Full Year 2021 Endeavour Mining PLC Earnings Call
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Good afternoon, ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the NN dailies Mining's fourth quarter and full year 'twenty 'twenty. One results conference call. At this time all participants are in listen only mode helped them on H M. S presentation, there will be a question and answer session.
We know that due to time constraints would be prioritizing question from covering analyst.
Today's conference call is being recorded and it drastically political will be available on the Endeavours website tomorrow.
I would now like to hand over the conference to my nature Madam. Please go ahead.
Hello, everyone I am Martino, the teacher, Vice President strategy, and Investor Relations and I'd like to welcome you to Endeavour's Q4, and full year 2021 results webcast.
Before we start please note the usual disclaimer.
On the call today, I am joined by Sebastian Mark Joanna and Patrick.
Sebastian will start by recapping, our 2021 accomplishments and finished by outlining the key priorities for 2022 in the second section drama will start by walking through our Q4 financial results and then Mark will walk you through our detailed operational results buying by mine.
As usual, we will be as quick as possible to leave sufficient time for questions at the end of the call.
Now I'll hand, it over to Sebastian.
Thank you Martino and Hello to everyone on the call it's great to be speaking again too.
2021 was a very successful year for us, where we achieved a number of accomplishments across the business.
Do you also mark the culmination of all our hard work over the last five years to transform the company as you recall our goal has been and continues to be to create a resilient business capable of generating sufficient cash flow to reinvest into the business from the exploration and growth and reward our shareholders.
2021, therefore marked an important milestone.
It was the first year, where we were able to do all of these.
If you remember between 16 and 19, we focused on building E T and Hyundai.
In 2020, we focused on reducing our net debt and we consolidated our position in West Africa with the acquisition of semi phone and Taronga.
And last year after reaching a net cash position, we started rewarding shareholders with the launch of our shareholder returns program, while continuing to strengthen our balance sheet.
Looking a bit more closely at the 21 key themes, we highlighted six of them on stage, which we will cover in more detail throughout the presentation.
First is our continued success on the operational front, where we have now met or exceeded guidance for the last nine years.
The strong performance allow us to generate $1 $2 billion in operating cash flow, which created significant flexibility in covering our capital allocation priorities.
We finished the year with a similar net cash position as we started at the beginning of the year with approximately $76 million.
This is a strong achievement considering that we absorbed $313 million of debt from Taronga in Q1.
And we also declared $278 million in shareholder returns in the form of both dividends and buybacks.
This is more than two times, our minimum commitment for the year.
During 'twenty one we also continued to progress our organic growth pipeline.
We notably completed our previous five year exploration strategy by discovering $11 5 million ounces of indicated resources.
Given its success, we proceeded to launch all makes five year strategy, which aims to discover between 15 to 20 million ounces.
On the project side, we completed the phase one expansion at some other on Massawa and advanced a number of the F. S studies.
On the ESG front, we published on your strategy last June which reflects our biggest size of ambitions. We are making good progress on a number of initiatives and we look forward to providing a detailed update when we publish our sustainability report in May and.
And finally, we achieved an important milestone with the successful completion of our premium LSE listing we are now very well positioned in the UK space and are seeing strong investor demand in particular as well again FTSE 100 indexation from next Monday.
Before I move to the body of the presentation I'd like to take a moment to thank Michael decades, who will be retiring from the board. After 12 years as chair at the next AGM in May.
Michael has been a mentor for me and his advice and support has been instrumental to our collective success.
Given we have built a resilient high quality business.
The nation community has been well positioned to attract high caliber board members capable of supporting us through our next phase.
The board and I are extremely is thrilled to welcome venkat as our incoming new independent Nonexecutive chair of the board and Ian Cockerill as our senior independent director.
Both venkat as former CEO of Anglogold and Ian as former CEO of Goldfield are seasoned veterans in our industry in particular in Africa, and we are extremely lucky to be able to benefit from their leadership and knowledge. Those changes we look who are following our AGM end of May.
Turning now to slide seven we see the operational and financial highlights for the year.
We produced over one 5 million ounces at a low all in sustaining cost of $885 per ounce cementing our position as a leading global gold producer and the largest in West Africa.
This allows us to generate almost $1 2 billion in operating cash flow and $1 5 billion in EBITDA for the full year.
On a per share basis, our operating cash flow before working capstone and our adjusted net earnings were both up which is nice to see given our focus on per share metrics.
Turning to slide eight you can see how we performed against our operating targets safety is our first priority and we're happy to continue performing well with a lost time injury frequency rate remaining significantly lower than the industry average however, even though our safety performance is industry, leading we bill.
There is always room to improve and we continue to make it a priority to drive that figure even lower.
With respect to operating performance production for the full year beat our guidance, while the audience sustaining cost was within the guided range, which was particularly pleasing given the inflationary backdrop.
As you can see on slide nine our production increased by over 600000 ounces year on year, largely due to the acquisitions of some other on massawa and one of them, but also thanks to the strong performance at E T and Hyundai.
I'm, particularly pleased with the diversification of our portfolio as you can see in the bottom right Pie chart. Our productions come from six operating mines in three countries. Following the divestment of the Karma and liked by the mines with no one mine accounting for of the bulk of the production.
Regarding our production cost we are proud to have kept our all in sustaining cost in line with the previous year. Despite the inflationary pressures I mentioned a moment ago.
Turning to slide 10 on this page you've seen blue operating cash flow and in Gray, our annual Capex spend which I think illustrates the inflection point for endeavour from an investment phase to a cash flow phase.
You see it up from 2017 until mid 2019 was our investment phase when we built Hyundai and E. T commencing in the second half of 19, we began to being positive free cash flow territory, which has been growing ever since and we benefited from those earlier investments.
In 'twenty, one operating cash flow increased by 57% over 'twenty due to increased production from two of our flagship assets E. T. N. D. The addition of the Taronga assets, which were acquired in February and a full year of operations from the former <unk> assets, which were acquired in mid 'twenty.
In addition, we benefited from a higher gold price environment, we are not in a position where we can continue to meaningfully invest in the business, while still generating positive free cash flow.
Given that increasing our cash flow generation I think it is important to highlight how our capital allocation priorities are they vote, which are illustrated on page 11.
As I mentioned in my opening remarks, 21 was a hallmark here for US is it was the first year of many to come I hope in which we were able to take all the boxes of our capital allocation framework.
You can see on this page that we have created a resilient business that can generate sufficient cash flow to reinvest into the business in the form of sustaining and non sustaining capital provide economic contributions to governments, where we operate fund exploration and growth all while maintaining a healthy balance sheet and offering attractive shell.
Returns.
To give you some context on our balance sheet since completing the construction of E. T. We have significantly reduced our net debt from $660 million that mean 19 to a net cash position of $75 million by the end of 'twenty.
We then absorbs $332 million of net debt from Taronga in 'twenty, one photo in which we continued to reduce our leverage finishing the year with a net cash balance of $76 million.
Notably we did this while simultaneously paying down the debt and paying out $268 million to shareholders during the year.
On slide 13, you can see more detail on how we are tracking against our shareholder returns commitment as you recall, we have outlined a three year dividend policy to pay a progressive fixed minimum dividend, which increases each year with the aim of distributing a cumulative minimum of just over $500 million by the.
And a full year 'twenty three.
For 'twenty, one we exceeded our minimum dividend of $125 million paying $140 million.
In yellow you can see that in addition to our Suppli mental dividend, we executed $138 million in share buybacks during the year.
Looking at the waterfall chart, you'll see that since paying a maiden dividend in February 'twenty, one we've returned over $338 million to shareholders.
For context. This is near the equivalent of the Capex required to build a new mine.
We hope this shows how committed we are to delivering shareholder returns.
To put these shareholder returns numbers in context for full year 'twenty. One for every single ounce of gold we produced in 'twenty. One we returned $180 to our shareholders, which was equivalent to 10% of our revenues or 24%, although operating cash flow.
Perhaps a more conventional measure of shareholder returns is yield where the dividend plus buyback implied yield stand at about four 6%.
Turning to slide 15, we highlight our return on capital employed performance over recent years.
As you know we target a 20% return on capital employed across our business, which we achieved in 'twenty.
These came down slightly in 'twenty one following the addition of the newly acquired assets. However, we expect the return on capital employed to increase in the upcoming years.
And it is easy to see why we can make this claim with conviction on this slide in the middle of the screen you see that we are achieving a very high plus 40% rocky for our legacy assets.
A key driver has been our ability to optimize the assets and unlock values for exploration.
It is particularly noticeable at whom they were the spike in 'twenty came on the back of the starting to mind, a high grade Kari pump discovery.
On the right hand of the page you see the return on capital employed for the acquired assets based on the purchase price allocations. While these amounts are currently below our target we expect to increase them given the ongoing optimization programs and a strong exploration potential we see.
On the left hand side of the page you see the breakdown of our capital employed some other land Massawa represents the bulk for the group while it's rocky is the lowest this is a timing issue as we expect its rocky to be unlocked once the phase two expansion is completed.
Speaking about gross plans that's a good lead into the next slide where we highlight our key growth projects.
We have an attractive pipeline of growth projects, which compete for capital internally.
Our priority is the subdued on Massawa phase two expansion.
The successful completion of the phase one expansion to the backend of the existing plant came in below budget and on time in December last year, and we expect to restart reaping the benefits of these upgrades. This year as we start to see the higher grade ore from the Massawa central and North zone pits, while working on phase one we've been simultaneously finalizing the DFS.
As to which we expect to publish in the coming weeks.
Our Greenfield development pipeline is also progressing well.
On the authentic real property, we expect to publish the DFS during the second quarter, while at Kalana, we working on advancing some of desktop work that contributes to the DFS and.
Expect to publish the DFS results later this year.
Both projects looks attractive and thanks to the loan production visibility we have from our portfolio. We have the flexibility to decide when is the optimum time to launch one of these projects into construction.
In the meantime, turning to the next slide you can see the continued importance of our refreshed exploration efforts with an $80 million budget committed for 'twenty two.
We firmly believe that the greenstone belt in West Africa is one of the world's most prospective and under explored belts and we are strategically position as the largest player in the region to continue to reap the benefits.
Why are we so confident well on slide 19, you see that during the year, we discovered over 3 million ounces of indicated resources and over 11 million ounces since 2016.
This marked the successful completion of our five year target of discovering between 10 to 15 million ounces.
As we continue to have high confidence in exploration success late last year, we published our new five year target, which you see on the next slide.
Yeah.
Owing to a larger group size, we're not targeting between 15 and 20 million ounces of indicated resources discoveries over the next five years, while maintaining a discovery cost of below $25 per ounce.
This represents discovering more than two times, our annual mine depletion at a cost that is over three times lower than the global average discovery cost.
In this graph you can see in blue the existing on Susan Grey. The answer is we expect to find discovering this answer is directly linked to our capacity to increase our return on capital employed as we mentioned earlier and will unlock value for shareholders.
Yeah.
Before handing over to Joanna I want to touch on a London listing that was completed in June last year.
Given our strong fundamentals. The fact that we are the largest pure gold producer on the LSE. Both in terms of annual production and market cap, we are well positioned to attract new investors looking for broad exposure and we expect to see the full benefit this year.
A key stop the key steps for US is how much of the free float shares are held in the U K and that number stands now at 24%.
We believe this is a good figure given that we havent raised equity along with our listing that may have raised liquidity, but would have been completely counterintuitive to our focus on shareholder returns.
Another key stats is the LSE trading liquidity and since listing on the LSE, 26% of Orlando shares have now been traded on the LSE and its associated over the counter exchange.
Our goal is to continue to increase liquidity in the U K and we believe that innovation and strong marketing efforts will help.
We've also noticed that trading liquidity in the UK doesn't tell the whole story.
Given where Elisa listed will tick the box and now now investable for certain funds. However, there could be there could very well by the shares on the <unk> and bring them over to the U K.
The last indicator is tracking how many new U K and European shareholders have been that have been added to the resistor. Following the LSE listing and that Amazon is climbing we.
We expect it to continue to climb as we all know about to reach a new milestone FTSE 100, inclusion, which is set to take place on Monday of next week.
Overall, it's good news for current shareholders as we expect this will drive further demand for our shed. Once you are a part of the larger indices and visible to the broader market investors tends to note to not only compare you against your peers, but also against other sectors and I believe that we stack up very well on that front too.
Looking ahead, we may be considered for more in this is later this year, which could drive additional incremental demand for our shares.
I will now hand over to Joanna to talk you through our quarterly financial results.
Thank you Sebastian.
Oh.
Right.
Yes.
Great. Thanks, John production at 16000 ounces over the previous quarter, while all in sustaining costs cost was up modestly at 1% over the quarter.
This strong production was driven by good performances from the Hyundai manner and when you're online.
We are continuing to generate significant margins given our low all in sustaining cost and the high gold price environment.
Make sure that we will continue to generate healthy margins, we have put in place a revenue protection program similar to the one that we implemented during the construction of our two flagship assets when they entity.
Late last year, we entered into a low premium collar for 75000 ounces of production a quarter starting in Q1, 2022, which extends until Q4 2023.
Securing a put price of 17 57 $750 per ounce and a call price of $2100 per ounce for a premium of $10 million, which we paid in Q4. This insurance that we protect our exposure to gold prices.
We advanced our pipeline for organic growth projects.
We also entered into forward sales contracts for approximately 520000 ounces in 2022, and 120000 ounces in 2023, securing a price of around $30 per ounce, which ensures that we continue to generate healthy margins and increases cash flow visibility during the upcoming investment base.
On Slide 24, you can see the trend of our operating cash flow, which increased by $44 million or 14% over the third quarter.
As Sebastian mentioned earlier for the full year, we generated close to $1.2 billion in operating cash flows.
Moving to slide 25, you can see the bridge between Q3 and Q4 operating cash flows living.
Moving from left to right you see that we benefited from a slightly higher realized gold price. We then had higher operating expenses, which were largely driven by higher royalties corporate cost and the cash impact of negative movements in foreign exchange.
These were partially offset by lower mine site operating expenses.
We then had the benefit of lower taxes paid on the working capital and close in the quarter.
The working capital inflow was an inflow mainly due to an inflow in payables from an increase in payables and Dan manner, and an inflow in receivables due to a decrease in receivables related to amounts received from a contractor at our any money.
Moving to the next slide on page 26, we illustrate how our financial position strengthened during the year.
We ended the quarter with a net cash position of $76 million, an improvement of $146 million over Q3, and we're trying to balance sheet to a net cash position once again.
As mentioned previously our operating cash flow was $356 million for the quarter investing activities saw that sort of $132 million compared to sustaining and non sustaining capital expenditures as well as a limited amount of course capital mainly for the completion of the phase One project that's up at all in our power and the ongoing study work that our near term developments.
By financing activities for the quarter, an outflow of $71 million due to share buybacks and financing fees.
We also recognized a foreign exchange gain of $79.
At quarter end year end Endeavour's liquidity remained strong with $906 million of cash and $500 million Undrawn and Rcs.
Moving to the next slide we touch on our new debt structure. Following our successful refinancing conducted in the fourth quarter.
We refinanced our existing RC up in corporate loans, with a new $500 million unsecured RC app and a $500 million of fixed rate senior bond a $500 million senior notes have a 5% fixed coupon that paid semi annually and matures in October 2026 proceeds from the notes issued were used to repay all of our notes outstanding under the two.
<unk> existing loan facilities.
This now leaves us with a diversified long term and low cost capital structure.
We also have the $330 million in convertible notes outstanding with a 3% coupon payable semi annually and maturing in February 2023.
We retain the flexibility to redeem these notes in cash, which given our focus on per share metrics would be our preference.
Moving to slide 28, we have a detailed breakdown of our net earnings for the past two quarters as usual I won't go through every line here, but it will address a few of the most significant items.
And no one you see that the increase in corporate costs, primarily due to the integration of the telephone trying to assets as well as seasonally higher costs associated with bonus payments.
And no two you see that we recognized an impairment for 2020 , one, which primarily consists of a $246 million impairment apartment demand.
The oven with reserves have increased by 110000 ounces compared to last year and we continue to believe that there's exploration upside it depends a mine there.
Recoverable amount based on our impairment testing has decreased relative to the fair value that was recognized at the acquisition date of July 2020.
The recoverable amount calculated has decreased as the current year model was based primarily on our reserve case with updated cost and production parameters. While the previous plan included more resource to reserve conversion and exploration upside.
Our updated valuation model reflects the current security environment at the <unk> mine and increased costs associated with the operations as it relates to the securely logistics as well as the limited exploration activities undertaken on higher grade targets due to security constraints.
As for Karma, we've looked at $12 million impairment unexpected fair value of the consideration received at the closing of the sale.
Three you see that the gain on financial instruments during the quarter was due to an unrealized gain on the revaluation of the conversion option on the convertible notes and again on other financial instruments, including the gold color on the phone and sounds like a part of our revenue protection program.
When looking at the bottom line you see that our adjusted net earnings for the quarter was three cents below Q3 at 58 cents per share.
I will now hand, it over to Mark to walk you through our operating results mine by mine Mark. Thanks.
Thank you Joanna and Hello to everyone on the call.
Before taking you through the performance of each asset I would like to touch briefly on our overall performance for the year.
Sebastian and Joanna mentioned, our operational performance for 2021 was strong and reflects the benefit of having multiple mines in multiple jurisdictions in our portfolio.
Looking at the production bridge on Slide 30, our core legacy mines exceeded their 2020 output. While the addition of skip a dollar Massawa and one you provided nearly 500000 ounces of additional production.
The result was a record year for endeavour producing out of the $1 5 billion ounces.
In terms of costs. We have also performed very well achieving a garden. Despite some of the inflationary pressures that our industry is facing.
This is testament to the hard work that is being done on the ground to both manage costs and optimize operations to ensure that our costs continue to improve on a relative basis.
Our goal is to remain in the borrowing cost quartile among our peers.
Moving onto slide 31. This shows the evolution of our reserves and resources at HSN.
Overall, the group reserves remained flat year on year net of depletion while resources were up 4%.
Having said that we are waiting on some of the recently discovered resources to be converted into reserves.
To give you a bit more color on this it relates to the timing of completing drill programs and resource model update and in the finalization of necessary geotechnical and metallurgical test work to support the model.
While this has been completed at ETE and lift gate. We are currently in the process of completing the work for Hyundai and Tebo dollar Massawa, hence the increased resources and decreased reserves shown for last year.
If we're looking at the detail we made good progress at <unk>, where drilling has been underway over year, resulting in $1 7 million ounces being discovered.
At $7 1 million exploration was limited as we needed time post acquisition to development of new programs for 2022 onwards.
The drilling campaign for Boongary related to extensional drilling around the existing pit whilst Atlanta. The focus was on early stage work.
I will now talk to each of the mines in detail starting with Abdullah Massawa on the next slide.
Quarter on quarter production performance was stable.
<unk>, mainly from the <unk> and Sofia mine pits.
Supplemented by ore from the $7 paid.
All in sustaining cost decreased during the quarter due to slightly increase operating costs offset by additions to all stop pause and supported by decreased sustaining capital spend.
Looking forward to 2022 seven done on Massawa is expected to produce between 360 and 375000 ounces at an all in sustaining cost of 675 to $725 per ounce.
It will be sourced initially from the Sofia north pit with supplemental feed coming from the <unk> in the first half of 2022.
Morning commenced at Massawa Central in January this year, along with Massawa North.
The third portion of the ore bodies, we will provide an increasing contribution to see how youll gold production as the year progresses.
One interesting opportunity that we're looking at is the use of fully depleted <unk> storage.
This approach is used very successfully in many parts of the world and has multiple benefits, particularly on the environmental side, including increasing water recycling back filling a pit voids and deferring or eliminating the need to take further land to construct new tailings storage facilities.
Turning to the next slide we have been busy with a number of projects. That's Abdallah Massawa since we acquired the asset.
Continuing from the work that turning around to access and establish the Sofia pits. We have now successfully commenced mining at the massawa pits and upgraded the old Massawa exploration camp for the minor increase to stay closer to the new operations.
We are also installing a 30 kilometer power on to link the massawa facilities to the existing seven dollar Palace station.
The $7 and Medina affiliates relocations are also well advanced.
The phase one plant expansion was completed on budget and on schedule in December last year.
So we now have a gravity circuit additional aging time and improved carbon management capacity and the processing plant will in preparation for the higher grade ore from the Massawa central and northern pits that will start coming through this year.
At the same time, we've been progressing the DFS for phase two expansion, which will add a refractory oil prices, who plan to allow us to process. The heartbeat all from the Massawa deposits.
<unk> is on track to be completed later this quarter and given that the study is well advanced or I can give you a flavor of what the project will look like.
The graphic on the right hand side shows the updated plan design and incorporate some key changes that have been made since the touring a PFS was published in August 2020.
We are so focused on constructing a $1 2 million ton per annum, standalone buyouts client, however, rather than better crush the box food using the existing CIL crushing circuit, we have added a separate pressure to improve claim management and prevent refractory and non refractory ore from becoming cross contaminated.
We've also added a gravity circuit to recover any frigo and flotation plant of cells to improve the quality of the concentrate that will be fit the box reactors.
Lastly, we've added further reagent storage process services and backup power to ensure that the plant can operate uninterrupted to keep the bacteria healthy which is a key element to the success of a biopsy.
I look forward to sharing the results of the DFS with you all in the coming weeks.
Moving onto <unk> on slide 34.
2021 was a record year for production, while all in sustaining costs remain below $850 per ounce.
Production was higher than 2020 due to increased tons milled, while grades remained relatively consistent.
The key factor in the success of Honda has been the Kari pump.
Which has grown rapidly from discovery to becoming a significant all source, providing high grade oxide ore to the processing plant.
Kari pump will remain a key ore source for the first half of 2022 before the focus shifts to waste stripping of the next phase of the pit.
At this time, we plan to increase the amount of faith from Kari West, which although slightly lower grade will be blended with the stockpiled Kerry palm pool to maintain the fleet right.
Following a record 2021 performance.
<unk> is expected to produce between 260 and 275000 ounces for 2022 at an all in sustaining cost of 875 to $925 per ounce.
Mill throughput average processed grades and recoveries are expected to remain broadly consistent with 2021 and mining activities will be spread quite uniformly between the kari pump Kari west and visually mine pits.
We are also advancing well in the next two years it will rise, which we expect to complete ahead of the wet season.
Turning to <unk> full year production increased significantly compared to 2020 increased throughput while all in sustaining costs increased slightly high.
Mill throughput was achieved buffeting supplemental OXXO to walk through the surge bin which is used to process. Some of the higher moisture content OXXO tool that can slow down the crushing and milling you fit through the crusher.
During the second half of 2021, we opened up access to the La <unk> pit for iron ore with a whole road and commenced mining.
Over the past few years, the overall layout at EV has improved significantly following the completion of a number of small residual vision to open up new areas or in the Becker to Walter and column two peaks.
This has significantly improved mining conditions enabled further cutbacks and provided new areas for exploration team to add near mine resources.
Looking ahead to 2022 is expected to produce between 255 and 270000 ounces at an all in sustaining cost of 850 to $900 per ounce.
It will be mined from the Le plaque they play it back to Walter and Collins who'd pit this will be supplemented by ore from historical Dumbs at first waste and hate to.
Money at the current phase of the play will be completed in the first half of the year with increased contributions of higher grade ore from <unk> and multi pit in the second half of the year.
A favorable rise will be completed on the existing TSA for perforation works, including permitting land compensation and clearing will commence for the new TSA in the second half of the year.
Turning to <unk> on slide 36 production was higher year on year, but trended lower as the year progressed due to a decrease in the oil feed grade, which was partially offset by a higher throughput rate.
All in sustaining cost increased due to the significant increase in mining volumes. Following the recommencement of open pit mining in quarter, four 2020, and a full year of mining in 2021.
Looking ahead to 2022 <unk> is expected to produce between 130 and 140000 ounces at an all in sustaining cost of 900 to $1000 per ounce.
Morning activities in the first half of 2022 will focus on waste stripping in ore extraction from the east pit and waste stripping in the west pit.
In the second half of 2022 stripping activities will continue in both periods, while all will be sourced mainly from the west pit.
We will continue to optimize the processing plant throughout the course of the year to increase throughput.
Moving to slide 37 men had a very strong 2021 with production, beating our guidance, while all in sustaining costs within Lockheed gardens.
This was due to the successful transition of open pit mining from wine in all stage III to widen a SaaS stages, two and three which room on concurrently.
Development of the C. Wonder brand was largely completed during the year with the contribution from start production increasing as the year progressed.
Kathryn development at the <unk> underground commenced in the last quarter of the year.
Following the stellar outperformance in 2021 mandate is expected to produce between 170 and 190000 ounces in 2022 at an all in sustaining cost of between 1001 thousand $100 per ounce.
Mining of the why not open pit is expected to finish towards the end of the first half of 2022, while in the second half of the year mill feed is expected to be sourced primarily from Vasu underground supplemented by early stage development and production of oil from the wine underground commencing in quarter, three and a small satellite pit commencing in.
Quarter four.
The wine underground, we will become a primary ore source for men in the future and development of this ore body is progressing well with more than 7500 meters completed to date.
Onto the next asset went on slide 38.
Full year production of 147000 ounces in 2021 at an all in sustaining cost of $994 per ounce was in line with expectation.
One is a fairly new mine, which has been processing at well above nameplate capacity since operations commenced which is posed some challenges requiring by increased mining and tailing storage.
Capacity.
The increase in mining capacity has been achieved through the use of additional contract is with a further step change required this coming year.
Due to the nature of the ore bodies when you're on is comprised of a number of small pits.
We are working closely with the exploration team to extend their operating knowledge around the existing and planned pit and scheduling our grade control drilling program completed willing to advance of mining to provide accurate detailed for planning.
In 2022 went down is expected to produce between 140 and 150000 ounces at an all in sustaining cost of 1050 to $1150 per ounce.
It will be sold primarily from the <unk>, north and <unk> pits with supplemental feed coming from the <unk> pit in the first half of the year.
Second half of the year greater volumes of ore are expected to be sourced from the North valley North pit with mining for poorer remaining steady throughout.
Mining at the <unk> satellite pits is being accelerated which is requiring the whole REIT to be constructed this year rather than in 2023.
Along with land compensation and resettlement of people living around these planned pits.
In addition to this the T cell to the starter dam, which was completed in January will continue immediately with a wall reis to provide additional storage capacity.
To reduce construction costs, the same contractors mining waste directly from the North Valley North pit for bulk pool construction.
We've also started option studies fulfill three including investigating in deposition.
And following the camera on slide 59, as you know we have announced the sale of common last week. So I will not go into any further details on <unk> performance.
However, I would like to take this opportunity to personally thank the team at Karma for their hard work and their ability to rapidly establish new satellite pits and continuous heap leach.
Preparation ahead of staffing attainment.
The team I've got this stance will find out now.
Are we supposed to new owners and the team all the very best for the future.
I hand back to Sebastian.
Thanks, John and Mark.
As we have heard as you have heard 2021 was a good year for us and we are very well positioned to again have.
Strong success across the business in 'twenty two.
We expect to continue to strengthen our business resilient resilience and allow us to continue to reward our shareholders over the long term.
Before we move to Q&A I want to thank all of our staff for their incredible efforts and commitment over the recent years, our strategic progress and for everything that they continue to achieve I'm thrilled with the commitment and the quality of the team we have and proud to lead such an amazing business.
Thank you all for dialing in and we'll now open the lineup two questions.
Thank you, Sir ladies and gentlemen, we'll now begin the question and answer session. As a reminder, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
We will be prioritizing questions from covering and at least at this time. Please standby, while we compile the Q&A queue.
If you wish to cancel your request. Please press the pound was a husky once again is star one if you have any questions or comments at this time.
We have first question is coming from <unk> Habib from Scotiabank. Please ask your question.
Thanks, operator.
Congrats Sebastian and endeavor team.
On a strong 2021.
Really looking forward to a strong operational updates and trying to do as well.
Sebastian a couple of questions from me just starting off with <unk>.
The fact that you have.
Two project feasibility studies that you plan to release over the next couple of weeks.
Now are you considering giving the green light to both projects or are you looking to stagger the side, but all that expansion and authentical construction start.
Based on the fact that you know you've got some inflationary pressures across the industry right now.
They assure of Ace I mean, I think you're right you know the the priority for us today.
Is is really set by the water Massawa phase two and I think that the.
The DFS should come out in the next two or three weeks, we said before the end of Q1, so we're getting there.
Shortly.
As for fit accrual.
Realize that given the inflationary pressures you know investor sentiment is shifting towards a bit more focus on preserving and maximizing free cash flow and shareholder returns.
We remain extremely bullish on our project pipeline.
You know I agreed that we are in good spot because we aren't under any pressure to need to launch the greenfield.
As soon as possible.
That's mainly due to the long visibility we have on production on the existing assets and given the inflationary pressures we have been taking our time to see where prices stabilize and we'll seek to selection of all the key suppliers.
All sales to negotiate the prices. So I would expect again that are in.
The DFS for left figure fed accrual would come out in Q2.
And to your point you know we are extremely cautious in trying to find all the levers to ensure that we don't rush into building a greenfield at the time were inflationary pressure is at its maximum.
Got it thanks for that.
Okay.
Such a close eye.
The second question Sebastian now.
This is on the LFC and endeavors looking to be added on the FTSE 100 next week is what any plans of implementing an ADR in New York.
Well look you know, we always said that.
Once we are you know are well settled on the on the LSE.
We might consider looking at an ADR program in the U S. We all know that.
The biggest pool of investors.
In the U S.
Therefore, that's something that we were investigating the future, but as you know it's a long it's a long process. We went through it diligently I think you know to get into the.
Into the LSE in particular as a premium listed company.
So we just need to take our time to prepare for the next the next step. It's also linked to size I think that we are getting now.
Other size, where a U S listing you know it will be interesting down the road, but same thing there is there is no rush.
Got it thanks for that Sebastian then I'll.
I'll leave it there on the two questions and then I'll jump back in the queue. If I have more questions. Thank you.
Great. Thank you very much elyse.
We have the next question is coming from Fahad Tariq from Credit Suisse. Please ask your question.
Hi, Good morning, Thanks for taking my question on Slide 11, you mentioned the different phases that the company has gone through the investment phase and now we're getting into a.
Cash flow generation. Please as you think about maybe the next two to three years.
It sounds like there may be.
The transition back to an investment phase in the bathroom I just wanted to get your thoughts on how you think about the company.
Maybe returning to that in the next few years with some of these greenfield projects.
Sure.
<unk>.
The biggest difference compared to two or three years ago. When we were in this heavy investment phase with the construction of.
The entity.
It was clearly the balance sheet.
We did it at the time and it got us to a point, where we had over $650 million of net debt through the construction phase. The big difference today is as I said you know I believe we have now a very strong and resilient business, which is able to do.
The three things, which is running the existing operations.
Building.
Sequentially.
The right mine for the future and at the same time investing in the exploration.
Given our cost profile and production level to be.
Being able to do all that without <unk>.
Impacting the balance sheet and I think thats the biggest difference on where we are today. We are at this stage, where we can do the three without putting pressure on the balance sheet.
Okay, great. That's it for me thanks.
Thanks Todd.
We have the next question is coming from any to Tony from CLA.
Please ask your question.
Hey, good morning, CIBC World markets.
Good morning, Sebastian team my questions are with regards to some of the reserve resource update that you provided.
Firstly on.
Let's address our Bongo.
And the write down that you took there.
Like the reserves went up but it basically was it was it the result of the the inferred going down is that the reason why that you're you know that the write down took place there.
Hi, I need a yes, I mean exactly as you know I mean, the way you do impairment is.
You take a management view on.
On the asset.
As part of the.
The allocation of the purchase price.
We clearly had views with reserves and also conversion from resources into reserves.
Fundamentally.
It Hasnt changed the only difference is because of the security environment, we had to delay our exploration program there and therefore, the resource conversions that we were expected to do in.
In 'twenty, one has been delayed and therefore in order to be I would say cautious in the current environment, we prefer to do the.
Impairment calculation based on the reserves rather than including also the resources that we haven't been able to drill yet so I would say again, it's more of a cautious approach rather than a change in our approach to the asset.
Okay, and then just moving to none of them because when I look at that asset.
Everything went down the global resource actually went down by 23%.
Overall ounces it went from $2 7 million ounces, but when you include measured indicated and inferred and a T P and yet that asset didn't take a write down there isn't much different.
And the great hard to understand what the difference between those two assets and why one took the write down and the other one which to me biopic should've taken a write down to nine.
So on the on my note I mean, there's a bit of a different story where.
We were able to do a lot of work on the <unk> open pit.
And the basically go with an underground approach.
And we started as you know we started in on the decline on the underground.
So we were able to basically move from one open pit extension to an underground Louise higher grades.
And get comfortable as we move forward on the on the value of the assets in the future of the asset.
Okay, because I'm, just saying that the Illinois went down right.
It's about 400000 ounces there so maybe I can take that one offline and then we can I mean, just the start.
And we can take it offline there was a reduction in the reserves, which was based on the open pit expansion that are semi for had in mind and we basically converted resources on the underground into reserves. So that's that's the shift that has been going on.
Round around meta so taking out the existing reserves that <unk> had on the open pit expansion and on the other side, including into reserves now resources that they had for the underground that we are convinced.
More attractive than the expansion of the of the open pit, but we can take that offline, yes sure and then the last one would be Sabadilla Massawa can you just walk me through the mechanics of what happened there it's a little.
I mean the.
The ounces on reserves.
Hum.
Can you just lost a lot of times, it's super low grade and I'm just wondering what went on there. But then you added and then I as well, but also at lower grades.
Can you give us some color on like what the additions there.
Sure I mean, I can I can ask Martina.
Martino and Mark to come back on this it's mainly the fact that we haven't yet converted the additional resources into reserves. So it's just a timing effect as you know usually during the year and this is why it's always.
Always tough for us I mean in terms of having a cutoff date you know at the end of the calendar year, because a lot of the drilling programs are basically happening in <unk>.
Q4, and in Q1 and results are coming across the year. So in that case, we had the all the new resources coming in before year end, but the conversion into reserves is going to happen now. So we were not able to include them into the into the new reserves.
Okay and last question before I kick off line you assumed in your fair value assessments, 5% operating cost escalation.
As a sensitivity and then similarly for the Capex escalation is that in line with the kinds of cost Escalations you've seen at the various assets. When you did the fair value test.
Sorry can you can you just repeat Anita sure. When you did the stent the fair value and you put your sensitivities around around the operating costs and Capex I think in both cases.
For all of the assets you seem to 5% escalation and then summarized and said therefore, we do not see using reasonable assumptions that that we will have the carrying value will exceed the cap recoverable value and I'm just trying to understand if 5%.
It's correlating to the kind of cost escalation you're seeing at your asset that you did the current values tough one.
Yes on an overall basis I would say that that's accurate.
When we've talked about this a quarter to quarter.
Inflation concerns et cetera, generally is around 5% I mean, we think there's other levers if that were to be higher that we would see would be able to use so that 5% a reasonable a reasonable.
All.
Range to use in terms of the sensitivity analysis.
Okay. Thank you.
Thanks Anita.
Yeah.
We have the next question is coming from the line of Don Demarco from National Bank Financial Please ask your question.
Okay. Thank you operator and good.
Good morning.
Session T. Congratulations on quite a strong free cash flow.
Couple of questions on inflation can you tell me the oil price assumption that you used.
And your 2022 guidance are you still comfortable with the cost guidance and what's the sensitivity for each say, 10% increase in oil prices.
That's helpful.
Sure.
What's important is and Thats you know.
Probably one of the strengths of being you know in West Africa.
Fuel is both in country.
And in the West African countries, where we operate about 75% of the fuel cost is taxes.
So and then the prices our revised the on a quarterly basis or on a semi annual basis by governments. So that's very important because it means that you don't have any direct correlation between the oil price that you see.
The spot oil price and the fuel price.
So I would say that in 2022 with factored in are about between 5% to 7% increase in the fuel price compared to 21.
And so far you know when I look at Q1.
We are.
Below what we had included in terms of.
Increased prices.
Okay. So when you did your guidance. Thank you was there an assumption.
And you've got whatever that assumption is still valid for the rest of the year given that the dynamics and despite cost increases in price of oil.
So we are again.
When we put out the guidance into the guidance on cost. We have included our own fuel price, which is based on local local fuel price or there is in a nutshell.
Not related to our markets spot oil price and what I can say is that included in the guidance.
Was local fuel price that we haven't reached in Q1, so we haven't seen it yet.
The.
The other part I would say.
Inflation locally on the fuel price and I remain I would say pretty confident as you know in in West Africa governments tend to try to reduce the.
The taxes in order not to impact too much I mean, the fuel cost.
Rather than directly translating the old price into the fuel cost.
Okay, perfect and maybe just touch on I know, it's noncore, but you know it's good to see reserves there.
Is he didn't see any guidance change.
Alright.
And is there any plan.
Okay.
Sorry, John you broke up.
Well I was just asking about but a quick question on phones or whether or not.
The 2022 guidance is still intact.
I see some reserves are up and are you planning on doing that monitoring client.
Yeah, No no no changes I mean to debut guidance, it's all set and no changes there.
Okay.
Thank you very much done.
Okay.
We have the next question is coming from the line of Dan Shaw from Morgan Stanley . Please ask your question.
Hi, Thanks for taking my question.
A lot of it's been answered already but just perhaps a follow up call.
On the oil price.
And your exposure to that can you just remind us.
And remind us of your exposure in terms of.
How many of your assets are linked to grid power versus using diesel generators.
Can you share any information on that thank you.
Sure we have I mean.
It varies from site to site, what I would say is there is about $250 million of fuel cost you know in the in the business for for Endeavour on a yearly basis to $150 million.
So that's the the amount of fuel that we buying in average for for the year.
And then I refer to what I, just said to Don.
We've included between 5% to 7%.
Underlying fuel price increases in our 2022 budget.
<unk>.
Again, you know given that the revised prices in country Aldo in the either quarterly or semiannually.
We don't see any.
Massive variation.
That that you can see on the on the oil price.
That's very clear thanks very much.
Thanks, Dan.
We have the next question is coming from the line of Wayne Lam from RBC. Please ask your question.
Hey, Good morning, guys. Just a question that I was just wondering when you expect to see it to be mined out and then can you just walk us through the current tailings capacity there in just a bit more detail on the long term strategy.
On that front.
Sure Mark do you want to comment on Sofia Sofia My.
Pain, both Sofia mine pit will be finished.
In quarter one.
And in the Sofia North people will extend into next year.
So on the Tcf capacity.
That's an interesting one because we've got teeth if capacity for.
The existing CIL.
Which we can we can comfortably last for another.
Probably three or four years, the what it's really about is what do we do for the bio and <unk>.
Yeah.
What we've considered in the study at present is that we're actually going to construct a brand new TSA, which was the.
The existing plan and Thats, all actually permitted and ready to go but it's a very large land take and we actually believe that a better scenario.
Is to do an in pit tailings storage at the separate alope, so with mining that separate alloy and we're looking at the timing to be able to.
Effectively transition across to that so that we can use the <unk>.
Current TSA footprint for the flotation tailings for the buyout circuit and then construct a small so within that footprint for the the <unk> CIL tailings. So it is a work in progress we've got forecasts.
<unk> forecasted both from a study and a cost perspective is to construct the new TSS. However, we.
Advancing down the path to go to the deposition starting with obviously getting all of.
The regulatory approvals and so forth.
Okay.
Okay perfect. Thank you and then.
Can you just walk us through the exploration strategy now at Pangu and managing the security situation.
Trying to ramp up the drilling activity and just wondering given the history of the company and constantly upgrading the asset portfolio is there a scenario where bunker you can now start to become non core given the shorter mine life, there and falling outside that magic box.
Thanks, So I think I'll, let you know.
Patrick give you a bit of feedback on the exploration as for the more strategic question. I mean, <unk> is a core asset today I mean, there is no change on that front and again as I explained the shorter mine life is simply because we took a view just based on reserves because we wanted to have a cautious approach I mean to the impairment is given the security environment, but doesn't change.
You know our view on the asset and its potential but hey.
Do you want me to say something on the exploration.
Not much actually as you may have seen the spending you know we have been.
Spending less in 2021 that we initially sold as easy as just due to the fact that we are being very careful in stripping out outside of the mine on the outside of the defense area.
I can say that we start to go out a little bit outside the mine.
Looking at the more proximal target that we have today, but we want to take all of the upside to our leasehold that because.
Security is obviously things that we want to take basically we see the same with oil exploration potential.
The only thing is we are much more cautious in del Mar to the speed in which we cannot already exploration in <unk>.
That's all.
Thanks, Kevin.
Okay got it and maybe just last one for me.
Just wondering.
Now what the proportion of oxide ore is at one yard and just given the challenges in continuing to run at above design capacity.
The mill kind of be scaled back in and what kind of throughput rates.
Should we maybe be thinking about going forward.
I don't have the exact number in terms of the oxide fresh ratios from a loss of <unk> perspective, but the key point is that we are still right. We've got additional pit to mine that.
Willie North and South that for core then we go to some of them. We got a stinger. So there's always going to be that oxide proportion and you can imagine as we get towards the back end of the of the mine life and as we start depleting the the oxides and we only have fresh firstly, the frisch, Craig will be higher and secondly.
We'll have the low grade oxide stockpiled ore to supplement it so from that perspective.
Life of mine feed right will be more or less assignments, we progress the great profile will ultimately tie with them.
As mining is going to be some stockpiles.
Okay, great. Thank you that's all for me. Thank you very much guys.
Thanks.
We have the next question is coming from Lorraine <unk> from Jpmorgan. Please ask your question.
Good afternoon, and thanks for the call.
I have three questions. If I may so the first one is do we have any updates on the situation in Burkina Faso, given the recent change in the government and what are your expectations for the operations going forward.
The second one is if that's possible to have the current split between cash offshore and cash onshore and West Africa, because when I read the latest computer ports. They mentioned that the company has taken some cash management initiatives. So it will be good to understand better what exactly.
And third question is.
The total Capex guidance for this year and next year also including growth Capex for our fifth acro and the supportive phase III. If that's already available. Thank you very much.
Sure Hi, Lorenzo just on the book in a political.
Situation I mean, it's been almost two months since the former president of booking resigned.
The military pressure, the new government, which was announced 10 days ago give assurance to echo of US you know for the different countries. The same economic zone that he would oversee.
<unk> returned to constitute in the constitution of life.
It has so far kept to that word.
Transitional Committee of 15 members was called on to drop the transition chart, an agenda working on a voluntary basis.
No representative from political parties in this commission the <unk>.
T Charter was signed last week outlining his three year transition with a 24 member cabinet during the transition the transitional leader will be the senior culinary Paul I'll hit them EBA.
Either of the <unk> were familiar with.
And we are very familiar with him and the key people which are around them.
Importantly, <unk> will not be allowed to run for election in three years to ensure a smooth transition.
We expect them in through that tough stance on tourism, which should improve.
The security situation they have a very strong proximity with France, which will be more and more involved in the country to fight back.
Terrorism, so we see that as positive and again what has been positive as you know so far that hasnt been sanctioned you know to the country, mainly because they see that the country is on the right trucks too.
To find the right thing and putting in place a civil government.
And the new government I mean, we know them and the minister of mine and we know you know most of the key members of the government and therefore, we're not expecting any particular turbulence.
On that front.
Maybe giuliano do you want to give a quick word to Lorenzo on the splits between onshore and offshore cash yes for sure.
I would say that at year end, our onshore offshore split with about one third two thirds, one third being offshore.
Does vary during the quarter with the timing of wholesale and just didn't have enough cash and the dividend payment that we had this week so.
It would fluctuate, but generally I would say that the.
Ratio that we were aiming to maintain with respect to the cash management in Burkina.
Mentioned by I believe it's S&P.
That was primarily driven by when the queue happened in January we had a significant amount of cash in Burkina and in the Echo what jurisdiction you are able to.
<unk> bank accounts in various countries and the local mines.
Haven't been count incentives also we were able to manage the cash and move on.
A significant amount of it to the bank accounts in Senegal and maintain our cash.
Locally at the levels that we need from a from a working capital perspective, so that in there. There is a few other things that we did from a cash management perspective just.
To manage that over the course of that over the course of the quarter, but the political situation in Burkina.
And then on the Capex.
I mean, we are on track with the.
Guidance, we gave on sustaining and non sustaining capex.
And I think you know I would refer to slide three in our presentation, where.
We describe them, which is about 170 for sustaining and 170.
About four non sustaining.
As for gross Capex I think it will come you know as we published the DFS for the different projects that as you saw.
Differing in order to improve.
The overall Capex and therefore, you should expect that this is coming more towards 'twenty three than.
And then strong numbers through 'twenty two.
Thank you very much can I just follow up on my on my first question.
Danny.
There are actually any talks with the new government about what their intention for the mining operation in the country or that has not happened yet.
Yes of course.
We have had a lot of.
Discussions in fact.
It started even two or three days.
After the after the group.
Our country manager has been.
Discussing daily and now that there is a minister in.
In place Kantar.
Continue to have.
Regular interaction with them.
<unk> is also the president of the chamber of mines. So obviously is talking on behalf of Endeavour, but also on behalf of the rest of the mining sector.
Feedback has been extremely positive and supportive towards the mining industry.
Referred to.
As part of the.
Sure.
First speech that was made.
With strong support from the beginning of the outset from the new rules and the government to support the mining sector as a critical sector going forward for our country.
So again don't expect any any particular issues on that front.
Okay. Thank you very much again.
Thanks Lorenzo.
Okay.
We have the next question is coming from Joseph Rodriguez from Morgan Stanley . Please ask your question.
Hi, Thanks for your presentation I think a follow up on the question that.
Adjusted.
So when you wrap it all Nathan D. I know they have a night and.
And they they take the.
The average rating of the countries in which you operate.
Sure I think the best way by by the rating downgrade on Burkina Faso have you had talks with some people might think that on.
When do you expect that out that that rating.
Because I know they also mentioned that your expansion plans.
Hum.
Reliance on looking at stuff, that's going to decline, but Miami, but what's your view on that.
Sure, Yes, obviously, we've been having continuous dialogue with the rating agencies as you probably saw on the S&P side, we've been put on the watch for the next three months and they will be reassessing after three months their own views on the country risk and it's based on that.
They will reassess the credit rating, but again.
Based on the current situation and the fact that the country hasn't been going through sanctions.
I am not expecting any any changes on that front.
Okay. Thanks, that's.
That's clear.
Thank you that will conclude today's Q&A session I would now like to turn the call back to <unk> for any additional or closing remarks.
Thank you everyone for joining the call today I realized there might still be questions in the queue given timing we remain available offline to transfer. These thank you would have a good day.
Ladies and gentlemen that does conclude today's conference call. Thank you for your participation you may now disconnect.
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