JOHANNESBURG (miningweekly.com) – TSX-listed Endeavour Mining has reported a “solid performance” in the first half of 2019, with the successful commissioning and ramp-up of the Ity carbon-in-leach (CIL) project, in Cote d'Ivoire, placing the miner on track to meet its full-year guidance.

Based on Ity’s strong operating results, Endeavour president and CEO Sébastien de Montessus believes that the project’s commissioning and ramp-up have been derisked and is anticipating further near-term upside as capacity will increase from four-million tonnes to five-million tonnes a year during the fourth quarter.

The Ity CIL produced 58-million ounces in the June quarter, putting it on par with Endeavour’s other flagship mine, Hounde, in Burkina Faso. Together, these two mines contributed 68% to the total June quarter production of 171 000 oz.

The June quarter production was 41% higher than that of a year earlier, owing to the commissioning of the Ity CIL operation, while all-in sustaining costs decreased to $790/oz.

Endeavour is targeting 615 000 oz to 695 000 oz in the full year, of which between 160 000 oz and 200 000 oz will come from Ity CIL and between 230 000 oz and 250 000 oz from Hounde.

The company also operates the Agbaou mine, in Côte d'Ivoire, and the Karma mine, in Burkina Faso.

Endeavour’s revenue increased from $190-million in the June 2018 quarter, to $219-million in the quarter under review. Its net earnings fell to $1-million, from $4-million in the corresponding period of 2018, but is an improvement on the net loss of $15-million in the March 2019 quarter.

On a year-on-year basis, adjusted net earnings remained unchanged at $9-million in the June quarter and it is an improvement on the adjusted loss of $5-million in the March quarter.

The miner said that its flagship Ity and Hounde assets were expected to bring non-capital-intensive growth in the short term, as it benefited from the commissioning of higher-grade deposits, both of which were over 1 g/t higher than current reserves being mined.

Following the build of the two assets and near-mine exploration success, Endeavour was “well-positioned to benefit from the repositioning of [its] portfolio in a higher gold price environment”.

Going forward, the company would focus on debt reduction, driven by its expected cash flow generation from these flagship assets. During the debt reimbursement phase, the firm intends to review available internal growth opportunities developed through its exploration success.

In line with this strategy, further exploration is under way at Kalana, in Mali, with the goal of delineating additional satellite deposits, and updating the feasibility study, to give the project the required scale to fit Endeavour’s investment criteria.

A $4-million exploration campaign, totalling about 26 000 m, started in the second quarter, with the aim of testing additional targets located within a 10 km radius of the Kalana deposit and increasing the resources base available for the project. A total of 20 500 m has been drilled on nearby targets during the first half of the year.

To maximise the cash flow certainty during its debt reimbursement phase, Endeavour has put in place a short-term gold revenue protection strategy consisting of gold option contracts, similar to the strategy employed during its recent construction phases.

A deferred premium collar strategy using written call options and bought put options has been put in place beginning on July 1, 2019 and ending on June 30, 2020 with a floor price of $1 358/oz and a ceiling price of $1 500/oz. The programme covers a total of 360 000 oz, which represents about half of Endeavour’s total estimated gold production for the period.

The total premium payable for entering into this programme was $9.2-million, which is deferred and settled as monthly contracts mature. 

Once the gold option contracts programme ends, Endeavour will return to a position where its gold production is fully exposed to spot gold prices, it said in a statement.

At the end of the first half of the year, Endeavour’s available sources of financing and liquidity remained strong at $198-million, including its $78-million cash position and $120-million undrawn on the revolving credit facility.

In addition to these liquidity sources, Endeavour anticipates strong cash flow generation owing to minimal capital requirements following the achievement of commercial production at Ity CIL. 

Operating cash flows before non-cash working capital from continuing operations amounted to $57-million in the second quarter of the year, or $0.52 a share, an increase of $9-million quarter-on-quarter, despite a $26-million increase in income tax paid, owing to the benefit of commercial production at Ity CIL. 

Operating cash flows before non-cash working capital from continuing operations amounted to $105-million in the first six months of the year, or $0.96 a share, a decrease of $44-million year-on-year.