Endeavour hits pay dirt at Agbaou

VANCOUVER — West Africa-focused Endeavour Mining (TSX: EDV; US-OTC: EDVMF) has been on the hunt for valuable oxide resources at its flagship Agbaou gold mine, 80 km south of Yamoussoukro, Côte d’Ivoire, and exploration results from the company have hit right on target.

The latest exploration and infill drilling intercepted continuous grades, such as 10.2 metres at 3.5 grams gold per tonne and 13.3 metres at 2.8 grams gold along the same shear zones that host the orebody at the producing West pit.

Exploration also expanded mineralization at the parallel-trending Gamma zone to 600 metres, boasting intercepts of 12.2 grams per tonne over 9.4 metres. Whereas drilling at the Beta zone, southwest of the operations at North pit, returned 16.5 grams gold over 8.3 metres.

CEO Neil Woodyer said in a release that the drilling “confirms the exciting potential we have to continue to extend mine life at Agbaou,” and these ounces will be brought into reserves by year-end.

The exploration success builds upon another stellar quarter for Endeavour, which tabled after-tax net earnings of US$33 million for the second quarter, despite realized gold prices falling 2.1% from the previous quarter to US$1,193 per oz. gold.

The company finished off the quarter with US$52.7 million in the bank, and used the healthy earnings to pay down its revolving credit facility by another US$20 million — the second voluntary payment made this year — dropping the balance to US$260 million.

Ota Hally, Endeavour’s chief financial officer, tells The Northern Miner in a phone interview that the company aims to keep all-in sustaining costs (AISC) for gold below production guidance of US$980 per oz. at its four gold mines: Agbaou in Côte d’Ivoire, Nzema in Ghana, Tabakoto in Mali and Youga in Burkina Faso.

“When gold prices are high it sends miners scrambling, and everyone gets preoccupied on throughputs,” he says. “Whereas now, it’s all about making profitable gold — and that’s key for us. We make sure every ounce of gold that comes out of the ground contributes to the cash flow.”

Hally says that Endeavour is well underway to reaching the company’s objectives for the year, having already delivered 59% of its US$100-million free cash flow target.

During the second quarter, Endeavour ramped up production to 131,165 oz. gold, and dropped AISC to US$898 per oz. gold, up 6% and down from $946 per oz. gold, compared to the first quarter. 

Favourable euro exchange rates and declining oil prices strengthened the company’s cost savings, Hally says, along with free-digging oxide ore and improved recoveries across its operations.

He adds that Tabakoto had “solid earnings,” with sustaining margins improving to US$7.7 million compared to US$200,000 in the comparable quarter in 2014.

Cash flow at the Malian mine was boosted by input from the Kofi C deposit and a switch to owner mining, both of which lowered AISC to US$990 per oz., from US$1,283 per oz. in the comparable 2014 quarter.

Hally describes Agbaou as the project in the company’s portfolio that “continuously exceeds expectations” with its “excellent performance.”

“We built Agbaou to produce margins in the downturn,” he says. “It’s a key asset for us, and it’s our flagship mine.”

For the quarter, Agbaou had a low AISC of US$619 per oz. gold — well below guidance of US$690 to US$740 per oz. gold — due to high mill throughput and strong recoveries, thanks to the free-digging oxide ore.

The oxide blanket at Agbaou extends 40 to 60 metres deep across the deposit, making it hard for geologists to pick out mineralizing trends without drilling.

But condemnation holes in 2014 around the open pits identified shallow zones of oxide-hosted gold mineralization amendable to the mine’s production schedule, and since then Endeavour has almost doubled its exploration budget to US$4.6 million for 2015.

“We had really good success last year and replaced all our ore reserves — not just at Agbaou but at Tabakoto as well,” Hally says. We had a great field season, and we’re proceeding with a repeat of that this year.”

Endeavour is working to follow up with a 21,800-metre exploration and infill drill program to unravel the deposit at Agbaou and expand its profitable oxide resource, so that it can maximize profit margins.

Hally says the company hopes to build another mine similar to Agbaou at its Houndé gold project, 250 km southwest of Ouagadougou in Burkina Faso.

The fully permitted project could add 190,000 oz. gold per year over an initial 10-year mine life, at an AISC of US$714 per oz. gold.

But Hally notes the company may have to reconsider its production plans if gold prices stay below US$1,100 per oz. gold, and would look at other ways to optimize the project before development. He says the production decision for Houndé could arrive by year-end.

Endeavour has traded within a 52-week range of 38¢ to 96¢, and last closed at 62¢. The company has 412 million shares outstanding for a $256-million market capitalization.