Endeavour Mining set to grow following merger

Having just completed a merger with Adamus Resources in December, Australia-based Endeavour Mining (EDV-T, EVR-A) now has two producing mines in West Africa and several advanced projects in the pipeline.

The combined company expects to produce about 180,000 oz. gold from its mines in Burkina Faso and Ghana this year, but could be producing 250,000 oz. per year by the end of 2013 if development goes ahead at its Agbaou project in Côte d’Ivoire. 

Meanwhile the company has a strong position in the region with 10,411 sq. km of land holdings in Ghana, Côte d’Ivoire, Liberia, Burkina Faso and Mali.

In southwest Ghana, the company’s 90%-owned Nzema mine went into production in early 2011. The mine, 10%-owned by the Ghanaian government, consists of several shallow oxide pits along the Salman trend and the Anwia deposit, 8 km to the west. 

As of March 2011, reserves at Nzema stood at 16.5 million tonnes grading 2.01 grams gold per tonne for 1.1 million oz. gold, with 440,000 oz. contained on the Salman trend and the rest at Anwia. Measured and indicated resources, including reserves, are 37.2 million tonnes at 1.78 grams gold.

With a 665-sq.-km land package in the area, Endeavour holds several prospective exploration targets that could feed its central 1.6- to 2.1-million-tonne-per-year mill. Regional results include 22 metres of 4.13 grams gold and 27 metres of 2.02 grams gold at Avrebo some 10 km southeast, and 10 metres of 6.34 grams gold and 10 metres of 3.61 grams gold at Akropon some 10 km northeast. 

The company is also targeting mineral expansion at depth on the Salman trend.

The company put its 90%-owned Youga gold mine, sitting roughly 180 km southeast of Burkina Faso’s capital, into production in mid-2008. The Youga mine also consists of several pits feeding ore to a conventional gravity and carbon-in-leach plant, with a capacity of a million tonnes per year. 

At the end of 2010, the mine’s reserves stood at 4.5 million tonnes of 2.5 grams gold for 362,000 contained oz. gold. Resources again are about double at 11.2 million tonnes of 2 grams gold for 709,000 oz. gold.

In 2011 the company drilled more than 50,000 metres of reverse circulation and diamond drilling and is expected to release an updated resource shortly. The company has identified 12 targets within 3 km of the mill and inside the mining permit. Outside the Youga mining permit area, the company holds four exploration permits covering over 400 sq. km. Endeavour has identified several targets in the region including: Zerbogo, 25 km southeast of the mine; Bougre, 13 km southwest; and Ouare, 35 km northeast.

The company’s advanced-stage projects include the 469-sq.-km Agbaou project in Côte d’Ivoire and the Finkolo project in Mali that it has joint ventured with Resolute Mining (RSG-A). 

According to a 2009 feasibility study, Agbaou has reserves of 10.9 million tonnes grading 2.1 grams gold for 732,000 oz. gold, with life-of-mine cash costs of US$516 per oz. and a 9-year mine life. The company is updating the study and is expected to make a production decision this quarter.

At the end of November the company closed its remaining gold hedge at Youga of 23,500 oz. at US$700 per oz. by paying $24 million to buy out of the hedge. The company also plans to close out its Nzema hedge book, which as of last March stood at 290,000 oz. gold payable at US$1,075 oz. gold.

Shortly before the merger went through, Endeavour spun out its debt finance and M&A advisory business into Endeavour Financial, having not long before been more merchant bank than gold explorer.

Endeavour’s share price recently closed at $2.50. The company has a 52-week share price range between $1.71 and $2.94 with 244.6 million shares outstanding. Raymond James analyst Brad Humphrey ranks Endeavour Mining as “outperform” with a target of $3.70 over the next six to 12 months.