2023 30 June
2022
*Net comprehensive earnings from continuing operations* *101* *15* *206* *117* *154*
Net (loss)/earnings from discontinued operations (188) 5 (1) (184) 30
*Net comprehensive (loss)/earnings* *(87)* *20* *205* *(67)* *184*
*Total net (loss)/earnings attributable to:*
Shareholders of Endeavour (109) 17 189 (106) 147
Non-controlling interests 22 4 15 39 37
*Earnings per share attributable to Endeavour:*
Basic (loss)/earnings per share $(0.44) $0.02 $0.76 $(0.43) $0.59
Diluted (loss)/earnings per share $(0.44) $0.02 $0.76 $(0.43) $0.59
14) For Q2-2023, adjustments included a net gain on financial instruments of $30.0 million largely related to the unrealised gain on forward sales and collars, a gain on non-cash, tax and other adjustments of $4.0 million that mainly relate to the impact of the foreign exchange remeasurement of deferred tax balance and other income of $2.6 million, partly offset by an impairment charge of $14.8 million related to the Group’s exploration permit portfolio.
For H1-2023, adjustments included a net loss on financial instruments of $36.2 million, largely related to the fair value loss on the convertible option of convertible notes and unrealised losses on forward sales and collars, a gain on non-cash, tax and other adjustments of $9.1 million that mainly relate to the impact of the foreign exchange remeasurement of deferred tax balance, partly offset by an impairment charge of $14.8 million related to the Group’s exploration permit portfolio and other expenses of $2.5 million.
15) Adjusted net earnings from continuing operations attributable to non-controlling interests increased from $16.7 million in Q1-2022 to $25.7 million in Q2-2023 due to higher earnings from the Houndé and Sabodala-Massawa mines, which was partially offset by higher exploration expenses.
Adjusted net earnings from continuing operations attributable to non-controlling interests decreased from $44.4 million in H1-2022 to $42.3 million in H1-2023 due to lower earnings from the Houndé, Sabodala-Massawa and Mana mines, higher corporate costs and higher tax expenses.
16) Adjusted net earnings attributable to shareholders for continuing operations decreased by $11.2 million from $64.9 million (or $0.26 per share) in Q1-2023 to $53.7 million (or $0.22 per share) in Q2-2023, despite higher revenues, due to higher tax expenses, higher operating and exploration expenses, and higher earnings attributable to non-controlling interests.
Adjusted net earnings attributable to shareholders for continuing operations decreased by $99.2 million from $217.9 million (or $0.88 per share) in H1-2022 to $118.7 million (or $0.48 per share) in H1-2023 due to lower volumes of gold sold at lower operating margins, higher corporate costs, higher exploration expenses and higher share-based compensation.
*SUMMARISED STATEMENT OF FINANCIAL POSITION*
The following tables present the summarised statement of financial position and liquidity for Endeavour, with accompanying explanations below.
*Table 8: **Summarised** Statement of Financial Posi**tion*
All amounts in US$ million unless otherwise specified Note As at 30 June 2023 As at 31 March 2023 As at 30 June 2022
*ASSETS*
Cash and cash equivalents 845 810 1,097
Other current assets [17] 638 507 482
*Total current assets* *1,483* *1,317* *1,579*
Mining interests [18] 4,113 4,594 4,882
Other long term assets [19] 500 453 434
*TOTAL ASSETS* *6,096* *6,364* *6,895*
*LIABILITIES*
Other current liabilities 406 431 465
Current portion long-term debt — — 348
Income taxes payable [20] 244 260 205
*Total current liabilities* *649* *690* *1,018*
Long-term debt [21] 1,004 854 537
Environmental rehabilitation provision 131 166 147
Other long-term liabilities 42 69 52
Deferred income taxes 472 564 675
*TOTAL LIABILITIES* *2,299* *2,343* *2,430*
*TOTAL EQUITY* *3,797* *4,021* *4,466*
*TOTAL EQUITY AND LIABILITIES * *6,096* *6,364* *6,895*
*NOTES:*
17) Other current assets at the end of Q2-2023 consisted of $281.0 million of inventories, $255.7 million of trade and other receivables, $41.0 million of prepaid expenses and other and $60.5 million of other financial assets.
· Inventories decreased by $45.3 million from $326.3 million at the end of Q1-2023 to $281.0 million at the end of Q2-2023, largely due to the disposal of the non-core Boungou and Wahgnion mines.
· Trade and other receivables increased by $137.3 million from $118.4 million at the end of Q1-2023 to $255.7 million at the end of Q2-2023, largely due to the inclusion of a $157.3 million receivable related to the cash considerations from the divestment of the Boungou and Wahgnion mines, partly offset by movements in gold sale and VAT receivables.
· Prepaid expenses and other decreased by $17.9 million from $58.9 million at the end of Q1-2023 to $41.0 million at the end of Q2-2023, largely due to the exclusion of pre-payments related to the divested non-core Boungou and Wahgnion mines.
· Other financial assets increased by $56.8 million from $3.7 million at the end of Q1-2023 to $60.5 million at the end of Q2-2023, largely due to the inclusion of the current portion of the Net Smelter Royalties (“NSR”) that were received following the divestment of the non-core Boungou and Wahgnion mines, partly offset by the reclassification of a $5.0 million contingent consideration receivable from Néré Mining following the sale of Karma in Q1-2022, as trade and other receivables.
18) Mining interests decreased by $480.4 million from $4,593.7 million at the end of Q1-2023 to $4,113.3 million at the end of Q2-2023, largely due to the divestment of the non-core Boungou and Wahgnion mines.
19) Other long-term assets increased by $46.7 million from $453.3 million at the end of Q1-2023 to $500.0 million at the end of Q2-2023, largely due to the inclusion of the consideration from the divestment of the non-core Boungou and Wahgnion mines. Other long-term assets consist of $134.4 million of goodwill allocated to the Sabodala-Massawa and Mana mines, $220.7 million of long-term stockpiles not expected to be processed in the next twelve months at the Houndé, Ity and Sabodala-Massawa mines, and other financial assets of $144.9 million that primarily comprise deferred cash and NSR consideration elements of $134.7 million following the sale of the Boungou, Wahgnion and Karma mines, $40.0 million related to Allied Gold shares received as consideration upon the sale of Agbaou, and $28.1 million of restricted cash relating to reclamation bonds.
20) Income taxes payable decreased by $15.7 million from $259.5 million at the end of Q1-2023 to $243.8 million at the end of Q2-2023, largely due to the increased taxes paid during the quarter.
21) Long-term debt increased by $150.2 million from $854.0 million at the end of Q1-2023 to $1,004.2 million at the end of Q2-2023 due to the drawdown on the Company’s RCF during the quarter. Long-term debt at the end of Q2-2023 consisted of $496.1 million in senior notes and $515.0 million drawn on the RCF, which was partly offset by $6.9 million in deferred financing costs.
Subsequent to quarter end, on 28 July 2023, Endeavour secured a syndicated term loan (the “Term Loan”) with local banking partners within the West African Economic Zone (“UEMOA”) for XOF 100.5 billion, locking in a competitive fixed rate, long term, financing solution to support the ongoing development of the Lafigué project. The Term Loan is a more tax-efficient funding source as it does not require bringing cash off-shore and incurring cash leakage through withholding taxes. The local entity, Société des Mines de Lafigué, is the borrower on the facility, which is guaranteed by Endeavour Mining plc. The Term Loan is for a principal amount of XOF 100.5 billion (approximately US$167.1 million) with a five year term, maturing in July 2028. The Term Loan bears interest at a fixed rate of 7.0% per annum, payable quarterly, while the principal will amortise in sixteen equal payments commencing 12 months after issue. There are no additional covenants associated with the term loan. There is an arrangement fee of 0.5% and an upfront fee of 0.5% payable on closing to the banking syndicate which includes Ecobank, Bridge Bank Group, Banque Atlantique, Orabank and United Bank for Africa.
*Table 9: **Summarised** Statement of Financial Position*
*THREE MONTHS ENDED* *YEAR ENDED*
All amounts in US$ million unless otherwise specified 30 June
2023 31 March
2023 30 June
2022 30 June
2023 30 June
2022
Cash and cash equivalents [22] 845 810 1,097 845 1,097
Principal amount of Senior Notes (500) (500) (500) (500) (500)
Drawn portion of Revolving Credit Facility (515) (360) (50) (515) (50)
Principal amount of Convertible Notes — — (330) — (330)
*Net Debt / (Net Cash)*^*1* *[23]* *171* *50* *(217)* *171* *(217)*
Trailing twelve month adjusted EBITDA^1,2 1,104 1,284 1,594 1,138 1,594
*Net Debt** (Net Cash) / Adjusted EBITDA (LTM) ratio*^*1,2* *0.15x* *0.04x* *(0.14)x* *0.15x* *(0.14)x*
^1Net debt, Adjusted EBITDA, and cash flow per share are Non-GAAP measures. Refer to the non-GAAP measure section in this press release and in the Management Report. ^2Last Twelve Months (“LTM”) Trailing EBITDA adj. includes EBITDA generated by discontinued operations
22) At quarter end, Endeavour’s liquidity remained strong at $974.5 million, consisting of $844.5 million of cash and cash equivalents and $130.0 million available through the Company’s revolving credit facility.
23) Endeavour’s net debt position has increased by $120.2 million, from $50.3 million at the end of Q1-2023 to $170.5 million at the end of Q2-2023. The net debt / Adjusted EBITDA (LTM) leverage ratio increased from 0.04x at the end of Q1-2023 to 0.15x at the end of Q2-2023, but remains well below the Company’s long-term target of less than 0.50x, which provides flexibility to continue to supplement the Company’s shareholder return programme while maintaining headroom to fund organic growth.
*OPERATING ACTIVITIES BY MINE*
*Houndé** Gold Mine, Burkina Faso*
*Table 10: **Houndé** Performance Indicators*
*For The Period Ended* *Q2-2023* *Q1-2023* *Q2-2022* *H1-2023* *H1-2022*
Tonnes ore mined, kt 1,479 1,233 1,330 2,712 2,668
Total tonnes mined, kt 11,837 13,247 10,725 25,084 23,411
Strip ratio (incl. waste cap) 7.00 9.74 7.06 8.25 7.77
Tonnes milled, kt 1,419 1,370 1,217 2,789 2,450
Grade, g/t 1.66 1.18 2.42 1.42 2.18
Recovery rate, % 94 93 94 93 94
*Production, **koz* *72* *47* *87* *119* *160*
Total cash cost/oz 955 945 699 951 698
*AISC/oz* *1,085* *1,154* *807* *1,113* *791*
*Q2-2023 vs Q1-2023** Insights*
· Production increased from 47koz in Q1-2023 to 72koz in Q2-2023 due to higher grades processed, higher tonnes of ore milled and increased recoveries.
· Total tonnes mined decreased due to lower production at Vindaloo Main and waste development neared completion at the Kari Pump stage-3 cutback, which increased access to ore. Tonnes of ore mined increased as ore mining resumed in the Kari Pump pit following the stage-3 cutback, whilst ore mining continued at Kari West.
· Tonnes milled increased due to higher mill availability, which was partially offset by an increased proportion of harder transitional ore in the mill feed.
· Average grade milled increased, in line with the mine sequence, as a greater proportion of higher grade ore from the Kari Pump deposit was re-introduced into the mill feed.
· Recovery rates increased slightly as Kari Pump ore was re-introduced into the mill feed
· AISC decreased from $1,154/oz in Q1-2023 to $1,085/oz in Q2-2023 primarily due to the higher grades processed and higher volumes of gold sold during the quarter, partially offset by higher mining unit costs due to increased grade control drilling, increased ore tonnes from Kari Pump requiring longer haulage, and a slightly higher processing unit cost.
· Sustaining capital expenditure decreased from $10.2 million in Q1-2023 to $9.3 million in Q2-2023 and primarily related to waste development at the Vindaloo Main and Kari Pump pits, plant equipment and heavy vehicle maintenance.
· Non-sustaining capital expenditure decreased from $21.1 million in Q1-2023 to $6.3 million in Q2-2023 and primarily related to pre-stripping activities at the Kari Pump pit and infrastructure around the Kari area.
*H1-2023 vs H1-2022 Insights*
· Production decreased, in accordance with the guided trend, from 160koz in H1-2022 to 119koz in H1-2023 due to the lower grade ore from Kari West making up a greater proportion of the mill feed, while waste development activities were prioritised at the Kari Pump and Vindaloo Main pits. AISC increased from $791/oz in H1-2022 to $1,113/oz in H1-2023 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 price increases, as well as increased sustaining capital due to waste development activities at the Vindaloo and Kari Pump pits.
*2023 Outlook*
· Houndé is on track to achieve its FY-2023 production guidance of 270 - 285koz with AISC expected to achieve near the top-end of the guided $850 - 925/oz.
· As previously guided, production is expected to increase in H2-2023 as greater volumes of ore are expected to be sourced from the high-grade Kari Pump pit following the completion of the current phase of waste stripping in H1-2023 and ore mining is expected to increase in the Vindaloo Main pits. Ore mining will also continue at the Kari West pit, which will continue to provide supplemental ore feed to the mill. Throughput and recoveries are expected to be slightly lower in H2-2023 due to a greater proportion of fresh ore from Vindaloo Main in the blend.
· Sustaining capital expenditure outlook for FY-2023 remains unchanged at $40.0 million, of which $19.5 million has been incurred in H1-2023. In H2-2023, sustaining capital expenditure is expected to mainly relate to continued waste stripping and mine and plant equipment upgrades.
· Non-sustaining capital expenditure outlook for FY-2023 remains unchanged at $35.0 million, of which $27.4 million has been incurred in H1-2023. In H2-2023, non-sustaining capital expenditure is expected to mainly relate to waste capitalisation across Kari Pump and Vindaloo Main and the stage 8 and 9 embankment wall raises at TSF 1.
*Ity** Go**ld Mine, Côte d’Ivoire*
*Table 11: **Ity** Performance Indicators*
*For The Period Ended* *Q2-2023* *Q1-2023* *Q2-2022* *H1-2023* *H1-2022*
Tonnes ore mined, kt 1,887 1,936 1,668 3,823 4,202
Total tonnes mined, kt 7,156 7,366 6,027 14,521 12,978
Strip ratio (incl. waste cap) 2.79 2.80 2.61 2.80 2.09
Tonnes milled, kt 1,808 1,819 1,597 3,627 3,266
Grade, g/t 1.61 1.68 1.77 1.65 1.73
Recovery rate, % 92 93 86 92 83
*Production, **koz* *86* *91* *77* *177* *149*
Total cash cost/oz 761 712 804 736 757
*AISC/oz* *797* *732* *895* *764* *813*
*Q2-2023 vs Q1-2023 Insights*
· Following a record performance in Q1-2023, production decreased from 91koz in Q1-2023 to 86koz in Q2-2023, due to the anticipated lower average grades milled, lower tonnes of ore milled and lower recovery rates.
· Mining activities continuing to focus on Bakatouo, Walter, Ity and Le Plaque pits with significant waste development at Walter and Bakatouo. Ore tonnes mined decreased due to the waste development activities at Walter and Bakatouo, which was offset by a decrease in strip ratio and more higher grade ore tonnes at Le Plaque.
· Tonnes milled decreased slightly due to lower mill utilisation .
· Average grade milled decreased due to lower grade ore mined from the Ity and Walter pits, which was partially offset by higher grade ores mined from Le Plaque.
· Recovery rates decreased slightly as a result of soluble copper content in the ore feed from the Bakatouo pit.
· AISC increased from $732/oz in Q1-2023 to $797/oz in Q2-2023 due to higher processing costs as a result of increased use of genset power due to reduced availability of hydro-electric power on the grid at the end of the dry season, as well as the higher soluble copper content in the ore feed requiring increased cyanide consumption, higher sustaining capital and lower volume of gold sold.
· Sustaining capital expenditure increased from $1.8 million in Q1-2023 to $3.2 million in Q2-2023 and primarily related to spare parts, dewatering borehole drilling, and capitalised lease costs for the contractor’s heavy vehicle fleet.
· Non-sustaining capital expenditure decreased from $31.0 million in Q1-2023 to $22.5 million in Q2-2023 and primarily related to ongoing construction activities at the Recyn project, completion of the stage 5 of the TSF 1 raise, TSF 2 construction and stripping activity at the Walter cut-back.
*H1-2023 vs H1-2022 Insights*
· Production increased from 149koz in H1-2022 to 177koz in H1-2023 due to an increase in tonnes milled, as continued use of the surge bin provided supplemental mill feed, and due to higher recoveries due to the cessation of processing higher grade semi-refractory material from Daapleu in Q2-2022 and the addition of the pre-leach tank in Q2-2022, which was partially offset by a decrease in average grade milled that followed the cessation of processing material from Daapleu. AISC decreased from $813/oz in H1-2022 to $764/oz in H1-2023 due to higher volumes of gold sold and a decrease in mining unit costs as a result of greater volumes of oxide ore mined from Le Plaque which has a lower cost to mine.
*2023 **Outlook*
· Ity is on track to achieve near the top-end of its FY-2023 production guidance of between 285 - 300koz at its AISC guidance of $840 - 915/oz.
· In H2-2023, ore is expected to be sourced mainly from the Le Plaque, Bakatouo, Walter and Ity pits with supplemental mill feed sourced from stockpiles. Mining and mill throughput rates are expected to decline in H2-2023, largely due to the impact of the wet season, while milled grades and recoveries are expected to remain stable for the remainder of the year.
· Sustaining capital expenditure outlook for FY-2023 has been reduced from $25.0 million to $10.0 million, of which $5.0 million has been incurred in H1-2023, as less than anticipated investments in plant maintenance are required due to the launch of the mineral sizer optimisation project. In H2-2023, sustaining capital expenditure is expected to mainly relate to capitalised lease costs associated with the fleet.
· Given Ity’s strong operating performance and its consistent above nameplate throughput, its non-sustaining capital expenditure outlook for FY-2023 has been increased from $40.0 million to $80.0 million, of which $53.5 million has already been incurred in H1-2023, due to the acceleration of the construction of TSF 2 to ensure sufficient tailings capacity is available over the coming years to support the higher mill throughput. TSF construction and embankment raises have been a significant focus in H1-2023, which represented a capital spend of $24.0 million. In addition, Endeavour accelerated the launch of the construction of the mineral sizer primary crushing optimisation initiative, which is expected to help de-bottleneck the crushing circuit and facilitate sustained levels of throughput above 6.0Mtpa. In H2-2023, non-sustaining capital expenditure is expected to mainly relate to the completion of the Recyn project, which is expected to be commissioned in late H2-2023, construction of TSF 2, which will continue throughout 2023, and the mineral sizer optimisation project.
*Mana Gold Mine, Burkina Faso*
*Table 12: Mana Performance Indicators*
*For The Period Ended* *Q2-2023* *Q1-2023* *Q2-2022* *H1-2023* *H1-2022*
OP tonnes ore mined, kt 409 423 376 832 846
OP total tonnes mined, kt 1,904 1,783 837 3,686 2,482
OP strip ratio (incl. waste cap) 3.65 3.22 1.23 3.43 1.93
UG tonnes ore mined, kt 280 253 196 533 395
Tonnes milled, kt 671 614 652 1,285 1,274
Grade, g/t 1.61 2.34 2.83 1.96 2.88
Recovery rate, % 91 94 90 93 91
*Production, **koz* *31* *44* *55* *75* *107*
Total cash cost/oz 1,403 1,046 880 1,195 914
*AISC/oz* *1,481* *1,130* *905* *1,277* *953*
*
Q2-2023 vs Q1-2023 Insights*
· Production decreased from 44koz in Q1-2023 to 31koz in Q2-2023 due to lower average grades processed and lower recoveries, which was partially offset by higher ore tonnes milled.
· Total open pit tonnes mined increased, as the mining rate improved at the Maoula open pit with a focus on waste development, while open pit tonnes of ore mined decreased.
· Total underground tonnes of ore mined increased as initial stope production commenced at Wona Underground, which was partially offset by a decrease in stope production from Siou Underground. Mining activities at Wona focused on underground development with 2,217 meters of development completed across both Siou and Wona.
· Tonnes milled increased due to higher mill availability and utilisation as a result of the maintenance conducted during the previous quarter.
· Average grade milled decreased due to lower grade ore sourced from Siou Underground, and a higher proportion of lower grade development ore sourced from the Wona underground deposit.
· Recovery rates decreased due to changes in the ore blend, as it comprised increased ore tonnes from Wona Underground.
· AISC increased from $1,130/oz in Q1-2023 to $1,481/oz in Q2-2023 due to the lower volumes of gold sold and a higher volume of open pit tonnes mined at a higher strip ratio as well as an increased focus on underground development, which was partially offset by lower sustaining capital.
· Sustaining capital expenditure decreased from $3.8 million in Q1-2023 to $2.5 million in Q2-2023 and primarily related to infrastructure improvements.
· Non-sustaining capital expenditure increased from $15.9 million in Q1-2023 to $17.3 million in Q2-2023 and primarily related to underground development and infrastructure at the Wona Underground and the stage 5 TSF embankment raise.
*H1-2023 vs H1-2022 Insights*
· Production decreased from 107koz in H1-2022 to 75koz in H1-2023 largely due to lower grades milled as lower grade ore was sourced from the Maoula open pit and from the Siou and Wona Underground deposits, given the focus on development activities during H1-2023. AISC increased from $953/oz in H1-2022 to $1,277/oz in H1-2023 primarily due to lower volumes of gold sold, a higher open pit strip ratio and higher underground mining unit costs due to contractor mobilisation and ramp up and higher fuel and consumable pricing.
*2023 Outlook*
· Given a slower than expected ramp up of the new underground mining contractor at the Wona Underground operation, 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 H2-2023, production is expected to increase compared to H1-2023 as development work completed to date will enable increased access to stopes at Wona Underground, and stope mining is expected to continue at Siou Underground. The mill feed is expected to continue to be supplemented with lower grade ore from the Maoula open pit. Average processed grades are expected to continue to increase as greater volumes of higher grade underground ore is expected to form a greater proportion of mill feed.
· Sustaining capital expenditure outlook for FY-2023 has been decreased from $25.0 million to $15.0 million, of which $6.3 million has been incurred as of H1-2023, as a result of the slower than expected ramp up of the new mining contractor at Wona Underground. In H2-2023 sustaining capital expenditure is expected to mainly related to capitalised underground development, processing plant upgrades and underground infrastructure.
· Non-Sustaining capital expenditure outlook for FY-2023 remains unchanged at $45.0 million, of which $33.2 million has been incurred in H1-2023. In H2-2023, non-sustaining capital expenditure is expected to mainly relate to capitalised underground development, underground electrical installation and dewatering and continuation of the stage 5 wall raise of the TSF.
*Sabodala**-Massawa Gold Mine, Senegal*
*Table 13: **Sabodala**-Massawa Performance Indicators*
*For The Period Ended* *Q2-2023* *Q1-2023* *Q2-2022* *H1-2023* *H1-2022*
Tonnes ore mined, kt 1,341 1,235 1,717 2,576 3,425
Total tonnes mined, kt 11,428 11,207 12,777 22,635 24,853
Strip ratio (incl. waste cap) 7.52 8.08 6.44 7.79 6.26
Tonnes milled, kt 1,201 1,124 1,048 2,325 2,102
Grade, g/t 2.17 2.