Endeavour Mining plc Q1 2023 Earnings Call
Good day and thank you for some goodbye welcome to the Endeavour mine in Q1 2000 twenty-three results conference call. At this time, all participants stopping to listen only mode. After admonishments presentation that will be a question and answer session. We note.
She used to time constraint, we will be prioritizing questions. So kathryn.
Today's conference call is being recorded on a <unk>.
Transcript of the call will be available on the Indepth as website to mobile I would not like to have the cold over to management. Please go ahead.
Hello, everyone I am Martino deputies here in front of Investor Relations and I'd like to welcome you to our queue 120 23 results webcast before we start please note our usual disclaimer.
<unk> I am joined by Sebastian Mark Guy and Journal.
Today's call will follow our usual format.
First go through the quarters highlights done the financials and finally will walk you through our operating results by mind.
I will try to be as quick as possible to these prime for questions at the end.
Now 100 over to Sebastian to walk you through our queue one highlights.
Thank you much you know Hello, everyone 2023 is an exciting year for endeavour and we are pleased to be delivering against our key objectives driven.
Driven by last you a stronger production or performance, we began the year with financial strength, which provides the flexibility to Delaware against this year's capital allocation priority, which is to maintain an attractive shareholder returns program, while unlocking our growth potential give.
Given that there's some other than subway expansion on the Lafitte gate Greenfield bills are expected to both increase the group's production and lower Archos base. They will further enhance our capability to reward our shareholders.
Ah such a goal is to increase shareholder return program. One time I got any gross projects are completed, thereby ensuring that our efforts to unlock gross immediately benefits all our stakeholders where.
Well if we're pleased to report that both projects are progressing on time and on budget. We supposed production expected in Q2 of next year for the <unk> expansion and shortly afterwards for they'll ask you get project.
And looking further ahead, our exploration program continues to provide us with a strong platform for future growth.
Really it got lost your Sunday Iguala discovery call Iraq continues to demonstrate its potential to become another cornerstone of asset and we will provide the resource update later this year.
On the operation on from we're trucking in line with our guidance as we expect production weighted towards the second half of the year you to mind sequencing across the group.
On the financial front, our business continues to operate with low leverage and thanks to a strong balance sheet, we were able to settle the principal on a 330 million dollar convertible notes in cash, thereby minimizing shareholder delusion.
Meanwhile, we are continuing to progress on R. E S G initiatives, which have been well received by external agencies.
Over the next slide I'll touch up on our progress against this Geo strategic objective starting with our safety performance.
So looking at the next light safety remains of course, our top priority and while I lost time injury frequency right remains the industry, leading we are continuing to put significant emphasis on are you target.
Anytime we have construction activities the potential for incidents increases as the nature of the work changes and more man hours are worked as they are significantly more people on site. It is for these reasons that we are amplifying our safety campaign in training to ensure everyone gets home safely.
Turning to the next slide you see our quarterly production and cost trend is mentioned, we trucking in line with our guide that trend that we expect production weighted towards the second half of the year.
As we entered twenty-three, Wisconsin, they're both financial strength, we were able to implement the optimal mindset words to take advantage of the dry season in the first half of the year and accelerates dripping activities.
This meant mining in Q1 was focused on the lower grade areas, specifically at how 'bout that I'm, a sour where we started to develop the sub either a bit four MP telling of the position and started developing new none refractory pizza Massawa as you can see in the color box on the slide.
Mark will detail performance by mind later in the presentation.
Speaking of Sutherland Massawa, we see them for like nine that its expansion project is progressing on budget was 70 per cent of the 290 million dollar initial capital cost now committed. It is also tracking on schedule with suppose gold from the biopsy don't expected during the second quarter of next year.
On the slide you can see a picture of the processing plant construction progress metallic mark provide further details on a project build with any section.
Of course, we are extremely excited about this project because of its strategic and financial benefits. One of this expansion has completed the setup by myself mine with a rank of the Tijuana asset capable of producing over $400000 per year, thereby increasing the quality of our portfolio and further diversifying our production.
Base.
Moving to our next gross project.
Which is all I figured greenfield development and <unk> as a reminder, that if he gave will be another cornerstone asset for the company Wisden envisage annual production of over 200000 homes over the initial 13 year of my life.
Low audience sustaining cost of below $900 per ounce.
It's construction is also progressing on budget is 46 per cent of the initial capex has been committed and pricing is in line with expectations.
Also progressing on schedule with Firstgold expected beginning of the third quarter of next year.
Thanks to the two girls projects within just over 12 months from now we will have more lower cost production from sorry about that I must have walked in Senegal, and another cornerstone asset in production with luffy gay coming online in could you.
I will let Mark walk you through a more detail a day later on.
Turning to slide 11 to touch up on our ongoing exploration efforts. We continue to be very pleased with our results, which have yielded over 15 million ounces of discoveries. Since 2016. This year, we have a 17 million dollar budget and I've already use this sort of it during the first quarter to a dream intensively.
Ahead of the rainy season.
Have you seen the top left by child, the largest hookers has been on during the major Tendai Grinches discovery. We made last year. In addition, we continuing to focus on extending the my lives are are producing assets.
Overall, we are thrilled to remain on track to discover a target of between 15 to 20 million answer as I've indicated resources by 25 with already 6.5 million answer discovered over the last two years.
Given its increasing importance I'd like to touch upon 10 day Guilla on the next slide based on young going during the results. We are more and more convinced that it will not only be another flagship asset for endeavour, but it also has the potential to be a tijuana assets in the region.
So far we have 1.1 million answers in the indicated category and another 1.9 million ounces of inferred all achieved in less than 15 months is at a cost of less than $10 per homes.
Last year, we drilled 60000 meters and this year, we're planning to do with a photo of 70000 meters and based on what we are saying we might increase operating budget as well.
I was shown with the yellow dots on the map. Our main goal. This year is to infiltrate and extend the resources and the food they put it in in two one we completed over 40000 meters of drilling.
Based on this training, we expect to publish an updated resource later this year, which will form the basis of the first study of the property.
In addition, we also seeing good success by drill testing other highly perspectives targets identified on the property with similar structural and George equal settings.
Beyond exploration potential what is nice wisdom like what is the fact that it appears to be a minute or two open pit mining and then the metallurgy called test work indicates high gold recovery rates of more than 95%.
And additionally, dislocated and you're good infrastructure I suppose the main road and grid power on nearby and there are a limited relocation requirements.
So given everything that I, just said about tender I feel obliged to rates rates that it would be difficult for us to justify buying the project and paying over $1 billion for three or 4 million answers. When we are capable of discovering something similar directly in our backyard.
On slide 30, and you can see details of our shareholder returns program, which is the capital allocation priority for US last year, we delivered nearly $300 million of dividends on share buybacks, which was double our minimum dividend commitments of $150 million for the year.
We paid out our H 222, a dividend in March of this year and expect to announce and pay the H 120th Street of it and during the third quarter.
Given the strong gold price environment, and a healthy balance sheet, we again expect to pay up more than the minimum development commitment, which were set at 175 million this year.
In addition, we've been continuing to supplement our minimum dividend commitment with <unk>.
During the quarter, we bought $11 million worth of shares which under community babies means that we have repurchased $244 million worth of shares since the program began two years ago.
On Slide 14, you can see that at the end of last year shareholder returns program had already leave at $633 million in the form of dividends on buyback or $200 for every ounce of gold produced.
And this amount is expected to surpass the 800 million dollar mark by the end of this year.
On a similar team in order to Minimise shareholder dilution in February of this year, we settled our convertible notes of $330 million in cash for the principal amount. We also he should 875000 shares whereas $20 million an equivalent of 0.3 per cent of shout outstanding.
For the in the money option value as you see in the Bud shops on page 15.
The convertible note ended up being a low cost financing solution, which had a three per cent coupon and an implicit cost of capital of less than 4% over the life of the notes once incorporating the value of the in the money option.
Turning to slide 16, you'll see that our business continues to have low leverage despite the cash outflows experience during the quarter relating to the shareholder return payment gross capital and a contingent payment made.
Thanks to our strong Castro generation and disciplined and kept her location, we expect to maintain Lola average throughout occur in construction phase.
Turning to slide 17 to provide a quick update on our ongoing sustainability initiatives given that there are many initiatives. It's nice to have the opportunity to describe a few of them on each webcast.
Starting with the top left we have a big focus on diversity. This year was the target of 15% female new hires.
To try and address the perception that the mining industry is for men, we launched our where mines initiative, which is an outreach program focused on promoting mining as a carrier to a young woman.
This event has withheld at the original office in Abidjan and was very successful with over 230 students attending.
Staying with the education theme. We also launched the start of a six months vocational training program. They are like figure project. This will improve their employability and we also hope to hire some of them.
Moving to the top right as you know plastic weight is an issue waste as an issue in West Africa, and we are playing a part in reducing the consumption of single use water bottles.
We organized a big awareness companion Becca without Angio partners plastic would you say well developing recycling technologies that can be used by entrepreneurs.
Now the phone box, we've mentioned many times that mining has the potential to be one of the most impactful industries and contributing to improvements in living standards, particularly in West Africa.
And it is not a very rewarding to see that the goal is being used by the jewelry industry for the same reason.
We are delighted and extremely proud to have supplied the gold one by Mccalla Court, what kinda forever on the Red carpet at the met Gala in New York last Monday.
Both she and M F I call well crafted the jewelry have west African origins and we're keen to use fully traceable and particularly source gold, which we provide through the single mind origin initiative.
The goal came from our Itchy mine and a specific QR code has been developed which takes the consumer on a journey from the mind to the end product.
In addition, last week, where we are pleased to host jewelry designer sand on the horror game or so users single minority in Golden as jewelry pieces and Vanity fair at all really itchy mind. It was a great opportunity for them to see first hand, Ah high standards and their social and economic benefits that we provide to our communities.
We hope that efforts such as these will help raise awareness for the important Ah responsibly source gold we already have several jewellery brands that I have adopted our gold such as <unk> and we're excited to see others wanting to follow.
A lot more ideas initiatives will be detailed in our sustainability report, which will be published later this month.
Turning to slide 19, now given we are approaching our two year anniversary of a listing on the premium segment of the LSE, we'd like to share a few stats. We're very pleased with our listing given that approximately 40 per cent of trading volume has occurred in the UK over the last 12 months as.
This is a great outcome given that we did an issue equity into the UK along with our listing.
As you see on the chop getting included in the 5000 has clearly help drive appetite for a stock.
Leaving trees is also reflective of the change in our shareholder base, which has seen U K and European shareholders climbed up the register.
And now I'd like to formally welcome Guy to the team and handle webcast over to him to run you through the quarter's financial performance.
And what a perfect day for you stopped Guy So may the force be with you.
Thank you for the best and and Hello to everyone I'm very pleased to join endeavors, such an exciting time for the company. It's now roughly my second month in a row and if I'd had the opportunity to visit some of our minds and regional offices.
<unk> me to see first hand, the potential which remains to be unlocked throughout the business as well as the quality of the teams across the grid.
10-Q, one results slide 21 summarizes broke our operational and financial highlights for the quarter and underlines previously communicated expectation for a second half wasted production profile in 2023.
Rather than spending too much time on this slide I'll take you through the detail and subsequent slides starting with our upgrading cashback before working capital on slide 22.
Depicted in the charts, we continue to generate strong quarterly castro's $242 million during the first quarter despite lower volumes.
The 14% decrease in the prior quarter is broadly in line with the logo cells and partially offset by the high realized called price.
If we could turn to slide twenty-three to review the operating cashback variances between two one in queue for.
Are operating cashflow for the quarter was $206 million, which is a decrease of some 105 million versus Q4 last year.
30th variances from left to right, we benefited from a $128 higher realized go price offset by 43000 ounces of let it go and say what to do to our production again being wasted towards the second half of the <unk>.
A lot of production meant that cash operating expenses were also leather in absolute terms.
Income taxes paid increased by $25 million largely due to the prior period, including tax payment deferrals across the <unk> and <unk>.
And finally, working capital was an offer $67 million in a reverse <unk> largely due to Lubbock trade in other tables and increase in stockpiled seven dollar and an increase in V. I T receivable due to the timing of sales.
Turning to the next slide you see that we continue to have a very healthy financial position ending the quarter with $50 million, a <unk> and a low leverage ratio of 0.04 times net debt to adjusted EBITDA well below our target of 0.5 times.
Taking a look at the waterfall Sharks, you see the net that bridge between Q4 and Q1.
During the quarter, we generated 206 million in operating cashback of.
Of which we invested some 200 million to fund mind capital expenditure and growth.
On the financing side, we used $186 million to set lock convertible notes for 330 million and paid $100 million and shareholder dividends.
In addition, repaid $46 million tabarrok goals for to rank as acquisition Massawa.
Which had a three year look back Gulf price links contingent payment component.
As a result of the timing of these catch up twice, we drew down $360 million I'm Gonna <unk> too.
Many short term offshore cashless.
And finally, owing to the appreciation of the Earache Donna.
<unk> cash on hand increased by around $9 million.
Moving to slide 25, and a desk structure.
<unk> and detailed earlier during the quarter, we improved a capital structure by setting the principal about convertible notes in cash locking in a 4.1% cost of capital over the life of the notes.
A capital structure is not composed of our $500 million five per cent senior notes and a 645 million unsecured Osijek, which we upsize from 575 minutes during the quarter, while maintaining the same favorable terms.
While our gross debt position hasn't changed significantly.
K a capital structure in place with long term disability and note upcoming maturity.
A desk structure, therefore positions as well to deliver on yet sound, great with significant liquidity Hendrix.
In terms of profitability Slide 26 shows are quickly adjusted EBITDA in.
Q1, we delivered $279 million over Justin EBITDA, which compares favourably without performance in the last two quarters is a high a gold price strong earnings from mine operations in Russia based compensation.
Set increased exploration costs and low volume sold.
A strong EBITDA has helped maintain are attractive margins cost you 50 per cent at.
It remains competitive not only within our peer group, but across other sectors as well.
<unk> 27, and a net earnings.
Rather than focusing on each and every line item I'll just touch upon the key items, which you circled on this line.
Regarding lost on financial instruments of $73 million. This includes unrealized losses on gold hedges 41 million losses on the settlement with the conversion option on convertible deck of $19 million realized losses on the Gulf colors afford contracts of $6 million in losses on foreign exchange contracts amounting to some <unk>.
$7 million.
Secondly adjustments in the quarter was 67 million and included the unrealized losses on financial instruments in the loft and other expenses, which is partially offset by gain O non-cash tax and other adjustments.
It's also worth noting the NCI portion decreased by 11 million, while the adjusted earnings decreased by any 6 million.
This is due to the internment add back in the prior quarter, resulting in high ratings attributable to Noncontrolling interests.
Overall this meant that adjusted net earnings per share amounts to 28 cents, which represents an increase of two cents per share over the prior quarter.
This is due to the benefits of the higher gold price lower total costs low taxes and share best expenses, which will set by the increase in exploration costs.
And now I'd like to end up to muck, who go through the details of our operations undermined online basis.
Thank you God Hello to everyone on the cold.
Before I torture, the operational performance site.
I would like to share a few insights from more than seven weeks expansion West Africa. So far this year.
We have a very strong groups of general managers to run their operations.
And also have a good pop front of talent coming through you'll get the opportunity to act as G. M. During the rusted bribes.
Following the decision of one of their dreams to step down for an extended period for health reasons. We've moved a number of people around and also I promoted another west African into a G M roll with three of their operations down managed by West Africans.
<unk> have been shameless with H operation continuing to perform as good as if not better than before.
The added benefit you said at James have knowledge of multiple endeavour mind, which means that they can also supported each other with decisions around people equipment other acids and various challenges that might be faced.
Looking at the portfolio performance as a whole I am place decided that we are on track to achieve that for your production and cost gardens.
Production is expected to be stronger in the second half of the year.
At five out of six available minds as in general we will focus on stripping even colder one two I can have hydride morning areas for later in the year, particularly.
Particularly ahead of the wet season, which starts in like <unk>.
This trend is not something that is new to us as in three out at the last four years and production has been whites a tool tough too.
The benefit of managing a diverse portfolio is that we can stay jam on plans to ensure we are well prepared for the worst season.
On the next slide you can see the production variance compared to a quarter four of last year.
He is very clean and this wonderful <unk>. The main reason for the quarter on quarter production decrease was driven by the 42000 Nance decline type of down in the south.
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When when it comes to <unk>.
Going very well.
Get only $90 million or 299 budget has been spent so can you just comment on why Spendings and later in the first year and what's Gonna drive increase in the homestretch.
Sure. So mark I mean, do you want to come in for a <unk>.
Critical paths of one dollar has always been the biopsy reactions because of the amount of stainless steel. Thank each and then popping insightful you got pulling coils and and call them out of all the complexity within that.
That's certainly been the the the key for a complaint everything else is tracking well around that.
Okay.
And can continue <unk>.
The expiration in 2023 takes a large piece of the bike just about 12 or 20 per cent.
So are the results that you're seeing in Q1 or expect to see are they target are supporting a potential increase.
About that 400000 ounce per year, right or is it more about backfilling beyond 2027.
I don't know just some kind of color about what what's your what's that exploration program what insights it might be yielding at this early stage.
Yeah, I spoke with the drilling and the results that we're seeing we are we are looking at tiring, maintaining the 400000 ounces plus extra on top with with new discoveries and growth. It's it's a very big plant to field and unfortunately for us up or down on the songs are very slim tall exploration.
Ground lots of targets that we think might be tested in the past, we going back I Verizon reviewing it there's plenty of opportunities that are coming out and we're putting the drove it on so I will see those results <unk>.
Okay. Thank you good luck with kids, that's all for me.
Things done.
Thank you we will take our next question.
And the next question comes from the line is Sandy P. T for Morgan Stanley . Please go ahead, you're lying his iPad.
Good morning, and thank you for taking my questions I have two left so firstly your prior comment against the productivity to average around 90 long getting to it.
Make a point of the guidance.
In that context are you comfortable.
<unk> are are you pointing towards the lower end of the <unk>.
<unk> sorry.
[noise] right.
Hello can you hear me now.
Yep Yep, you're talking about the production range the right yeah. Yeah. So the question was that good but I think I'm going to suggest that collection needs to average around 390 <unk> during second half of the yet <unk> mid point of the guide me today and that can text are you comfortable <unk> what are you pointing it towards lower end up with items.
No I mean, so far I mean, we are comfortable to be you know in line. So let me point of the guidance.
Okay. Okay. That's helpful. Taking me on <unk> pharmacy, So your current <unk>.
The fact that you will provide details on the new policy <unk>.
But can I ask how are you thinking about <unk> are you thinking to switch to earning sky slow based policy submitted to the mining companies are are you comfortable with.
Progressive policy that'd be <unk>.
Sure. So the I mean, the the objective is to continue to to increase the dividend policy. In particular, you know starting in 24 once the commissioning of the two key projects is done and we're still reviewing what's the best metrics to give more visibility around the dividend policy.
But I mean clearly the objective is to move forward, increasing the overall return policy to shoulder.
Perfect. Thank you.
Thank you.
We will take our next question.
And the next question comes on the line is Terry <unk>. Some kind of code can you. Please go ahead your line of sight.
Hi, Good morning, guys, maybe just another question on tender Guilla I know, it's obviously early days, but.
Is there a potential for this project to be kind of shovel ready by 2026, or so or is it.
Do you expect it to be let's take longer than that.
I think we need to be you know real estate on the fact that depending on the size of the Beast. You know we would be looking at you know probably 27, you know it would be if everything goes well you know what that means that we'd be launching.
Auction. The earliest you know what was the end of 25 and then it's in 18 months construction I would guess so yeah. I mean 27 is probably the the earliest.
Which would mean also that you know is becoming bigger and bigger so we need to give time you know for the for the team to be able to really assess <unk>. So that we don't make any mistakes in terms of mine plan and plumbed size.
Alright, Thank you and I guess based on what you were saying on the on the subject it looks like it's pretty much.
Moving to the head of the queue in front of all the other projects that you have.
While giving you know.
We continue I mean to receive some you know drilling results and just as an example, this morning Juno was telling US you know 51 me to the 312 grams per ton. So yes, I mean, clearly on the basis of what we currently see that will be the most attractive you know next projects for the for the <unk>.
<unk>. So you know the good news is that we've got a strong logging in gross pipeline and that's what we want and this is why we have been insisting that you know West Africa with so attractive in terms of the region because of its prospectivity and I think that you know we demonstrating day after day that you know being focus in that <unk>.
<unk> and he's probably you know the right the right thing to do even all they're getting gross we are able to you know to to get the undiscovered.
Alright, that's it for me thanks for that.
Thank you we will take our next question.
And the next question comes from nine a M.
<unk> package. Please can I get your line of sight.
Yeah, Hi, guys. Thanks for the opportunity to.
Two questions first one I just wanted to ask about OPEC for the garage projects is there any risk to the guidance do you think from inflationary factors since the feasibility study was set for example.
The fee Uhm. So if we were to mark to market on inputs and effects, where would you say that the $871 an ounce <unk> would move to.
I mean, unless there are some significant changes between now and next year. When we go into production. We wouldn't expect you know some some changes overall, what we see that you know at least acid will be producing a below 900 audience sustaining cost and that's why you know we.
We like you know this this asset.
We usually I mean, you should take the examples of you know our previous built we usually do much better in throughput you know pagai civilly on on those assets, which tends to improve also you know the the overall you need cost in total cost per asset. So yeah, I mean at this stage.
You know pretty pretty confident.
Okay. Thanks, very much and then no morning go it feels like it's been left out when his first cool can I ask how do you think about potentially early redemption does the phones, which is C. A yielding nine and a half the sandwich seems pretty attractive to me.
So as we said you know may may the force be with him. So guy if you Wanna have thank you at this age I mean, I think as you try to outline the capital structure is very simple and is working for us at the moment.
We can continue to consider as we go forward, but at this stage no no no formal plan to look at any kind of early redemption.
Okay fair enough. Thank you.
Thank you that will conclude today's Q&A session I would I'd like to tell Nicole <unk> cancel any can we get the Max.
Thank you everyone for joining today's webcast. We remain available for questions are fine. So don't hesitate. Thank you again and have a good day.
And that will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may not disconnect.
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