The strong net free cash flow generated by TSX-listed Endeavour Mining in the third quarter ended September 30, marked an important milestone for the West Africa-focused gold producer as it “demonstrates that [the company] has de-risked and repositioned the group as a cash-generating business, after nearly four years of intensive growth-capital spend,” president and CEO Sébastien de Montessus said on Tuesday.

As a result, Endeavour is now considered to be “strategically diversified” across multiple assets with stronger long-term planning capabilities, he added, noting that this “provides greater comfort in [Endeavour’s] ability to generate stable cash flows”.

This is demonstrated by strong third-quarter results despite the severe rainy season, De Montessus said.

Having successfully built its Ity and Houndé mines in Côte d’Ivoire and Burkina Faso, respectively, with minimal equity dilution, Endeavour’s priority would now shift to deleveraging the business, underpinned by its short investment payback periods, De Montessus explained.

During this debt reduction phase, Endeavour expects to benefit from low capital-intensive growth with Ity’s 25% volumetric upgrade nearly complete and the expected upcoming integration of recently discovered higher-grade deposits at its flagship mines.

Looking ahead, however, De Montessus said the miner would continue to focus on building optionality within the portfolio through its exploration programme – a good example of which is the recently announced 1.2-million-ounce indicated resource at 2.5 g/t at Endeavour’s Ivorian greenfield Fetekro property, discovered for less than $9/oz.

QUARTER FINANCIALS

Meanwhile, Endeavour’s output increased by 6% quarter-on-quarter to 181 000 oz owing to increases at Ity, Karma (in Burkina Faso) and Agbaou (in Côte d’Ivoire), which Endeavour said “more than offset” the slight decrease in output at Houndé.

The impact of the severe rainy season was mitigated by the mining of higher-grade ore across the group and the use of stockpiles, the miner said.

All-in sustaining costs (AISC) for the three months were $803/oz, remaining relatively flat quarter-on-quarter as higher costs at Houndé were partially offset by lower costs across Ity, Karma and Agbaou.

In addition, royalties increased by about $13/oz over the period owing to the higher realised gold price which attracted higher applicable royalty rates.

Total production for the year to date, meanwhile, decreased from 524 000 oz to 473 000 oz owing to the sale of the noncore Tabakoto mine, in Mali, while AISC decreased by $36/oz to $817/oz over the same period owing to the Tabakoto divestment and lower costs at Ity and Agbaou, which more than compensated for higher costs at Houndé and Karma, Endeavour mentioned.

As a result, the group’s full-year production guidance has now been adjusted to between 650 000 oz and 695 000 oz at an AISC of between $795/oz and $845/oz. A wide range was provided owing to the Ity carbon-in-leach plant still having being under construction when guidances were set, the miner explained.

Following a quick ramp-up and strong performance since commissioning, Ity’s production is now expected to be near the top end of the between 160 000 oz and 200 000 oz range, meaning that the lower end of the group’s guidance has been increased slightly to 35 000 oz.

All the other mines, on aggregate, remain on track to meet their full-year production guidance as Agbaou’s strong performance is expected to offset that of Houndé while Karma remains in line.

The group’s AISC guidance has also been slightly adjusted upwards by 4%, representing $35/oz, to between $796/oz and $845/oz to reflect the higher realised royalties associated with the stronger gold price environment, which is estimated to have an impact of about $15/oz, or 1.5%.

In addition, it also reflects a 2% increase in the expected AISC across the mines, representing about $20/oz. This increase, Endeavour noted, is mainly owing to Houndé’s higher-than-expected AISC, which is owing to the slower than expected ramp-up at the newly commissioned Bouéré higher-grade deposit.

Ity’s AISC is expected to be near the top end of its guided range, while Agbaou is expected to finish below its guided range.