Endeavour works to win market favour

Endeavour Mining (EDV-T, EVR-A) has its own way of dealing with recent stingy market valuations for gold companies: put its head down and dig.

The company updated the market on its construction at its Agbaou Gold Mine in Côte d’Ivoire and on the progress of a feasibility study at its Houndé project in Burkina Faso and in both cases the company is pushing full bore ahead.

Agbaou, which sits roughly 200-km northwest of the port city of Abidjan, remains on-budget and on-schedule and is slated to go into initial production in the first quarter of next year.

Endeavour says the project is 52% finished and that it has committed 62% of the $159 million budget with $45 million already spent. The company also reports that camp construction is almost complete and that roughly 900 workers are currently on-site.

On the community relations side, Endeavour has finished a crop compensation program and the relocation of 250 residents is nearly complete. The company describes community support for the project as “solid”.

A technical report released in the spring of last year outlined measured and indicated resources of 14.97 million tonnes grading 2.43 grams gold for 1.2 million oz. of gold at the project.

Those resources will look to feed a plant designed to produce 103,000 oz. of gold per year over an 8-year mine life with direct cash costs estimated to be US$635 per oz. using a 5% discount rate and a US$1,250 gold price. The project is expected to produce a net present value (NPV) of $184 million.

A day before the construction update, Endeavour released news from another of its key development projects as it filed a preliminary economic study on its Houndé project in Burkina Faso.

The PEA was originally released in January and estimated it would cost to be $345 million to build mine direct cash cost of US$563 per oz. and an NPV of $288 million using a 5% discount rate and US$1,300 gold price.

Houndé is an open pit development with measured and indicated resources of 23.7 million tonne grading 1.9 grams gold for 1.46 million oz. and inferred resources of 12.21 million tonnes grading 1.9 grams for 752,000 oz. of gold

The company expects to get 91% process recovery at a milling rate of 8,000 tonnes per day in a facility that uses a conventional gravity and carbon-in-leach (CIL) circuit.

A feasibility study at Houndé got underway in January, and with the early completion of an infill drilling program, Endeavour expects to have the study finished by the end of the year.

That drill program, which wrapped up in February, cut a total of 41,365 metres in 369 drill holes and recent highlights included 73.9 metres grading 5.26 grams gold and 38.0 metres grading 5.93 grams gold.

If all continues to progress on schedule at Agbaou, it should be a seamless transition for the mine-building team to move from that project over to Houndé in early 2014.

And if Endeavour can get both mines humming along in a few years time, they should help it reach its forecast of over 550,000 oz. of gold production per year in 2016. The other key contributor to that increase will be the completion of its Tabakoto mill expansion in 2013.

The company’s growth profile has Canaccord Genuity Mining Analyst Nicholas Campbell arguing that investors in Endeavour equity are getting a producer at a developer’s price in his recent report on the company.

Campbell says the company’s price to net-asset-value (NAV) ratio rings in at just 0.44 times compared to the average junior that has a price to NAV of 0.67 times.

Investors may have been paying attention to the report as Endeavour shares were up 5¢ or 3% to $1.60 in Toronto on March 14. Its shares are down 30% since late January, however, when they closed as high as $2.27.