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Endeavour assures shareholders of its internal controls, posts lower earnings

Endeavour's Ity mine

Endeavour's Ity mine

27th March 2024

By: Marleny Arnoldi

Deputy Editor Online

     

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London- and Toronto-listed Endeavour Mining has assured shareholders that the board’s audit committee has determined that there are no material weaknesses in the group’s internal controls over financial reporting or disclosure controls and procedures.

This follows the termination, in January, of former president and CEO Sébastien de Montessus amid allegations of misconduct.

Endeavour says an investigation found that De Montessus allegedly diverted a $5.9-million payment to a third-party company and concealed his actions with “repeated false representations to the board and auditors”.

He is also alleged to have caused Endeavour to make two payments totalling $15-million to the same third-party company, “deliberately disguising them as advance payments to a contractor through repeated false representations”.

The company says the payments involved “deliberate circumvention” of the company’s existing controls framework.

However, the Endeavour board has nonetheless accelerated its review of internal controls in line with a new UK Corporate Governance Code, with adjustments to certain controls relating to merger and acquisition activity having been made.

Endeavour terminated De Montessus from his positions on January 4 and has not been able to confirm the ultimate beneficiaries of these payments despite extensive investigation, it says.

Endeavour has, nevertheless, clawed back $29.1-million of De Montessus’ remuneration in mid-January.

Endeavour says the “irregular payment instruction”, issued in March 2021, for $5.9-million, relates to the sale of its Agbaou mine, in Côte d’Ivoire.

Endeavour alleges that De Montessus, acting with certain others who are not employees of the group, instructed Allied Gold, the buyer of the Agbaou mine, to pay this amount to a third-party company rather than to a member of the group, thereby settling the debt from the buyer’s perspective.

The gold miner says the third-party entity named in the investigation was incorporated as an offshore entity in Ras al Khaimah, in the United Arab Emirates, and was liquidated on the day after the payment of the $5.9-million in March 2021.

The board further alleges that De Montessus made repeated false representations to management, the board and auditors that Allied Gold still owed Endeavour the $5.9-million.

During the investigation of this irregular payment, to determine the beneficiaries of the diverted funds, the investigation by Linklaters and Ernst & Young found a further two payments worth $15-million to the same third-party company.

To provide additional comfort to shareholders regarding the opening balance sheet position for the 2023 calendar year, the investigators also examined receivables written off by the group on December 31, 2022, to ascertain whether any of them had, in fact, been settled by way of payment to a third-party in a similar manner than the $5.9-million payment.

Endeavour confirms that it did not have to restate prior interim quarterly financial statements, yearly financial statements or associated management analysis, nor do the irregular payments materially affect the 2023 yearly financial results.

The board has reserved its position regarding the possibility of pursuing De Montessus for recovery of amounts lost by the group as a result of his actions.

In turn, De Montessus assures that he cooperated fully with the investigation and that $15-million was advanced to an established Endeavour contractor - meaning that Endeavour did not suffer any loss from that arrangement. He also tells Mining Weekly that this arrangement did not benefit him personally. "Those sums were properly offset against invoices from that contractor," he states.

RESULTS

Endeavour produced 1.07-million ounces in the 2023 financial year, at an all-in sustaining cost (AISC) of $967/oz, meeting or beating its yearly production guidance for an eleventh consecutive year at an industry-leading AISC.

This compares with the 1.16-million ounces produced in the prior financial year.

Endeavour’s operating mines include Houndé and Mana, in Burkina Faso, and the Ity mine, in Côte d’Ivoire. 

Adjusted earnings before interest, taxes, depreciation and amortisation amounted to $1.04-billion, while adjusted net earnings came to $230-million, or $0.93 apiece.

Compared with the prior financial year, Endeavour’s adjusted Ebitda decreased by 8% year-on-year.

The company declared a $200-million distribution for the year, as well as share buybacks totalling $66-million, which compares with $170-million of dividends paid and share buybacks of $99-million in the prior financial year.

Since the first quarter of 2021, Endeavour has returned $903-million to shareholders, which is 77% more than the minimum commitment.

Endeavour also managed to increase its measured and indicated resources by 1.4-million ounces, or 6% year-on-year, to 26.7-million ounces in the year under review as exploration prioritised the Tanda-Iguela discovery, in Côte d’Ivoire.

The company has been working on resource conversion in the new financial year, following $548-million of exploration and organic growth investment in the reporting year. Endeavour has earmarked $65-million for exploration in the new financial year.

Newly appointed CEO Ian Cockerill says Endeavour is well positioned with a high-quality portfolio and a resilient business model that is underpinned by a disciplined approach to capital allocation.

He adds that the company continues to advance its two high-margin development projects, the Sabodala-Massawa expansion and the Lafigué development project, in Senegal and Côte d’Ivoire, respectively, with both being on budget and in the process of commissioning.

The company’s cash and cash equivalents position at the end of the period was $517-million.

It plans to spend $245-million in growth capital in the new financial year, including $75-million in remaining growth capital for the Sabodala-Massawa expansion project and $170-million in remaining growth capital for the Lafigué project.

Endeavour aims to produce between 1.13-million and 1.27-million ounces of gold in the 2024 financial year at a consistent AISC to that of the 2023 financial year.

The 2024 financial year’s guidance marks an increase of almost 200 000 oz, or 18.5% year-on-year, compared with the 2023 financial year.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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