Endeavour Mining on the move

DENVER, COLO. — The Denver Gold Forum has built a reputation as being one of the industry’s premier events, with the finest names in the sector being presented by the key figures who have guided them to pre-eminece.

Speakers this year included the most famous names in mining: Ivanhoe Mines’ (IVN-T, IVN-N) Robert Friedland, Minera Andes’ (MAI-T, NKP-F) Rob McEwen and Kinross Gold’s (K-T, KGC-N) Tye Burt to name just a few.

And while those men did not disappoint, some of the more intriguing stories were put forth by emerging companies on the intermediate gold-producing scene.

One such is a company associated with another big name in Canadian mining, Frank Giustra.

The recently rebranded Endeavour Mining (EDV-T), which while having ties to Giustra, was presented by Sally Eyre, former chief executive of the recently acquired Etruscan Resources and now senior vice-president of operations at Endeavour.

Endeavour was founded 20 years ago as a project finance company and expanded into a leading merchant bank in 2001 after Giustra came on board. Its most recent transformation sees it morphing into a gold company, a process that began after it raised roughly $115 million as part of its gold growth strategy. Giustra remains an advisor to the company.

As evidenced by the amount of money raised, Endeavour has ambitious plans.

Knowing full well that intermediate producers receive better valuations than their junior counterparts, the company has managed to enter the gold mining ring at a considerable weight for a newcomer.

Endeavour began to bulk-up shortly after the big capital raise as it acquired a significant stake in West African producer Crew Gold (CRU-T) in April of this year. It followed that move by taking a significant stake and then fully acquiring Etruscan and its Youga gold mine in Burkina Faso.

Shortly after acquiring Etruscan, however, it divested itself of its 43% interest in Crew Gold. That transaction occurred on Sept. 13 as Endeavour decided it was better to take an $80-million profit on the investment than to play second fiddle to majority stakeholder, Moscow- based Severstal Gold.

That leaves Endeavour to continue with its sharp focus on operational issues at Youga.

Eyre says Youga was in a bad way before Endeavour came on board largely because Etruscan was under- capitalized.

That is a problem no more, as Endeavour has set upon a mine optimization plan and debt restructuring.

Big gains were made on the mining side by replacing the drill and blasting contractor whose under-performance had resulted in excessive waste accumulation. Bringing in a new contractor paid quick dividends as evidenced by a 20% reduction in mining costs.

The company has also seen an increase in monthly gold production in an order of 20%, to 7,667 oz. and a reduction in average cash costs of 29% to US$495 per oz.

In all, Eyre says the company will have spent $9.7 million by the time the year is out on capital expenditures at the mine.

Youga, which sits 180 km southeast of the capital Ouagadougou, has life-of-mine reserves of 6.2 million tonnes grading 2.7 grams gold per tonne. It produced 64,879 oz. gold in 2009, and is slated to produce 80,000 oz. this year.

And while Youga is shaping into a stable and solid gold producer, it does not make up the entire Endeavour story.

In acquiring Etruscan, the company also laid claim to a valuable asset in Cte d’Ivoire — a country that is garnering attention lately for both its mining potential and increased political stability.

Endeavour recently was given the authorization it needed to launch a 20,000-metre drill program at its Agbaou gold project which sits 200 km northwest of the country’s capital, Abidjan.

The project already represents one of the largest undeveloped gold deposit in the country, with reserves of 10.9 million tonnes grading 2.1 grams gold for 731,000 oz. gold.

That is enough, Endeavour says, to support a mining operation that would produce 77,000 oz. gold a year for 9.1 years at cash costs of US$516 an oz. It estimates capital costs for building the mine at US$106 million.

But while the environmental and social impact study for the project was approved in December 2009, the company is still waiting on a mining permit — the application of which was submitted in October 2009.

As for any possible destinations for the significant amount of capital the company still has on hand and access to, Eyre says not to be fooled by its current regionally based portfolio.

“We’re not restricted to just West Africa,” she says. “We have a global acquisition strategy.”

And in this environment of record high gold prices, with no sign of tighter monetary policy on the horizon, the company could not have picked a better time to scour the globe with deep pockets for gold mines in need of some repair.

While the market seemed hesitant to warm up to the story initially, it has been catching on in recent weeks.

Since announcing shareholder approval of the Etruscan deal in mid-August, Endeavour shares have increased approximately 30%, closing at $2.73 in Toronto on Sept. 24.