Mr. Sebastien de
Montessus reports
ENDEAVOUR MINING CORPORATION : ENDEAVOUR REPORTS STRONG FY-2018 RESULTS
Endeavour Mining Corp. has released its financial and operating results for the fourth quarter and full year 2018, with highlights provided in the associated table.
All currency figures are in U.S. dollars.
KEY OPERATIONAL AND FINANCIAL HIGHLIGHTS
(in millions)
Quarter ended Year ended
For continuing operations Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2018 2018 2017 2018 2017
Production and AISC highlights
Gold production (koz) 174 139 151 612 403
Realized gold price ($/oz) $1,198 $1,161 $1,228 $1,228 $1,199
All-in sustaining cost ($/oz) 707 820 649 744 769
All-in sustaining margin ($/oz) 490 341 581 484 436
Cash flow highlights
All-in sustaining margin ($m) 85 46 81 296 171
All-in margin ($m) 40 23 57 184 102
Operating cash flow before
non-cash working capital ($m) 53 45 39 261 159
Cash flow per share ($/share) 0.49 0.42 0.36 2.43 1.49
Profitability highlights
Revenues ($m) 208 156 171 752 471
Adjusted EBITDA ($m) 56 49 84 265 172
Net earnings (loss) attr. to shareholders ($m) (32) 15 (15) (0) 27
Net earnings (loss) ($/share) (0.29) 0.14 (0.15) (0.00) 0.27
Adjusted net earnings (loss) attr.
to shareholders ($m) 16 (1) 53 53 54
Adjusted net earnings (loss) per share ($/share) 0.15 (0.01) 0.49 0.49 0.51
Balance sheet highlights
Net debt ($m) 536 535 232 536 232
Sebastien de
Montessus, president and chief executive officer, stated: "Two thousand eighteen was a successful year for Endeavour during which we beat our production guidance and ended with AISC [all-in sustaining cost] lower than the guided range, all while maintaining a strong safety record. The first full-year contribution from Hounde, coupled with the successful management of our portfolio, has sustainably decreased our all-in sustaining costs to below our strategic target of $800/ounce.
"Two thousand nineteen is expected to be another strong year as we look forward to the first gold pour at the Ity CIL plant in the coming weeks, where construction continues to progress ahead of schedule and on budget. Over the past two years, we have transformed our portfolio, investing nearly $1-billion into the business. Once Ity CIL commences production, we expect to enter a period of sustained strong free cash flow generation with a continued focus on return on capital employed.
"The maiden resource at Hounde's Kari Pump discovery was our most notable exploration achievement in 2018. In 2019 we look forward to converting this discovery into reserves. We will maintain an aggressive exploration program focused specifically at Hounde where we expect further maiden resources on new discoveries. In addition, we will look to further grow the resource in the Le Plaque area at Ity and advance exploration at our greenfield properties.
"I would like to thank our entire team for their dedication and contribution to our success in 2018 and for their efforts in positioning Endeavour for continued success in 2019 and beyond."
2018 key achievements and 2019 catalysts
In 2018, Endeavour continued to deliver against its strategy, with good progress made across its four strategic levers:
-
Operational excellence: reinforced record as group lost-time injury frequency rate (LTIFR) decreased from 0.29 to 0.16 year on year, remaining below industry benchmarks; production and AISC guidance met or beaten for the sixth consecutive year;
- Project development: remained a key focus area with the successful progress at the Ity CIL project;
- Unlocking exploration value: continued to deliver against the company's five-year discovery target, with 1.9 million ounces of measured and indicated resources discovered in 2018, totalling 4.2 million ounces at a discovery cost of about $13/ounce since the strategy was set in late 2016; in 2018, notable successes including the maiden indicated resource Kari Pump target at Hounde and at the greenfield Fetekro property of, respectively, 1.0 million ounces and 500,000 ounces, good results at the Le Plaque area at Ity which are soon expected to yield an increased resource, and greater confidence in the Kalana Main deposit resource;
- Active portfolio and balance sheet management: in line with its aim to focus on long-life and low-cost high-quality assets, following the sale of its non-core Youga mine and Nzema mines in 2016 and 2017, respectively, Endeavour sold its Tabakoto mine in 2018; on the balance sheet front, Endeavour finishing the year with strong liquidity sources despite the accelerated construction of its Ity CIL project.
Two thousand nineteen is expected to be another pivotal year for Endeavour with the following notable catalysts:
- Ity CIL project first gold pour expected in early second quarter of 2019, following which the group is expected to be net cash flow positive;
- Maiden reserve for the Kari Pump discovery at Hounde expected by midyear;
-
Maiden resource for the Kari West and Kari centre discoveries, and further resource delineation for the Kari Pump deposit at Hounde expected in the fourth quarter of 2019;
- Increased resource at the Le Plaque discovery at Ity expected in the second quarter of 2019;
-
Resource increase at the Fetekro greenfield exploration project expected in the second quarter of 2019 and further results on Kalana in the second half of 2019.
Strong fourth quarter 2018 performance; beating full-year guidance:
-
Continued strong safety record in 2018 with a low LTIFR of 0.16 across the group;
- The Tabakoto sale closing on Dec. 24, 2018, and deconsolidated in the financial statements;
- Fourth quarter 2018 group production from continuing operations increasing by 25 per cent over the previous quarter to 174,000 ounces and AISC declining by 14 per cent to $707/ounce due to a strong quarter at all mines;
- Full-year 2018 production from continuing operations increasing by 52 per cent over the prior year to 612,000 ounces, beating the top end of the 555,000-to-590,000-ounce guidance, while AISC from continuing operations decreasing by $25/ounce from prior year to $744/ounce, well below the guidance range of $760 to $810/ounce; 2018 benefiting from a full year of production at Hounde, and better production and AISC performance at Ity and Karma, which more than compensated for the expected lower performance at Agbaou.
GROUP PRODUCTION
(all amounts in thousands of ounces, on a 100-per-cent basis)
Three months ended Year ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2018 full-year
2018 2018 2017 2018 2017 guidance
Agbaou 44 31 43 141 177 140-150
Ity 21 21 17 85 59 60-65
Karma 33 26 21 109 98 105-115
Hounde 76 61 69 277 69 250-260
Production from continuing operations 174 139 151 612 403 555-590
Tabakoto (divested in December, 2018) 30 26 28 115 144 115-130
Nzema (divested in December, 2017) - - 25 - 116 na
Total production 204 165 204 727 663 670-720
GROUP ALL-IN SUSTAINING COSTS
(all amounts in US$/oz)
Three months ended Year ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2018 full-year
2018 2018 2017 2018 2017 guidance
Agbaou 776 954 690 819 647 860-900
Ity 622 730 869 719 906 790-850
Karma 697 841 918 813 834 780-830
Hounde 588 638 335 564 335 580-630
Corporate G&A 46 44 46 43 43 30-30
Sustaining exploration 0 14 4 12 19 10-10
Group AISC from continuing operations 707 820 649 744 769 760-810
Tabakoto (divested in December, 2018) 1,470 1,420 1,411 1,369 1,148 1,200-1,250
Nzema (divested in December, 2017) - - 855 - 859 na
Group AISC 818 917 785 843 869 840-890
Hounde mine
Fourth quarter versus third quarter 2018 insights
A record quarter was achieved as production increased, mainly due to significantly higher grades following the end of the rainy season:
- Tonnes of ore mined increased as mining activities ramped up following the end of the rainy season. Mining continued to focus on the Vindaloo Main and Vindaloo Central pits. The strip ratio was lower than initially planned due to a shift in the mine plan which delayed stripping to 2019.
- Tonnes milled increased slightly, continuing to perform nearly 30 per cent above nameplate capacity. The ore blend continued to be mainly transitional/fresh ore. Oxide ore represented 34 per cent of the mill feed, up from 32 per cent in the third quarter of 2018.
- Processed grades markedly improved as higher-grade areas of both the Vindaloo Main and Vindaloo Central pits became accessible following the end of the rainy season. In addition, the higher-grade ore mined was selectively processed while the lower-grade ore was stockpiled.
-
Recovery rates decreased slightly but remained at the level assumed in the optimized study.
AISC decreased due to higher production, lower unit mining costs associated with reduced water pumping requirements following the end of the rainy season, as well as the reduction in sustaining capital expenditures:
-
Mining unit costs decreased from $2.14 to $1.92 per tonne due to increased volumes mined following the rainy season.
- Processing unit costs decreased from $12.71 to $11.84 per tonne due to the reduction in fresh ore processed in the period when compared with the third quarter of 2017 along with increased throughput volumes.
-
Sustaining capital decreased from $2.7-million to $1.1-million following a reduction in waste capitalization in the period.
- There was $3.0-million of non-sustaining capex incurred during the quarter relating to waste capitalization.
Full-year 2018 versus full-year 2017 insights
Production increased significantly as 2018 benefited from a full year of production since commercial production began in the fourth quarter of 2017.
As guided, AISC increased as last year's production benefited from processing primarily high-grade oxide material.
Stockpiles grew in 2018, amounting to 2.0 million tonnes at 1.1 g/t containing 70,000 ounces at year-end.
2018 performance versus guidance
Production totalled 277,000 ounces, significantly exceeding full-year guidance of 250,000 to 260,000 ounces due mainly to both the mining activities and the process plant performing above their nameplate capacities.
AISC amounted to circa $565/ounce, well below the guided $580 to $630/ounce range due to the outperformance of the operation and a lower-than-planned strip ratio in the second of half the year following a shift in the mine plan which delayed higher stripping to 2019.
HOUNDE QUARTERLY PERFORMANCE INDICATORS
For the quarter ended Q4 2018 Q3 2018 Q4 2017
Tonnes ore mined, kt 1,736 1,413 663
Strip ratio (incl. waste cap) 5.87 6.00 13.78
Tonnes milled, kt 1,062 1,006 813
Grade, g/t 2.38 2.02 2.75
Recovery rate, % 93% 94% 95%
Production, KOZ 76 61 69
Cash cost/oz 508 519 194
AISC/oz 588 638 335
HOUNDE YEARLY PERFORMANCE INDICATOR
For the year ended Dec. 31, Dec. 31,
2018 2017
Tonnes ore mined, kt 5,822 1,222
Strip ratio (incl. waste cap) 6.1 13.1
Tonnes milled, kt 3,948 813
Grade, g/t 2.29 2.75
Recovery rate, % 94% 95%
Production, koz 277 69
Cash cost/oz 459 194
AISC/oz (preliminary) 564 335
2019 outlook
Hounde is expected to produce between 230,000 and 250,000 ounces in 2019, continuing to outperform its feasibility study estimates, at an AISC of $720 to $790/ounce:
- Mining is expected to continue in the Vindaloo deposit, while ore extraction at the Bouere deposit is expected to start in late first half of 2019. The strip ratio is expected to increase in 2019, due to both the mine plan sequence and to the carry-over of stripping delayed from 2018.
- Throughput is expected to remain above nameplate capacity while the ore blend is expected to shift from the current mix of about 30 per cent oxide ore and about 70 per cent transitional/fresh ore feed to mainly fresh ore by year-end, resulting in higher operating costs.
- Despite the expected higher grades mined, the average processed grade is expected to decline due to the use of lower-grade stockpiles. This marks a change compared with the previous mine plan due to the company's strategic focus on reducing working capital.
- Sustaining costs are expected to increase from $6-million to about $35-million mainly due to the increased strip ratio, a TSF raise and components to be purchased for fleet maintenance.
Approximately $7-million of non-sustaining expenditure is planned for 2019, mainly for the Bouere prestrip, road and resettlement.
2018 exploration program
The 2018 exploration program amounted to $14-million, totalling approximately 165,700 metres of drilling, focused mainly on the Kari gold-in-soil anomaly which covers a six-kilometre-long-by-2.5-kilometre-wide area, resulting in:
- The identification of a maiden indicated resource at the Kari Pump target totalling 11.3 million tonnes at 2.71 g/t Au containing 987,000 ounces, as published on Nov. 15, 2018. The maiden resource covers an area 1.3 km long by 800 m wide and remains open in various directions. The mineralization is amenable to open-pit mining and 45 per cent of the indicated resource is located within the oxide and transition zones, compared with most of the Hounde indicated resource located in fresh zones.
- The Kari Centre discovery, which extends 1.2 km along strike and across a width of over 200 m and remains open in various directions.
- The Kari West discovery which extends at least 1.0 km along strike and across a width of 500 m and remains open in various directions.
2019 exploration program
In 2019, Hounde will continue to be the priority exploration focus for Endeavour with a budget of up to $17-million totalling approximately 195,000 metres of drilling with the aim of:
- Delineating additional resources at Kari Pump;
- Delineating a maiden resource at the Kari Centre and Kari West targets;
-
Testing other targets such as Sia/Sianikoui, Grand Espoir and high-grade plunges at the Vindaloo deposit.
Reserve and resource evolution
As shown on the company's website, the variance in P&P (proven and probable) reserves compared with the previous year is primarily due to mining depletion at the Vindaloo deposit while the M&I (measured and indicated) resource increased due to the 987,000-ounce maiden resource outlined at the Kari Pump discovery.
Reserves are expected to increase in midyear as the Kari Pump resource is expected to be converted to reserves following the completion of the continuing metallurgical tests.
Metallurgical tests are under way with Als Chemex Australia. Preliminary results are indicating good gold recovery rates, similar to the Vindaloo deposit currently being mined.
Agbaou mine
Fourth quarter versus third quarter 2018 insights
Production increased as expected mainly due to a significant increase in milled grade following the waste extraction efforts over the course of the year which gave access to higher-grade areas:
- Ore mined increased due to greater extraction at the South pit as less stripping was necessary. Waste extraction efforts continued in the West pit, resulting in an increase in the overall strip ratio.
- Mill throughput increased as the proportion of fresh ore processed decreased from 15 per cent to 12 per cent.
- Processed grades increased due to the change in mining sequence giving access to higher-grade ore.
- Recovery rates improved slightly due to a lower proportion of fresh ore processed.
All-in sustaining costs decreased, mainly due to increased gold sales, which were offset slightly by higher sustaining costs driven by increased waste capitalization activity:
- Mining unit costs decreased from $2.57 to $2.38 per tonne because of the increased volumes mined in the South pit.
- Processing unit costs decreased from $7.77 to $7.66 per tonne due to the reduction in fresh ore processed.
- Sustaining capital increased from $3.6-million to $5.8-million following the increased waste capitalization in the West pit.
-
Non-sustaining capital increased from $100,000 to $3.3-million due to the prestripping of the West pit.
Full-year 2018 versus full-year 2017 insights
Production decreased as guided, as low-grade stockpile feed supplemented the mine feed to allow waste capitalization activity to progress quicker in 2018. In addition, mining was constrained to lower-grade areas.
AISC increased, as guided, due to the higher sustaining costs associated with the waste capitalization activity, the impact of lower production, and higher operating costs related to mining and processing a greater volume of fresh and transitional ore.
Stockpiles declined in 2018, amounting to 1.6 million tonnes at 0.6 g/t containing 32,000 ounces at year-end.
2018 performance versus guidance
Production totalled 141,000 ounces, achieving the lower end of the guided 140,000-to-150,000-ounce range.
AISC amounted to about $820/ounce, well below the guided $860 to $900/ounce range as a portion of the planned waste capitalization was shifted to 2019 and more oxide material was processed compared with the initial plan.
AGBAOU QUARTERLY PERFORMANCE INDICATORS
For the quarter ended Q4 2018 Q3 2018 Q4 2017
Tonnes ore mined, kt 481 625 826
Strip ratio (incl. waste cap) 13.65 10.11 7.74
Tonnes milled, kt 708 669 760
Grade, g/t 2.21 1.54 1.85
Recovery rate, % 95% 94% 93%
Production, koz 44 31 43
Cash cost/oz 601 791 607
AISC/oz 776 954 690
AGBAOU YEARLY PERFORMANCE INDICATORS
For the year ended Dec. 31, 2018 Dec. 31, 2017
Tonnes ore mined, kt 2,399 2,983
Strip ratio (incl. waste cap) 11.40 8.42
Tonnes milled, kt 2,830 2,906
Grade, g/t 1.70 2.02
Recovery rate, % 94% 94%
Production, koz 141 177
Cash cost/oz 677 557
AISC/oz 819 647
2019 outlook
Agbaou is expected to produce between 120,000 and 130,000 ounces in 2019 at an AISC of $850 to $900/ounce:
- Mining is expected to focus mainly in the West pit, with some contribution from the North and South pits. The strip ratio is expected to remain at a high level as a portion of the planned 2018 waste capitalization was shifted to 2019.
- The plant throughput is expected to decline as the oxide ore blend is expected to reduce from approximately 80 per cent in 2018 to 60 per cent, with the remainder of the feed comprising fresh and transitional ore.
- Despite expecting to mine higher-grade ore, the average processed grade is expected to remain fairly flat over 2018 due to the use of lower-grade stockpiles. This marks a change compared with the previous mine plan due to the company's strategic focus on maximizing free cash flow generation and reducing working capital.
- Sustaining costs are expected to increase from $13-million to about $24-million mainly due to increased waste capitalization.
Approximately $8-million of non-sustaining expenditure is planned for 2019, mainly for a TSF raise.
2018 exploration program
The 2018 exploration program amounted to $4-million, totalling approximately 27,800 metres of drilling, focused mainly on open-pit targets, located along extensions of known deposits and on parallel trends, and on the at-depth potential of the North pit:
-
Mineralization was confirmed at the extensions of several deposits including the MPN, North pit satellite 3, West pit 5 and Beta. However, the mineralization intercepted was low grade and lacked continuity, and therefore little follow-up drilling was done, with a focus instead on testing other higher potential targets.
- Mineralization was confirmed at depth in the North pit. However, in the short term no follow-up drilling is planned for this target as the potential resource in this area may not be suitable for open-pit operations. As such, the focus remains on testing other open-pit targets.
2019 exploration program
An exploration program of up to $2-million is being considered for 2019 with the aim of continuing to test targets located along extensions of known deposits and on parallel trends.
Reserve and resource evolution
As shown on the company's website, the variance in P&P reserves and M&I resources compared with the previous year mainly corresponds to mining depletion and an update in unit cost assumptions for the reserve calculation.
Karma mine
Fourth quarter versus third quarter 2018 insights
Production increased due to a significant increase in ore stacked following the end of the rainy season:
- Tonnes of ore mined increased as mining activities ramped up following the end of the rainy season. Activities focused exclusively on mining oxide ore from the Kao pit.
- Mill throughput increased as operating conditions improved, with increased stacker utilization.
- Recovery rates remained high due to the improved leach characteristics of the oxide ore stacked.
AISC improved as the overall operating costs decreased, following the end of the rainy season, and due to an increase in ounces sold:
- Mining unit costs decreased from $3.18 to $1.76 per tonne because of increased tonnages being mined following the wet season.
-
Processing unit costs decreased from $8.46 to $7.41 per tonne due to higher stacked tonnes and lower reagent consumption for oxide material processed.
- Sustaining capital increased marginally from $1.0-million to $1.3-million due to spending on mining components.
Non-sustaining capital spend was consistent with the third quarter of 2018, with $8.3-million spent. The fourth quarter 2018 costs were mainly related to prestripping at the Kao deposit, as well as the resettlement costs associated to its development.
Full-year 2018 versus full-year 2017 insights
Production increased as guided, despite a lower processed grade, as the plant optimization work done in 2017 increased stacking capacity.
AISC slightly decreased, specifically in the second half of the year when most of ore stacked was oxide ore while transitional ore from the GG2 pit impacted costs in the first half of the year.
Stockpiles grew in 2018, amounting to 700,000 tonnes at 0.6 g/t containing 13,000 ounces at year-end.
2018 performance versus guidance
Production totalled 109,000 ounces, achieving the middle of the guided 105,000-to-115,000-ounce range.
AISC amounted to about $830/ounce, achieving the upper end of the guided $780 to $830 range.
KARMA QUARTERLY PERFORMANCE INDICATORS
For the quarter ended Q4 2018 Q3 2018 Q4 2017
Tonnes ore mined, kt 788 755 1,184
Strip ratio (incl. waste cap) 5.54 3.01 2.14
Tonnes stacked, kt 1,037 981 1,026
Grade, g/t 0.98 1.02 1.06
Recovery rate, % 88% 89% 77%
Production, koz 33 26 21
Cash cost/oz 592 729 798
AISC/oz 697 841 918
KARMA YEARLY PERFORMANCE INDICATORS
For the year ended Dec. 31, 2018 Dec. 31, 2017
Tonnes ore mined, kt 4,715 3,862
Strip ratio (incl. waste cap) 2.59 2.96
Tonnes stacked, kt 4,097 3,552
Grade, g/t 0.95 1.07
Recovery rate, % 82% 83%
Production, koz 109 98
Cash cost/oz 704 716
AISC/oz 813 834
2019 outlook
Karma is expected to produce between 105,000 and 115,000 ounces in 2019 at an AISC of $860 to $910/ounce:
- Mining is expected to focus mainly on oxide and transitional ore from the Kao pit, which is expected to be mined out by midyear, and on oxide ore from the North Kao pit where prestripping will begin in the first quarter of 2019 and ore extraction in the second quarter of 2019. The strip ratio is expected to increase in 2019 due to North Kao.
- Tonnes stacked and recovery rates are expected to remain fairly flat over 2018.
- The mine's performance is expected to be better in the second of the year as the first half is expected to be impacted by the Kao pit transitional ore.
- Sustaining costs are expected to total about $5-million with the main spending related to the waste capitalization at North Kao pit.
- Non-sustaining expenditure is expected to be relatively flat at $24-million, comprising mainly stacking line extension and lift preparation and lining, and prestripping for the North Kao deposit.
2018 exploration program
The 2018 exploration program amounted to $3-million, totalling approximately 23,600 metres of drilling, focused mainly on Yabonsgo and North Kao, resulting in:
- The identification of a maiden indicated resource at the Yabonsgo target totalling 2.9 million tonnes at 1.28 g/t Au containing 119,000 ounces.
- The continuity of mineralization at the North Kao deposit was confirmed along an 800 m strike length, with additional lenses identified to the southeast.
- Other targets such as Rambo West, Mogombouli, Zanna and Rounga were also studied to prepare for the 2019 drilling campaign.
2019 exploration program
An exploration program of up to $2-million totalling approximately 27,000 metres has been planned for 2019, with the aim of delineating near-mill oxide targets, mainly focused on testing the extension of the North Kao deposit and the along-strike and northern plunge extension of the Yabonsgo deposit.
Reserve and resource evolution
As shown on the company's website, the variance in P&P reserves and M&I resources compared with the previous year corresponds to mining depletion and a decreased for the GG2 and Kao Main deposits, following changes in estimation parametres, which was partially offset by the addition of M&I resources and P&P reserves at the Yabongso deposit.
Ity mine: heap leach operation
Fourth quarter versus third quarter 2018 insights
Two thousand eighteen was guided to be a transition year for the heap leach operation with greater priority given to the CIL construction activities, particularly in the second half of the year for which the main goal was to stack ore from lower-grade stockpiles. However, Ity's heap leach operation performed above expectations, particularly in the fourth quarter of 2018 as mining was opportunistically conducted based on equipment availability and the good progress made on Ity CIL construction.
Production remained flat as a decrease in stacked grade was offset by a higher recovery rate:
- Tonnes of ore mined decreased, in line with the plan, as mining activity for the heap leach decreased to prioritize the construction of the CIL plant. Mining for the heap leach operation ceased mid-December.
- Ore stacked decreased as the quantity of ore mined decreased with lower-grade stockpiles supplementing the stacked feed. Stacking at the heap leach operation ceased mid-December.
- The stacked grade decreased as mining activity at the high-grade Bakatouo pit ceased for heap leach operations and low-grade ore stockpiles were used.
- Recovery rates increased due to improved leach characteristics associated with the ore stacked from the Bakatouo pit.
AISC decreased due to lower unit mining costs associated with reduced water pumping requirements, as well as a lower strip ratio, lower processing and G&A costs, and increased ounces of gold sold in the period:
- Mining unit costs decreased from $7.02 to $6.65 per tonne due to shorter haul distances as mining for the heap leach operations winds down.
-
Processing unit costs decreased from $14.70 to $13.80 per tonne due to lower reagent usage.
- Sustaining capital decreased from $300,000 to $70,000 as the heap leach operation winds down.
- There was no non-sustaining capital spent in the quarter.
- Depreciation and depletion increased for the period due to accelerated depreciation taken on the heap leach assets as it nears the end of mine life.
Full-year 2018 versus full-year 2017 insights
Record production was achieved due to significantly higher grades stacked from the Bakatouo deposit and increased stacking. AISC decreased due to increased production and lower sustaining costs.
2018 performance versus guidance
Production totalled 85,000 ounces, significantly exceeding its full-year guidance of 60,000 to 65,000 ounces as opportunistic mining was carried out in the second half of the year.
AISC amounted to about $720/ounce, well below the guided $790-to-$850-per-ounce range, due to the above-mentioned opportunistic mining.
ITY QUARTERLY PERFORMANCE INDICATORS
For the quarter ended Q4 2018 Q3 2018 Q4 2017
Tonnes ore mined, kt 200 253 402
Strip ratio (incl. waste cap) 1.47 2.43 3.18
Tonnes stacked, kt 316 326 372
Grade, g/t 2.37 2.64 1.86
Recovery rate, % 87% 78% 78%
Production, koz 21 21 17
Cash cost/oz 563 667 657
AISC/oz 622 730 869
ITY YEARLY PERFORMANCE INDICATORS
For the year ended Dec. 31, Dec. 31,
2018 2017
Tonnes ore mined, kt 1,127 1,410
Strip ratio (incl. waste cap) 2.58 3.71
Tonnes stacked, kt 1,307 1,194
Grade, g/t 2.49 1.85
Recovery rate, % 81% 83%
Production, koz 85 59
Cash cost/oz 646 733
AISC/oz 719 906
2019 outlook
Mining and stacking activities for the heap leach operation ceased mid-December. Residual gold from the heaps, of up to 5,000 ounces, is expected to be recovered in the first quarter of 2019.
Transition preparation and training efforts are under way to shift to CIL production in early second quarter of 2019.
2018 exploration program
The 2018 exploration program amounted to $9-million, totalling 49,600 metres of drilling, focused mainly on the Le Plaque area and Daapleu deposit, resulting in:
- The identification of mineralization in the Le Plaque area where drilling is continuing and a resource is expected to be delineated in the second quarter of 2019;
-
The validation of a high-grade at depth plunge at the Daapleu deposit;
- The identification of mineralization below the leach pad suggesting an extension of the Bakatouo deposit.
2019 exploration program
An exploration program of up to $11-million totalling approximately 71,000 metres has been planned for 2019, with the aim of delineating additional resources at the Le Plaque target, and testing other targets such as Floleu, Daapleu SW and Samuel.
Reserve and resource evolution
As shown on the company's website, the increase in P&P reserves was a result of additional reserve conversion at the Bakatouo deposit, while the M&I resource decreased, albeit less than depletion, due to additional resource delineation.
Tabakoto mine
(discontinued operation)
Tabakoto sale insights
On Dec. 24, 2018, Endeavour completed the sale of its interest in the non-core Tabakoto mine to Algom Resources Ltd., a subsidiary of BCM International Ltd., as previously announced on Sept. 4, 2018.
The total sale price consideration is up to approximately $70-million (U.S.), comprising an upfront cash consideration of $35-million (U.S.) (which was received on Dec. 24, 2018), a deferred cash consideration of $10-million (U.S.) expected in 2019, subject to certain conditions, and a 10-per-cent net smelter royalty on the Dar Salaam deposit, capped at a maximum of 200,000 ounces of gold.
An impairment and loss on sale totalling $41-million were recognized in 2018.
Fourth quarter versus third quarter 2018 insights
Production increased mainly due to higher average head grades, despite a decrease in milled tonnage:
- Open-pit production significantly decreased as the Tabakoto North pit neared its end of life.
- Underground tonnes mined increased due to the end of the rainy season, allowing for improved stope access and productivity.
- Despite a decrease in total milled tonnage, processing activities continued to perform well with throughput rates remaining flat.
- The overall average grade processed increased as per the mine sequence.
- The recovery rate remained flat.
AISC increased, despite lower mining and processing costs, mainly due to higher costs associated with processed stockpiles and higher G&A costs:
- Open-pit mining unit costs decreased from $5.36 to $5.15 per tonne because of a decrease in the open-pit mining activity.
- Underground mining unit costs decreased from $85.92 to $72.10 per tonne due to reduced fleet maintenance costs.
- Processing unit costs decreased from $22.45 to $20.34 per tonne due to decreased reagent consumption.
-
Sustaining capital decreased from $7.5-million to $6.1-million following the increased underground development at the site in the third quarter of 2018.
Non-sustaining capital spend was $1.1-million, down from $8.1-million.
There was zero depreciation and depletion this quarter as the asset was classified as a discontinued operation under IFRS during the period.
Full-year 2018 versus full-year 2017 insights
Production decreased and AISC increased mainly due to a decrease in processed grades following the completion of the high-grade Kofi C pit in 2017 and Kofi B pit in the first half of 2018.
2018 performance versus guidance
Production totaled 115,000 ounces, achieving the bottom end of the guided 115,000-to-130,000-ounce range, while the AISC finished above the guided range at $1,369/ounce.
The lower-than-expected performance is mainly attributable to suboptimal underground equipment availability and associated maintenance costs.
TABAKOTO QUARTERLY PERFORMANCE INDICATORS
For the quarter ended Q4 2018 Q3 2018 Q4 2017
OP tonnes ore mined, kt 108 146 165
OP strip ratio (incl. waste cap) 3.81 5.25 10.33
UG tonnes ore mined, kt 164 143 157
Tonnes milled, kt 417 433 436
Grade, g/t 2.41 2.08 2.20
Recovery rate, % 92% 92% 92%
Production, koz 30 26 28
Cash cost/oz 1,188 1,058 1,170
AISC/oz 1,470 1,420 1,411
TABAKOTO YEARLY PERFORMANCE INDICATORS
For the year ended Dec. 31, 2018 Dec. 31, 2017
OP tonnes ore mined, kt 572 647
OP strip ratio (incl. waste cap) 6.98 8.89
UG tonnes ore mined, kt 601 756
Tonnes milled, kt 1,714 1,640
Grade, g/t 2.28 2.90
Recovery rate, % 92% 94%
Production, koz 115 144
Cash cost/oz 1,055 929
AISC/oz 1,369 1,148
Ity CIL project construction: ahead of schedule and on budget
Construction is progressing on budget and two months ahead of schedule with the first gold pour expected in early second quarter of 2019.
Ity is expected to produce 160,000 to 200,000 ounces in 2019 at an AISC of $525 to $590/ounce, with the bottom-end production guidance corresponding to the nameplate capacity while the top-end factors possible upsides such as an earlier start date, a quicker-than-expected ramp-up and the plant producing above its nameplate.
The major milestones achieved to date include:
- Over eight million man-hours have been worked without a lost-time injury.
-
Overall project completion stands at more than 98 per cent, tracking approximately two months ahead of schedule.
- The project remains on budget with the remaining cash outflow for 2019 amounting to $50.0-million to $60.0-million. As at Dec. 31, 2018, the total project spend to date for capital expenditure stands at $374-million, which includes approximately $308-million of cash outflow, $50-million of leased equipment and $16-million of non-cash working capital.
- The ball and SAG (semi-autogenous grinding) mill commissioning has been completed and, in preparation for production, ore was introduced into the process plant milling circuit with all the CIL tanks filled and agitators commissioned.
- The dry plant has been successfully commissioned.
- The oxygen plant mechanical and piping installation is nearing completion and commissioning is expected to soon commence.
-
The tailings storage facility construction is complete.
- The 11-kilovolt switch room and 11 kV overhead power line have been commissioned, the 90 kV transmission line construction is nearly complete, and the backup power station has been commissioned.
- The Daapleu haul bridge construction and river diversion have been completed.
- The resettlement of Daapleu is complete and the official ceremony of handing over the houses took place on Dec. 10, 2018.
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Construction of the 312-room permanent employee camp, messing and staff recreation facilities is complete.
- Prestripping commenced at the Bakatouo and Ity Flat deposits in late 2018.
- Demobilization of construction personnel has begun following the completion of key construction milestones, and operating teams are in place with training programs well under way.
Kalana project update
The Kalana exploration program in 2018 amounted to $7-million comprising approximately 48,000 metres of drilling, focused primarily on the Kalana Main deposit and to a lesser extent on the Kalanako deposit.
At the Kalana Main deposit, the infill drilling program improved the geological model and converted a portion of the previously classified inferred resource in the northeastern part of the deposit to the indicated category.
The 2016 Kalana Main mineral resource estimate (MRE) as prepared by Avnel (the previous owner) was updated following a rebuild of the geological model using a more conservative approach to incorporate tighter geological controls for the high-grade nugget effect, stacked vein sets and dilution.
Endeavour considers the updated 2019 Kalana Main geological model to be a more robust and accurate model as:
- The geological model was updated with over 30,000 metres of infill drilling completed since the project was acquired in late 2017. In total, more than 2,200 holes and more than 221,000 assays (including over 103,000 LeachWell assays) were used to refine the geological model.
- A total of 135 veins within 61 vein packages were individually modelled as opposed to the previous approach of applying geostatistics to 56 grouped vein packages, and thereby provided an upgraded confidence in the vein packages/domain boundaries.
-
Mineralized intersections outside of the defined wireframes where continuity was not proven were excluded.
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The cut-off grade was lowered from 0.9 g/t Au to 0.5 g/t Au.
As illustrated in associated table table, the M&I resource grade has been decreased from 4.14 g/t Au to 2.69 g/t Au based on the above-mentioned changes. For reference, the 2016 P&P reserve grade stood at 2.80 g/t Au.
KALANA MAIN DEPOSIT M&I RESOURCE EVOLUTION (2016 AVNEL VERSUS 2019 SNOWDEN ESTIMATES)
(on a 100-per-cent basis)
Previous 2016 Updated 2019
M&I resource (1) M&I resource (2)
Cut-off grade (g/t Au) 0.9 0.9 0.5
(for comparative purpose) (as reported)
Tonnage (Mt) 23 18 27
Grade (g/t Au) 4.14 3.70 2.69
Content (Au Koz) 3,060 2,092 2,287
Mineral reserve estimates follow the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions standards for mineral resources and reserves and have been completed in accordance with the Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101. Reported tonnage and grade figures have been rounded from raw estimates to reflect the relative accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
(1)
As per Avnel calculated resources as at March, 2016, based on $1,400/ounce. For the notes related to the 2016 resource estimate, please consult the Kalana technical report dated March 30, 2016, available on the Endeavour website.
(2) The updated 2019 mineral resource has an effective date of Feb. 8, 2019, and is constrained by a $1,500/ounce conceptual pit shell. For the notes relating to the 2019 resource estimate, please consult the section entitled Kalana resource modelling. The qualified person for the 2019 updated resource is Geoff Booth, FAusIMM, mining consulting manager, Snowden Mining Consultants.
The Kalana Main resource estimate is robust based on a lower gold price pit shell, as shown in the associated table.
2019 KALANA MAIN M&I RESOURCE SENSITIVITY TO GOLD PRICE (0.5 G/T AU CUT-OFF)
Based on $1,250/oz pit shell Based on $1,500/oz pit shell
(on a 100-per-cent
basis) Tonnage Grade Content Tonnage Grade Content
(Mt) (Au g/t) (Au koz) (Mt) (Au g/t) (Au koz)
Indicated resources 25.4 2.71 2,204 26.6 2.69 2,287
Inferred resources 4.9 2.83 443 6.4 2.75 564
Mineral reserve estimates follow the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions standards for mineral resources and reserves and have been completed in accordance with the Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101. Reported tonnage and grade figures have been rounded from raw estimates to reflect the relative accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Endeavour updated the mineral resource estimate for the nearby Kalanako deposit based on the additional drilling conducted, as presented in the associated table.
2019 KALANA PROJECT CONSOLIDATED MINERAL RESOURCE ESTIMATE AS AT FEB. 8, 2019
(on a 100-per-cent basis)
Tonnage Grade Content
(Mt) (Au g/t) (Au koz)
Kalana Main
Measured resources - - -
Indicated resources 26.6 2.69 2,290
M&I resources 26.6 2.69 2,290
Inferred resources 6.4 2.75 560
Kalanako
Measured resources - - -
Indicated resources 2.1 2.27 150
M&I resources 2.1 2.27 150
Inferred resources 0.2 4.66 25
Tailings
Measured resources - - -
Indicated resources 0.7 1.75 40
M&I resources 0.7 1.7 40
Inferred resources - - -
Total Kalana project
Measured resources - - -
Indicated resources 29.4 2.62 2,480
M&I resources 29.4 2.62 2,480
Inferred resources 6.6 2.78 585
Mineral reserve estimates follow the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions standards for mineral resources and reserves and have been completed in accordance with the Standards of Disclosure for Mineral Projects as defined by National Instrument 43-101. Reported tonnage and grade figures have been rounded from raw estimates to reflect the relative accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
The updated 2019 mineral resource has an effective date of
Feb. 8, 2019, and is constrained by a conceptual $1,500/ounce pit shell. The qualified person for the Kalana Main resource estimate is Geoff Booth, FAusIMM, mining consulting manager, Snowden Mining Consultants. The qualified person for the Kalanako estimate is Helen Oliver, FGS, CGeol, Endeavour Mining. The qualified person for the tailings resource is Ivor Jones, FAusIMM, principal, Denny Jones Pty. Ltd.
An exploration program of up to $4-million totalling approximately 23,000 metres is planned for 2019, with the aim of testing nearby targets and initiating work on the Fougadian licence.
The updated 2019 mineral resource will be used as a basis for an updated feasibility study which is expected to be prepared for the fourth quarter of 2019.
In parallel to working on the Kalana feasibility study and further testing of exploration potential, Endeavour intends to review its other available internal growth opportunities. Based on Endeavour's capital allocation strategy, the Kalana project investment case will be reviewed against its other internal growth opportunities and uses of capital.
Exploration activities
2018 exploration activities
As shown in the associated table, a total of $53-million of exploration expenditures were incurred in 2018 with details by asset provided in the mine sections.
The 2018 exploration program mainly focused on delineating the potential at Endeavour's two flagship mines (Hounde and Ity) and on developing Endeavour's organic growth potential (Kalana, Fetekro and other greenfield properties).
EXPLORATION EXPENDITURES
(in millions)
2018 actuals 2019 guidance
Agbaou 4 about 2
Tabakoto 6 0
Ity mine and trend 9 about 11
Karma 3 about 2
Kalana 7 about 4
Hounde 14 about 17
Fetekro 4 about 7
Other greenfield properties 5 about 4
Total exploration expenditures* 53 45-50
* Includes expensed, sustaining, and non-sustaining
exploration expenditures.
2019 exploration activities
Exploration will continue to be a strong focus in 2019 with a company-wide exploration program of $45-million to $50-million, with approximately 20 per cent expensed, 5 per cent sustaining and 75 per cent non-sustaining.
The main focus is expected to continue to be near-mine exploration at Endeavour's two flagship mines (Hounde and Ity) and continue to develop organic growth opportunities such as Kalana, Fetekro and other greenfield properties:
-
At Hounde, additional resource delineation is expected, notably at the Kari Pump, Kari Centre and Kari West targets.
-
At Ity, additional resource delineation is expected, notably at the Le Plaque target.
- Greenfield exploration efforts are expected to be primarily focused on delineating additional resources at the Fetekro property. In addition, work will also be conducted on other exploration licences in Ivory Coast (such as on the Bondoukou cluster and the Mankono-Sissedougou JV with Barrick), on the Siguiri licence in Guinea, and on the Kofi North and Netekoto licences in Mali.
Group reserves and resources
Measured and indicated (M&I) resources amounted to 14 million ounces at year-end 2018, up 900,000 ounces or 7 per cent over the previous year, as mine depletion was more than offset by the maiden resources delineated.
Proven and probable (P&P) reserves for continuing operations amounted to eight million ounces at year-end 2018, down 600,000 ounces or 7 per cent over the previous year, mainly due to the time lag between resource delineation and reserve conversion. An updated reserve is expected to be published for the Hounde mine in mid-2019 following the 987,000-ounce maiden indicated resource outlined at the Kari Pump discovery.
2019 outlook
Group production from continuing operations is expected to increase to 615,000 to 695,000 ounces in 2019 and AISC is expected to be between $760 and $810/ounce due to the benefit of the Ity CIL project coming on line in early second quarter of 2019. More details on individual mine guidance have been provided in the earlier sections.
PRODUCTION GUIDANCE FROM CONTINUING OPERATIONS
(all amounts in thousands of ounces, on a 100-per-cent basis)
2018 actuals 2019 full-year guidance
Agbaou 141 120-130
Ity 85 160-200
Karma 109 105-115
Hounde 277 230-250
Group production 612 615-695
AISC GUIDANCE FROM CONTINUING OPERATIONS
(all amounts in $/ounce)
2018 actuals 2019 full-year guidance
Agbaou $819 $850-$900
Ity 719 525-590
Karma 840 860-910
Hounde 564 720-790
Corporate GXA 43 35-35
Sustaining exploration 12 5-5
Group AISC 744 760-810
As detailed in the associated table, sustaining and non-sustaining capital allocations for 2019 amount to $68-million and $83-million, respectively. Growth projects amount to $64-million, mainly for the completion of the Ity CIL project construction. More details on individual mine capital expenditures have been provided in the earlier sections.
CAPITAL EXPENDITURE GUIDANCE
(all amounts in millions)
Sustaining Non-sustaining Growth
capital capital projects
Agbaou $24 $8
Ity 1 2 $55
Karma 5 24
Hounde 35 7
Kalana 0 0 9
Exploration 3 36
Corporate (mainly comprised
IT systems across the group) 0 6
Total 68 83 64
Exploration will continue to be a strong focus in 2019 with a company-wide exploration program of $45-million to $50-million, with approximately 20 per cent expensed, 5 per cent sustaining and 75 per cent non-sustaining.
A short-term gold revenue protection strategy was entered into in early 2018 to protect the company's cash generation during the Ity CIL construction period, beginning on Feb. 1, 2018, and ending on April 30, 2019. The program consists of a deferred premium collar strategy using written call options and bought put options with a floor price of $1,300/ounce and a ceiling price of $1,500/ounce. The program initially covered a total of 400,000 ounces and as at Dec. 31, 2018, a total of 107,000 ounces remained. Once these contracts expire, Endeavour will return to a position where its gold production is fully exposed to spot gold prices.
Conference call and live webcast
Management will host a conference call and live webcast today at 8:30 a.m. Eastern Standard Time to discuss the company's financial results.
The conference call and live webcast are scheduled at:
- 5:30 a.m. in Vancouver;
-
8:30 a.m. in Toronto and New York;
-
1:30 p.m. in London;
-
9:30 p.m. in Hong Kong and Perth.
Analysts and investors are also invited to participate and ask questions using the dial-in numbers below:
International: 1-631-510-7495
North American toll-free: 1-866-966-1396
U.K. toll-free: 0-800-376-7922
Confirmation code: 5693456
The conference call and webcast will be available for playback on
Endeavour's website.
Quality assurance/quality control procedures
The sampling and assaying at Kalana and Kalanako were monitored through the implementation of a quality assurance/quality control (QA/QC) program with the use of certified reference materials (standards), blanks and duplicates inserted into the sample stream by Endeavour geologists.
QA/QC results are reviewed on a certificate basis and failed samples are identified and reassayed according to the Endeavour QA/QC protocol.
The Kalana exploration database is held within a propriety electronic secure database system with a dedicated database manager.
Qualified persons
Gerard de Hert, EurGeol, senior vice-president, exploration, for Endeavour Mining, has reviewed and approved the technical information in this news release. Gerard de Hert has more than 20 years of mineral exploration and mining experience and is a qualified person as defined by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
About Endeavour Mining Corp.
Endeavour Mining is a Toronto Stock Exchange-listed intermediate African gold producer with a solid record of operational excellence, project development and exploration in the highly prospective Birimian greenstone belt in West Africa. Endeavour is focused on offering both near-term and long-term growth opportunities with its project pipeline and its exploration strategy while generating immediate cash flow from its operations.
We seek Safe Harbor.
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