Re: News Release - Tuesday, August 07, 2012
Title: Endeavour Mining Reports Strong Q2, with Cash Flow of $47.6 Million from Production of 50,728 ozs of Gold
Vancouver, August 7, 2012 - Endeavour Mining Corporation ("Endeavour" or the "Corporation") (TSX:EDV, ASX:EVR, OTCQX:EDVMF) announces strong financial and operational results for the second quarter of 2012, including adjusted operating cash flow of $47.6 million. As previously announced on July 16, Endeavour's two operating mines exceeded prior guidance by producing 50,728 ounces during Q2 and 102,691 ozs for H1 2012.
Neil Woodyer, CEO, stated
"Our strong Q2 results clearly demonstrate the benefits of the merger we completed last year with Adamus as both mines continue to perform above previous guidance. Endeavour's adjusted cash flow has increased from $32 million in the previous quarter to $48 million this quarter and our cash position, net of debt, has also increased, from $11 million to $36 million. This financial strength positions us well as we continue to expand in West Africa, with our most significant growth initiative being construction of our third mine, Agbaou. We were very pleased to be informed recently by the Ivorian government that our Mining Permit for Agbaou has been granted and we are expecting receipt of the official permit shortly."
(All amounts in US dollars unless otherwise indicated)
Q2/H1 2012 Financial and Operational Highlights
- Gold production totaled 50,728 ounces for the quarter and totaled 102,691 ounces for the first half, significantly above annualized previous guidance
- The full year 2012 production guidance has been updated to between 187,000 and 202,000 ounces of gold from 170,000 to 190,000 ounces. Total cash cost per ounce for production from the two mines (excluding royalties and purchased ore) has been updated to $670 to 690 from $645 to 685 previously.
- Q2 2012 total cash cost1 (excluding royalties and purchased ore) was $618 per gold ounce produced, which is below prior guidance.
- H1 Cash margin2 (revenues from gold sales less cash costs and royalties) of $84.0 million continues on plan to meet our $150 million estimate for the full year (based on a $1,600/oz gold price).
- Q2 operating cash flow from mine operations was $56.1 million, which, after adjusting for $8.5 million of cash proceeds received in early April for March production, resulted in adjusted operating cash flow of $47.6 million.
- Adjusted net earnings were $21.4 million or $0.09 per share.
- During the first half of 2012, the Corporation invested $41.3 million from its operating cash flow into its operations and exploration programs. Of this, $36.1 million was capitalized and $5.2 million was expensed as exploration. These investments in operational improvements and growth include:
- Sustaining capital at Nzema: $6.0 million
- Sustaining capital at Youga: $1.7 million
- Development capital at Nzema $8.9 million
- Near-mine exploration: $14..6 million
- Agbaou exploration and development: $7.2 million
- Regional exploration: $2.9 million
- At June 30, 2012, the Corporation had cash & equivalents and marketable securities of $143.9 million and continues to hold a 38.5% interest in Namibia Rare Earths Inc. (TSX:NRE) with a market value of $7.1 million. As at June 30, 2012, the Corporation had drawn $100 million of its $200 million corporate loan facility.
- During Q2 2012, the Agbaou Gold Project in C�te d'Ivoire entered the construction phase, with planned gold production of 103,000 ounces per year at a cash cost of $635 per ounce beginning in Q1 2014.
- Positive drill results from near-mine targets at Youga and Nzema continue to show good potential for mine life expansion at both operations and Endeavour plans delivery of two Preliminary Economic Assessments (PEAs) by year-end, one from each of the two mining areas. Toward that end, in Q2, the drill program at the Ouar� gold deposit in Burkina Faso was completed and an updated mineral resource estimate in preparation for a PEA has commenced.
1 Cash Cost per Ounce produced excluding royalties is a non-GAAP financial performance measure with no standard meaning under IFRS
2 Cash Margin is a non-GAAP financial performance measure with no standard meaning under IFRS
Financial Statements and related MD&A will be available on SEDAR, the ASX website, OTC Markets website, and in the Investor Relations section of Endeavour's website www.endeavourmining.com.
In order to access the Corporation's MD&A and financial statements directly, please click the following URL: http://www.endeavourmining.com/s/FinancialStatements.asp
Mark Connelly, COO, stated
"We are very pleased with the operating results from both Nzema and Youga as well as commencement of construction at Agbaou to add approximately 100,000 ounces per year of production beginning in Q1 2014. We've already ordered our mills for Agbaou, which came in below budget, with delivery planned for June 2013. In September, we plan to begin earthworks, as construction ramps up. We are actively enhancing our existing mines, with power supply improvement projects ongoing at both operations and cost containment programs beginning to take effect. Our largest investment is in exploration, with 80% of that spending focussed on near-mine targets with the objective of extending the life of all our operations, including Agbaou."
Table 1 Nzema Gold Mine, Ghana - Quarterly Production
| NZEMA, Ghana |
2012 Q1 |
2012 Q2 |
2012 H1 |
2012 Full Year Guidance |
| Mine only (excluding purchased ore) |
| Ore Milled (�000 t) |
506 |
537 |
1,043 |
|
| Milled Grade (g/t Au) |
1.64 |
1.68 |
1.66 |
|
| Gold Production (ozs) |
25,543 |
25,482 |
51,025 |
95,000 - 102,000 |
| Cash Cost per Ounce Produced (US$/oz)1 |
$7052 |
$635 |
$6702 |
$680 - $700 |
| Nzema purchased ore |
| Tonnes of purchased ore (�000 t) |
7.5 |
11.4 |
18.9 |
|
| Grade of purchased ore (g/t) |
10.56 |
6.48 |
8.10 |
|
| Gold Production (ozs) |
2,432 |
2,381 |
4,813 |
7,000 - 10,000 |
| Operating cash flow from purchased ore |
$1.2 million |
$0.9 million |
$2.1 million |
$5.0 million |
1 Cash Cost per Ounce produced excluding royalties is a non-GAAP financial performance measure with no standard meaning under IFRS
2 Cash Cost per Ounce produced has been represented to reflect the effect of ounces produced from purchased ore during Q1 2012
- During Q2 2012, mining was from the Salman Central, Salman North 4 and Salman South 1A pits, with total mining volumes exceeding budget by 19% despite heavy rains.
- Phase 2 of the tailings storage facility raise was completed subsequent to Q2.
- In order to improve consistency of power supply, installation of a back-up diesel power generation plant was recently commenced, with completion expected by the end of 2012.
- During Q2 2012, the Nzema Mine contributed $18.6 million towards the total cash margin of $41.5 million.
- During Q2 2012, Nzema contributed $5.4 million towards earnings from mining operations, after one-off expenses of $4.7 million related primarily to withholding taxes from the Ghanaian Tax Authority audit for its taxation years June 2007 to June 2011, and generated $35.8 million of operating cash flow from mine operations.
Table 2 Youga Gold Mine, Burkina Faso - Quarterly Production
| YOUGA, Burkina Faso |
2012 Q1 |
2012 Q2 |
2012 H1 |
2012 Full Year Guidance |
| Ore Milled (�000 t) |
255 |
256 |
511 |
|
| Milled Grade (g/t Au) |
2.77 |
3.05 |
2.91 |
|
| Gold Production (ozs) |
23,988 |
22,865 |
46,853 |
85,000 - 90,000 |
| Cash Cost per Ounce Produced (US$/oz)1 |
$683 |
$599 |
$642 |
$655 - $675 |
1 Cash Cost per Ounce produced excluding royalties is a non-GAAP financial performance measure with no standard meaning under IFRS
- At the end of Q2 2012, the second lift earthworks for the Tailings Storage Facility was completed.
- Phase II of the Ghana Grid Power Project, which aims to improve grid power supply quality and availability, was advanced toward target completion by year-end.
- During Q2 2012, the Youga Mine contributed $22.9 million towards the total cash margin of $41.5 million.
- During Q2 2012, Youga contributed $18.3 million towards earnings from mining operations and generated $20.3 million of operating cash flow from mine operations.
Agbaou Project Development
Toward the end of the Q2 2012, Endeavour announced commencement of construction of the Agbaou Gold Project to add production of approximately 100,000 oz per year starting in Q1 2014, completion of an updated NI 43-101 compliant technical report, and selection of our EPCM contractor. The technical report indicated an economically robust project, with a total up-front funding requirement of $159 million and an Internal Rate of Return of 28% on an after-tax, 100% project basis at a gold price of $1,250. Since that announcement, long-lead items have been ordered (including the mills), engineering and planning has progressed and Endeavour's office in Abidjan, C�te d'Ivoire has been staffed. Our next major milestone is expected to be the commencement of earthworks in September of 2012. In addition, the Corporation was recently informed by a senior member of the government that the Ivorian cabinet had approved Agbaou's Mining Permit and, accordingly, receipt of the signed official permit is expected shortly.
Exploration Programs
During Q2 2012, exploration was conducted on authorized permits in Burkina Faso, C�te d'Ivoire, Ghana, Liberia and Mali. Endeavour's land position is the third largest in West Africa and covers over 10,000 square kilometres. The Corporation has approved an exploration budget of $34.0 million for 2012 that is expected to include approximately 215,000 metres of drilling, of which approximately $21.6 million is directed towards increasing resources and reserves to extend mine lives at the Nzema and Youga operations, $6.0 million towards increasing resources and reserves at Agbaou, $6.4 million towards delineating resources and conducting further metallurgical testing of the Nzema sulphides in Ghana, and the balance towards regional programs.
As of June 30, 2012, exploration spending totalled approximately $19.8 million for the half year, with a total of 138,000 metres of drilling completed. Positive results from near-mine exploration included: at Youga - A2-11-220 with 52.5 metres of 2.1 grams per tonne gold below the main pit - and at Nzema - discovery of new oxide zones by drilling across the site of the old Salman Village and surrounding areas. In addition, progress was made on the two PEAs targeted for completion by year-end - the Nzema sulphides project and the Ouar� project near Youga. Metallurgical samples of the Salman sulphide mineralization were sent for testwork and the contractor was chosen to conduct the PEA and supervise metallurgical testwork. On June 27, 2012 Endeavour announced completion of drilling at Ouar� and commencement of an updated resource estimate in preparation for the PEA.
Adjusted Earnings
Net earnings / (loss) from continuing operations have been adjusted for the impact of the fair value change of certain financial instruments, including the gold hedge liability and Endeavour's warrants that are denominated in Canadian dollars. This fair value gain is net of a one-off write-down in marketable securities. Other adjustments were made for a one-time Ghanaian tax audit assessment related to years prior to 2012 and deferred income tax expense, which is a one-time adjustment related to the December 2011 Nzema hedge buy-back and which was not recognized until the second quarter of 2012 when the tax return was completed.
Table 3 Adjusted Net Earnings Reconciliation for the quarter ended June 30, 2012
| US$ Millions |
| Net earnings after tax |
$ 33.4 |
| Net losses on financial instruments |
+ 6.0 |
| One-time Ghanaian tax audit assessment1 |
+ 4.7 |
| Deferred income tax expense2 |
- 22.7 |
| Adjusted net earnings after tax |
$ 21.4 |
| Weighted average number of outstanding shares |
245,053,857 |
| Adjusted Net EPS (Basic) for Q2/2012 |
$0.09 |
1 One-off expenses of $4.7 million related primarily to withholding taxes from the Ghanaian Tax Authority audit for its taxation years June 2007 to June 2011
2 The deferred income tax recovery is non-cash in nature and is primarily from an increase in losses arising from the realized hedge loss in December 2011 at the Nzema operation that was not previously incorporated into the deferred tax calculation at either December 31, 2011 or the first quarter ended March 31, 2012 as the December 31, 2011 tax return had not been finalized at these earlier dates.
Conference Call Details
Management will host a conference call and webcast presentation to discuss the Q2 results on August 9. Participating on the call will be Neil Woodyer, Chief Executive Officer, Mark Connelly, Chief Operating Officer, and Christian Milau, Chief Financial Officer.
Analysts and interested investors are invited to participate in the conference call using the dial in numbers below.
| International: |
+1 201-689-8433 |
| North American toll-free: |
+1 877-407-0832 |
| Australian toll-free: |
0011-800-2246-2666 |
The conference call can also be accessed through the following link: http://www.endeavourmining.com/s/Webcasts.asp
The conference call will be held and webcast by V-Call on Thursday August 9, 2012 at:
5:00 AM in Vancouver
8:00 AM in Toronto and New York
1:00 PM in London
8:00 PM in Perth
10:00 PM in Sydney The call will be archived for later playback on Endeavour's website until August 9, 2013.
Qualified Persons
Adriaan "Attie" Roux, Pr. Sci.Nat, Endeavour's Senior VP Operations, is a Qualified Person under NI 43-101, and has reviewed and approved the technical information related to mining operations in this news release.
K. Kirk Woodman, P.Geo., Endeavour's General Manager of Exploration, is the Qualified Person overseeing exploration projects in French West Africa and has reviewed and approved the technical information related to exploration programs in French West Africa contained in this news release.
Martin Bennett, MAIG, General Manager Exploration, is the Qualified Person overseeing Endeavour's exploration projects in Ghana and Liberia and has reviewed and approved the technical information related to exploration programs in Ghana and Liberia in this news release.
About Endeavour Mining Corporation
Endeavour is a gold producer delivering growth. Endeavour owns two gold mines producing approximately 195,000 oz per year in Ghana and Burkina Faso that are generating significant operating cash flows to fund exploration and development growth. In addition to upside potential at its current operations, Endeavour's third gold mine, Agbaou in C�te d'Ivoire has entered the construction phase for an additional 100,000 oz per year during Q1 2014. Endeavour's strong financial base encourages investments in long-term operational growth, exploration to replace and increase reserves, and funding for acquisitions.
Endeavour Mining Corporation is listed on the TSX (symbol EDV) and ASX (symbol EVR), and also trades on the OTCQX (symbol EDVMF).
On behalf of Endeavour Mining Corporation
Neil Woodyer
Chief Executive Officer
This news release contains "forward-looking statements" including but not limited to, statements with respect to Endeavour's plans and operating performance, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of future production, future capital expenditures, and the success of exploration activities. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "expects", "expected", "budgeted", "forecasts" and "anticipates". Forward-looking statements, while based on management's best estimates and assumptions, are subject to risks and uncertainties that may cause actual results to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the successful integration of acquisitions; risks related to international operations; risks related to general economic conditions and credit availability, actual results of current exploration activities, unanticipated reclamation expenses; changes in project parameters as plans continue to be refined; fluctuations in prices of metals including gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in the completion of development or construction activities, changes in national and local government regulation of mining operations, tax rules and regulations, and political and economic developments in countries in which Endeavour operates. Although Endeavour has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Please refer to Endeavour's most recent Annual Information Form filed under its profile at www.sedar.com for further information respecting the risks affecting Endeavour and its business.
For additional information, contact:
Marla Gale
Vice President - Investor Relations
+1 604 609 6117
mgale@endeavourmining.com
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Copyright � 2012 ENDEAVOUR MINING CORPORATION (EDR) All rights reserved. For more information visit our website at http://www.endeavourmining.com/ or send email to info@endeavourmining.com ..
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