Endeavour works to win market favour

Endeavour Mining (EDV-T) has its own way of dealing with recent stingy market valuations for gold companies: the company puts its head down and digs.

The company updated the market on 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 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 reports that camp construction is almost complete and that 900 workers are on-site.

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

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

These resources will look to feed a plant designed to produce 103,000 oz. gold per year over an eight-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 (PEA) study on its Houndé project in Burkina Faso.

The PEA was originally released in January and estimated total initial funding would cost $345 million, with life-of-mine direct cash costs of US$563 per oz. and a $288-million NPV using a 5% discount rate and a US$1,300 gold price.

Houndé is an open-pit development with measured-and-indicated resources of 23.7 million tonnes 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. gold.

The company expects a 91% process recovery at an 8,000-tonne-per-day milling rate in a facility that uses a conventional gravity and carbon-in-leach 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 year-end.

That drill program, which wrapped up in February, cut a total of 41,400 metres in 369 drill holes, and recent highlights included 73.9 metres grading 5.26 grams gold and 38 metres grading 5.93 grams gold.

If everything progresses 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. gold production per year in 2016. The other key contributor to this increase would be completing the Tabakoto mill expansion in 2013

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

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 it was closing as high as $2.27.