Q3 2023 Endeavour Mining PLC Earnings Call
Speaker 1: Oh
Okay.
Speaker 2: Good day and thank you for standing by. Welcome to the Endeavour Mining's third quarter 2023 results webcast. At this time all participants are in a listen-only mode. After management's presentation there will be a question and answer session so for those who wish to ask a question please dial into the phone line for questions.
Good day, and thank keeps a stunted by walking to the Endeavour Mining's third quarter 2023 adults webcast. At this time all participants are in a listen only mode.
After management's presentation, there will be a question and answer session.
Those who wish to ask a question please dial in to the phone lines for questions.
Speaker 2: Please note that due to time constraints, we will be prioritizing questions from covering analysts. Today's conference call is being recorded and a transcript of the call will be available on Endeavour's website tomorrow. I would now like to hand the call over to Endeavour's Deputy CFO and Head of Investor Relations, Martino Di Ciccio.
Please note that due to time constraints, we will be prioritizing question from Katherine analysts todays conference call is being recorded and a transcript of the call will be available on Endeavour's website tomorrow.
Now I'd like to hand, the call over to Endeavour's, Deputy CFO and head of Investor Relations Latino J E T O.
Speaker 3: Hello, everyone, and welcome to Endeavor's Q3 2023 results webcast. Before we start,
Hello, everyone and welcome to Endeavour's Q3, 2023 results webcast.
Before we start please note our usual disclaimer.
Speaker 3: On the call, I am joined by Sebastian, Mark, Guy, and Jonah.
On the call I am joined by Sebastian Mark Guy in General.
Speaker 3: Today's call will follow our usual format. Sebastian will first go through our Q3 and year-to-date result highlights. Then Guy will present the financials. And finally, Mark will walk you through our operating results by.
Today's call will follow our usual format Sebastian will first go through our Q3 and year to date results highlights then guy will present, the financials and finally, Mark will walk you through our operating results by Mark.
Speaker 3: After Sebastian's closing remarks, we'll open the floor up to questions and now I will hand it over to
After Sebastian's closing remarks, we'll open the floor up to questions and now I will hand, it over to Sebastian.
Speaker 4: Thank you Martino and hello everyone, calling with Marc and Jono from our ET mine in Cote d'Ivoire today.
Yeah.
Thank you Martino and Hello, everyone, calling with Mockingjay know from our <unk> mine in Cote d'ivoire today.
Speaker 4: I'm first pleased to report that we have continued to deliver against our six key focus areas for the year, as presented on the screen, with the goal of unlocking near-term value for all stakeholders.
First I'm pleased to report that we have continued to deliver against our six key focus areas for the year as presented on the screen with the goal of unlocking near term value for all stakeholders.
Speaker 4: I will go through each area in detail in the upcoming slides, but as a quick summary, on the operational front, thanks to the efforts made in H1, we saw the strongest performance so far this year in Q3, and we expect Q4 to be even stronger.
When he goes through each area in detail in the upcoming slides, but as a quick summary on.
On the operational front, thanks to the efforts made in H. One we saw the strongest performance. So far this year in Q3, and we expect Q4 to be even stronger.
Speaker 4: This means that we expect to meet full year production guidance for the 11th consecutive year and maintain our status as one of the lowest cost coal producers in the sector.
This means that we expect to meet full year production guidance for the 11th consecutive year and maintain our status as one of the lowest cost gold producers in the sector.
Speaker 4: On the capital allocation front, despite the significant investments in our growth, we are continuing to deliver strong shareholder returns while maintaining a healthy financial position.
On the capital allocation front, despite the significant investments in our growth we are continuing to deliver strong shareholder returns, while maintaining a healthy financial position.
Speaker 4: Regarding our plans to unlock growth in the short term, we expect 2024 to be an exciting year for Endeavour, as both the brownfield expansion of Sabado-La Massawa and the La Figue development project remain on budget and on track to be commissioned next year.
Regarding our plans to regarding our plans to unlock growth in the short term, we expect 2024 to be an exciting year for endeavour.
I suppose the brownfield expansion of some other massawa and Lafayette development project remains on budget and on track to be commissioned next year.
Speaker 4: Meanwhile, regarding our plans to unlock long-term growth, our exploration results continue to demonstrate our ability to self-generate an organic growth pipeline.
Meanwhile, regarding our plans to unlock long term growth our exploration results continue to demonstrate our ability to self generate inorganic gross pipeline.
Speaker 4: Our major focus is our recent Tenda Iguala discovery in Côte d'Ivoire.
Our major focus is a recent 10 day iguala discovering could you up where our results so far have exceeded expectations.
Pending the mineralized trend by 50% and delineating several potential satellite deposits at.
As previously mentioned, we believe that 10 day, well I can be a tier one asset and we look forward to publishing an updated resource estimate later this year.
Alongside this year's investment in our organic growth. We are pleased to continue to offer attractive shareholder returns as we have delivered $240 million to shareholders over the first nine months of the year.
Since our first dividend payment in early 2020. One we are proud to have returned over three quarters of $1 billion to shareholders, which is equivalent to over $200 for every ounce produced.
Looking ahead, our goal is to increase our shareholder returns program further still once our two ongoing organic growth projects complete to ensure that our assets to unlock gross benefits all stakeholders.
As part of our ESG strategy, we continue to launch important new initiatives with the name to protect the places where we operate and promote sustainable social economy grows in our host communities.
We are pleased to see that our initiatives are being noticed just send analytics recently upgraded our rating, making us the top ranked gold producer.
I would now dive deeper into each of these themes starting with our operating results.
So first as outlined in this year's guidance operating performance is weighted toward the second half of the year as we expect stronger production and lower cost at our Hyundai Sabadilla Massawa and many mines.
And as you can see on page seven this is a trend we are seeing due to the stripping assets down in the first half of the year, we had access to better grade in Q3, which represents our strongest quarter to date with production increasing by 13000 ounces over the second quarter and all in sustaining costs falling $33 barrels and we achieved this despite.
Q3 being impacted by the rainy season.
The good news is that we anticipate the fourth quarter to be even stronger.
I will let Mark run you through the mine by mine performance later.
Turning to page eight you can see that year to date, we've already produced 792000 ounces at an all in sustaining cost of 934 $74 per ounce, which places us on track to meet our guidance for the year, we have already achieved 75% of the bottom end of our production guidance with as just.
<unk> Q4 currently on track to be the strongest quarter of the year.
And as you can see on the screen. We are pleased that this operating performance continues to be achieved safely with a sector leading safety record.
Okay.
On page nine we can see that our year to date all in sustaining cost performance continued to place us as one of the lowest cost gold producers in the sector, which means that we are capable of generating healthy margins in order to fund our capital allocation priorities.
Diving a bit deeper into this year's capital allocation priorities, you will see that we have invested more than $370 million in gross capital. So far this year with a key focus on the sub atmos, our expansion and the Lafayette Greenfield project. In addition to our exploration efforts, which I'll discuss in the upcoming slides.
Alongside the investments we have returned $665 million to our stakeholders, which include investors in our host countries.
A total of $240 million has been returned to shareholders in the form of dividends and buybacks, while $425 million has been returned to governments in the form of taxes minority dividends and royalty payments, which is important for maintaining our social license to operate and our position as a trusted partner in.
Countries.
Moving to slide 11, I'll now provide an update on the progress being made at our growth projects, starting with the Sabadell on Massawa expansion project.
As a reminder, once this expansion is completed this summer that MSR mine will rank as a tier one asset capable of producing more than 400000 answer as the year, thereby increasing the quality of our portfolio and further diversifying our production base in.
In addition, based on the exploration success in finding oxide ore. We are confident we will be able to further boost production in the short term.
I will let mark provide details on the belt within the section, but at a high level construction work is progressing on budget with 84% of the $219 million initial capital cost now committed.
It is also on schedule with first gold from the box plant expected during the second quarter of next year.
Moving now to our next growth project, which is our <unk> development in Cote d'ivoire. It will be another cornerstone asset for the company with an envisage annual production of more than 200000 ounce over the initial 13 year mine life at a low all in sustaining cost of below $900 per ounce.
Like the some other MSR or expansion projects, we have now committed around 84% of initial capital with cost in line with expectations and we are on track for first production in Q3 next year in.
In fact, we just showed the progress of the project to our board yesterday and was very pleased to see it coming nicely.
Okay.
Shifting now to our ongoing exploration efforts, which continued to generate excitement amongst the team. So far this year, we spent nearly $80 million with a significant focus on our Greenfield discovery 10 day Guilla as can be seen on slide 13.
Whilst I will focus the discussion on 10 days in the upcoming slide I also want to highlight the success that.
But we are seeing across the portfolio.
Which we're happy to address during the Q&A session.
This success across the group leaves us well positioned to meet our five year discovery target of discovering 12 to 17 million ounces of indicated resources for continuing operations over the 2021 to 2025 period at the low discovery cost of less than $25 per ounce.
Yes.
Now looking at 10 day, well on page 14, I must say given the drill results received will continue to be more and more convinced that it has the potential to be another one tier one asset.
Okay.
Last year, we were thrilled to announce an initial maiden resource of $1 1 million indicated ounces and a further $1 9 million inferred answers.
And this was solely based on approximately 60000 meters of drilling.
This year, we have already drilled 131000 meters and are on track to drill in total of 180000 meters.
The results have exceeded expectations, extending the mineralized trend by 50% and delineating several potential satellite deposits. We are therefore eager to publish an updated resource estimate later this year, which is expected to result in a material increase in the overall resource base with a greater.
Proportion in the indicated category.
As mentioned earlier in addition to investing in our growth another key capital allocation priority for US is returning capital to our shareholders.
This year, we have already paid out $240 million to shareholders, which is comprised of the $100 million dividend for age to 2022 that was paid in Q1 and another $100 million dividend that was paid in Q3 for each one and 2020 threep.
On an annualized basis, the dividend paid for the first half of the year represents $25 million more than our minimum dividend for the year, which reads rates our commitments to banks to play mental shareholder returns.
In addition to our dividend we have returned over $40 million in share buybacks year to date, which means that since the launch of the program. In early 2021, we bought back more than $270 million worth of shares representing over 12 million shares.
Yes.
As you can see on page 16 overall this means that a progressive shareholder returns program has now returned more than $775 million in the form of dividends and share buybacks. Since we declared our first dividend in 2020 and commence payments in early 2021.
To put this in context, we have returned approximately 13% of our market cap since the beginning of our returns program.
Another way to look at it is that we delivered significantly more than the capital required to build one new mine.
Looking ahead once we complete our current two bills. We then expect to focus on further strengthening our balance sheet and increasing our shareholder returns before launching a newbuild, thereby ensuring that our efforts to unlock growth provides immediate benefits to all our stakeholders.
Yes.
Before I hand over to the team I wanted to touch on our ESG initiatives. We continue to believe that mining has the potential to be one of the most impactful industries in contributing to improvements in living standards, particularly in West Africa, where we operate.
And we are able to see this firsthand the results of our ESG initiatives and our economic contributions to the host countries, which amounted to over $2 billion last year.
While there are many ongoing initiatives, we are particularly proud this quarter to announce that we have now received external assurance for compliance to the World Gold Council responsible gold mining principles across all our mines. In addition to ISO certification for environmental and health and safety management. This.
Are significant milestones for endeavour and demonstrate our commitment to responsible gold mining practices.
In fact looking at the next slide you see that because of our efforts. We are proud to now be the top rated gold mining company in sustainability ESG rating universe and also one of the top performers across other sectors as well.
In the Appendix page you will see that we are now better ranked then Anglo American Rio Tinto Glencore, but also be a mining better than the alphabet any leather or Amazon just to name a few ones.
And on this positive note I'll hand, it over to Guy to walk through our financial results.
Thank you Sebastian and Hello to everyone joining us today.
Sebastian has already given the high level picture, so I'll focus more on the specifics of the third quarter.
To summarize the quarter from continuing operations increased by 5% over the last quarter, while costs were down 3%, resulting in a 4% improvement in adjusted EBITDA to $263 million and a 30% improvement in adjusted net earnings to $70 million.
While operating cash flow decreased by 22% to $115 million due to the impact of higher income taxes and withholding taxes during the period.
I'd like to now take you through the details starting with our quarter on quarter operating performance.
As you can see on the production bridge on page 21, our quarterly production from continuing operations increased by 13000 ounces to 281000 ounces.
Primarily due to increased production at Hyundai as a direct result of the higher grades mined and processed from the Kari pump pit.
Elsewhere at manner production was consistent with the prior quarter and $7 Massawa and <unk>.
Production decreased due to lower grades processed and lower throughput respectively.
On the cost side, our all in sustaining costs also improved by $33 per ounce quarter on quarter to an industry, leading $967 per ounce largely due to all in sustaining cost improvements at Hyundai as higher volumes were sold.
Looking forward, we expect a progressive quarter on quarter improvements to continue into Q4 with stronger production and cost performance expected as the wet season ends and we stopped processing higher grades at both manner and sabotage massawa.
Moving to page 22, you'll see that our stronger production and cost performance in Q3 drove higher adjusted EBITDA, increasing by $10 million over Q2 to $263 million. Despite the decrease in realized gold price.
And as a result, our EBITDA margin has improved to a healthy 50%.
Turning to our operating cash flow on page 23, we generated $115 million this quarter, which marks a 22% decrease over the last quarter, which as I said is largely as a result of the seasonally higher withholding taxes paid as well as higher income taxes.
Typically we incur higher withholding taxes at this time of year, and we paid $50 million this quarter with further withholding tax payments expected in Q4, as we continue to upstream cash from our operating entities to corporate.
Income taxes were also higher due to higher taxes at $7 Massawa due to the timing of provisional payments.
Moving now on to Slide 24, you can see a bridge of our quarter over quarter variances in operating cash flow.
Cash flow has decreased from $147 million to a $115 million for the quarter largely due to the lower gold prices higher operating expenses and higher taxes paid.
Which is which was partially offset by higher gold sales and a working capital inflow.
As shown in the waterfall chart the gold price declined from 1947 per ounce to 1903 for the quarter producing cash flow by $12 million.
Gold sales increased by 9000 ounces to 278000 ounces generating an additional $18 million in operating cash flow for the third quarter.
Operating expenses increased largely due to increased mining cost per tonne, Diane manner and increased processing costs across the group given the higher volumes that we process.
Meanwhile, the higher tax payments I mentioned on the previous slide drove the increased income taxes outflow during the quarter.
And lastly, our operating cash flow benefit benefited from a reduction in cash outflow, mainly due to a decrease in inventories across all of our sites.
Moving on to slide 25, we can see the impact of the Castro changes on a net debt position.
Our operating activities, having generated a $115 million, while we invested $195 million in our existing operations and our growth projects during the period.
Including a $116 million of growth capital, mainly related to the $7 Massawa <unk> expansion and the Lafayette Greenfield project.
Financing activities.
180 million outflow and included a $100 million in dividend payments to shareholders.
$55 million and dividends paid to minority shareholders and a further 17 million.
In share buybacks, which was partially offset by a $55 million drawdown against our Rcs to manage the short term offshore cash balances. While we are in the process of upstream in cash.
We also saw a $15 million loss incurred as the value of our cash on hand was impacted by foreign exchange rate changes as the euro depreciated against the U S dollar.
Overall this resulted in a net debt increasing from $171 million to $445 million.
In order to maximize value to shareholders, we are prudently increasing our leverage to fund our growth with the goal of them quickly deleveraging ourselves given the quick payback periods of our assets.
This is similar to our previous growth phase, where we absorbed that and then quickly deleverage over.
However, the key difference. This time is that because we started our current build phase with a strong balance sheet, we're capable of continuing to deliver strong shareholder returns while investing in our growth.
In fact, we currently have $867 million of liquidity available through our cash on hand, and headroom in our CF in Lafayette term loan, which provides significant financial flexibility.
While our leverage has increased quarter on quarter looking at page 27, you see that we are currently standing at a healthy 0.4 times net debt to adjusted EBITDA, which ranks us very favorably against our gold peers.
As we complete our growth projects next year, we expect to quickly delever the balance sheet back to a net cash position, while simultaneously increasing our shareholder returns.
Which will again places us ahead of the peer group.
Moving lastly to our net earnings on page 28, we continue to see high profit margins underpinned by a first quartile cost positioning.
I won't talk to the detail of every line item I'll just focus on a few for the quarter, we incurred $15 million of exploration costs. As we continued to aggressively explore that tender Guilla Greenfield project in Cote d'ivoire.
The gain on financial instruments decreased to a gain of $7 million in Q3 due to increases in unrealized foreign exchange losses, and a decrease in the unrealized gains on golf colors.
Adjustments during the quarter included a loss of noncash tax and other adjustments of $12 million and other expenses of $7 million, which was partially offset by a net gain on financial instruments of $6 million largely related to the unrealized gain on foreign sales in callers.
Overall this meant that we generated adjusted net earnings of $87 million for the quarter.
Equivalent to 28 per share represents an increase of approximately 30% over the prior quarter.
I'd now like to hand over to Mark to walk you through our operating performance.
Thank you <unk> and Hello to everyone.
Before I discuss our operating results in detail I would like to touch on our strong safety performance.
During the last quarter and lost time injury frequency rate with 0.0 rate per million man hours well below the industry average of 114, which is very encouraging, particularly as the number of people working on site has increased with construction activities and have two development projects.
Our strong safety performance has also been recognized with ISO certification for both environmental and health and safety management.
We put the highest priority on safe work practices and remain focused on eliminating all reportable assurances as we believe that all incidents are preventable.
I will now talk to a group performance and then <unk> in more detail.
Following the divestment of our noncore assets in June of being able to allocate more time towards our core mines and development projects.
And it is really pleasing to see the progress we are making across the group.
As Sebastian <unk> mentioned quarter, three was our strongest quarter. So far this year and that was despite the impact of the wet season, which affected mining and processing rates as well as cost.
As you can see on slide 31 at a group level, we remain on track to achieve our full year production and cost guidance.
Following continuous improvement in performance as he has progressed.
After three quarters, we have already achieved 75% of the bottom end of our production guidance.
While we are expecting core four to be our strongest with improvements in grade at Cebu dollar Massawa improvements in underground mining rates at <unk> and continued strong performances at <unk> and the expected.
Moving to our sub one dollar Massawa mine on slide 32.
As we prepare to start commissioning of the biomass project early next year. We are focused on ensuring that we have the right balance of refractory and non refractory ore available to ramp up production, whilst also continuing to support the existing CIL plant.
During the quarter, we prioritized striping up two new non refractory deposits non exterior <unk> and Sofia North extension.
To provide additional upside over to the CIL plant and support a strong fourth quarter.
In quarter, three head grades were lower at approximately three grams per ton as we mined the initial phases of these new pits.
<unk> and lower production quarter on quarter and higher all in sustaining costs.
During quarter four as these new pits advance, we expect grades to increase and we will supplement the phased with higher grade ore from the $7.
Overall head grades are expected to increase in productivity driving higher production.
Moving onto the expansion project that type of dollar Massawa I'm happy to say the box plant construction advancing into the final stages.
We remain on budget and importantly on schedule for our quarter two 2020 full startup.
As mentioned by Sebastian area, approximately $243 million.
84% of the initial $290 million.
Gross capital has now been committed with pricing in line with expectations.
As you can see from the photos the processing plant power plant in TSS are all well advanced.
For me the two key upcoming milestones at the project.
Our plant expansion and the buyouts bacteria ramp up.
The IGN megawatt power plant expansion is nearly finished with electrical instrumentation activities well underway ahead of <unk> in quarter four this year.
Once the power plant is up and running we can start commissioning the rest of the processing plant, including the buyout circuit.
The bulk ticket ramp up to full production is an important milestone and requires time for the biopsy material to grow in volume and progressively fill all of the Basel III <unk>.
Importantly, we have an initial 40 kilogram population of an option alongside.
We are growing in the pilot plant and storing in smaller tanks with the IMF ramping up the scale of the bacterial population in the main box reactors once power is available.
At $7 with the expansion project is progressing well and with a significant portion of the initial capital committed we were confident about launching the construction of a 37 megawatt solar panel power plant in quarter, three which will help us to reduce our energy cost and lower our carbon dioxide emissions.
So far we have committed around $11 million or 20% of the totaled $55 million capital as we move ahead with the procurement of long lead items, while we advance design work and geotechnical studies.
Importantly, we are tracking in line with our budget and on schedule for the completion of the project by the end of next year.
We expect to see an immediate cross benefit months solar plant is running as this pad will be generated at around one four per kilowatt hour compared to IV for a self generated power.
We're also adding an eight megawatt battery system that is designed to reduce the number of generators required for screening reserves, while the solar farms generating electricity.
The solar initiative will not only reduce our costs its habit on the massawa, but also air emissions and help put us firmly on track to meet our 2030 emissions target for the group.
Now moving onto our own dime on slide 35.
As you can see who they had a record performance in the quarter.
<unk> benefited from the work we did in the first half of the year. When we were focused on waste stripping in the Kari pump.
To advance to the next phase of all mining, which we started in late quarter two.
Throughout quarter, three Kari pump was the main source of oil and I'm going to it's hard reserve grade of around three six grams per tonne, we achieved higher head grades and higher production, which was slightly impacted by lower recoveries as a higher proportion of fresh and transitional ore from telecom within the mill site.
Heading into the fourth quarter, we expect to continue mining ore from the Kari pump fleet and will be blending it with an increased proportion of oil from carry risk and inventory mine, resulting in a slightly lower head grade.
Moving now to the <unk> mine.
After a record half one performance production decreased as guided during the third quarter as a wet season impacted mining and processing rates.
The wet ground conditions, and the higher moisture content in the ore respectively.
Lower mining and milling rates, coupled with higher voltage and de watering costs associated with the wet season drove cost slightly higher in quarter three.
Despite the continued rise in early quarter, four we expect throughput rates to increase in the fourth quarter, which will be offset by slightly lower price as well as mining will focus on low grade areas of the ultra and fit.
As it is throughput performance has surpassed expectations in the first half of the year. We took the decision to accelerate the construction of <unk> to ensure that we have sufficient tailings capacity at the current elevated throughput rates.
At the same time, we are making good progress at <unk> and mineral size optimization initiatives, which are in the commissioning and construction phases respectively.
Moving to a minimum as I highlighted earlier in the year, we are transitioning manner as we move from a combined open pit and underground operation to an underground only operation with multiple deposit being mined.
We are expanding the wiring underground mine through two photos and trades a client systems to increase underground production rates.
To support the increase in underground mining activity, we brought in a new contractor that so far this has been slower than expected. Therefore, we are putting a lot of focus on helping to embrace a new contract is performance to continue to advance development and stope production Atlanta.
We are starting to see improvements in mining activities with a 20% increase in development meters and a 40% increase in production from stopes in quarter, three compared to quarter two.
As a result, we saw increased production from the underground in quarter three while the open pit phase from Iowa is decreasing as the pit approach at the end of its mine life.
Overall production that men remained relatively flat in <unk> compared to quarter two while all in sustaining cost increase largely due to a higher strip ratio at the middle of the open pit.
Driving open pit mining costs higher.
During quarter four we expect to see continued improvement in stroke production ramps up at the mine or underground at.
At the same time, sorry production at the <unk> underground is expected to progress into higher grades as well.
Lower contributions from <unk> that will be offset by higher underground stope production, which is expected to increase head grades in quarter four driving higher overall production.
Moving now to our second development project, the Lafayette project in Cote d'ivoire, we.
We continue to make significant progress on our next cornerstone asset.
Construction is progressing well and we are on budget and on schedule first production in quarter three next year.
It is encouraging to say the project advance how quickly we have now commissioned 84% or $377 million of the initial capital.
We are pleased to see that pricing is largely in line with expectations.
You can see some of the critical path items and the images on this slide.
Detailed engineering is approaching completion concrete works for the crushing milling and grinding circuit is well underway.
We visited the project yesterday and it was pleasing to see the <unk> frame now in position.
Bono show installed.
The construction of the 225 Kilovolt power line is progressing well, we've completed the erection of the tails and streaming of the power lines and are working on the substation installations at each end of the line.
At the TSA, we're currently aligning with HCP, Lana and expect to finish in the coming months.
Overall, the key work streams are tracking in line with the schedule and we are very pleased with the progress made so far.
As Sebastian mentioned earlier, we're very excited for next year is that gross projects come to fruition.
I will now hand back to Sebastian for closing remarks.
Thank you very much guy in March as you can see we have continued to deliver against our key objectives in 2023.
Missions for a strong 2024, as we are progressing well towards unlocking organic growth projects for next year.
With a better MSR electric are completed we will further upgrade our portfolio.
By increasing production, while lowering our cost base. This will of course position us to generate strong cash flow, which will in turn allow us to continue to reward our stakeholders.
None of the progress we have made will be possible without our team and I would like to thank them for their continued hard work and dedication.
Thank you for joining us I will now hand over to the operator for Q&A.
Thank you ladies and gentlemen, we will now begin the question and answer session.
Linda if you wish to ask a question you will need to press star one on your telephone and wait for your name to be announced we will be prioritizing questions from Catherine on the lines at this time if.
If you wish to cancel your request please press star one again.
Please press star one if you will.
Wish to ask a question.
Please standby, while we compile the Q&A queue.
We will take our first question.
Our first question comes from the line of <unk> Habib from Scotia Bank. Please go ahead. Your line is open.
Thanks, Operator, hi, Sebastian and downstream congrats on a good quarter on quarter improvement.
<unk>.
<unk> season.
Just a couple of questions from me it's Sebastian.
Starting off just with.
In terms of cost.
<unk> 22, and kind of first half of 2023 was kind of all about increased cost due to inflation.
Are you starting to see cost stabilize in the second half of this year and any color on your expectations on cash costs and sustaining costs going into 2024.
Sure. Thanks <unk>.
On the on the on the cost you are right.
We flagged that we would be expecting steel and.
Inflationary environment and high elevated price in particular in H, one I would say that in <unk>, we haven't seen an increase and we start on certain areas I mean to see some price decrease.
So we haven't seen as we would have expected a bigger drop in particular in fuel price.
Senegal and in <unk> in particular, but hopefully this this will materialize I mean progressively over the next months.
Regarding 2024, we always said that we should see again a drop in our production cost at group level in 2024.
Simply by getting those two new projects online given that the two projects both the subdued MSR expansion with the buyouts and Lucky will both come out where it is lower cost than the average 2000 twenty's regroup costs. So this will in turn improve our cost in 2020.
Sure.
Despite seeing some higher trends in the sector.
Cost going up I would expect that next year, we will come back with the lower production costs for four endeavor then for 2023.
Yes.
Thanks for that and in terms of the sustaining capital I mean, you had.
<unk> sustaining capital in.
In the first half of 2023, just based on all the projects that you.
We're completing that's starting to fall off in the second half and can you just comment on the sustaining capital kind of going into 2024 as well.
Sure.
Well, if we look at.
The results release, there were some minor adjustments to our capital outlook for.
The remaining of the year.
But.
For 2004 2020 for I would say that I don't know Guy I mean, if you want to comment on.
On the on our expectations for 'twenty four.
Sure Sir.
If we take a look forward after as you said.
Some relatively peak Capex. This year, we're looking at a 250 more or less look forward for our combined sustaining and non sustaining.
Yeah.
Got it thanks for that.
And just switching gears I guess to Manav.
Martin I had a bit of a slower than expected ramp up of underground.
Development and on on that and so ramp up is progressing well based on the experience at <unk>.
Underground are you looking at opportunities of underground potential agile other operating mines as well.
Sure.
This is why we've been flagging that in a manner, which was important for us.
Trading progressively our core skills within the group I mean for underground.
We've been focusing today on transitioning water from open pit to underground it has been taking a bit more time, but we are scaling up.
Progressively with in particular, a new decline that water in order to have to.
To increase the underground mining rates.
We bought the mill filled it.
What we see is that clearly we are doing some drilling campaigns currently at holiday for example, with some very interesting preliminary results for.
Vindaloo main.
Some underground potential there I mean, we obviously know that there will be at some point.
Some underground.
<unk> at Sabre Massawa in particular, Massawa, which was clearly identified during the DD when we acquired the assets.
And last year, we see potential at at ETE. So.
Getting those core competencies within the group is is important and this is why we're trying to.
To set up the right way at manner and to basically use manner.
The training facility for underground competences for the rest of the group.
You might recall that.
Moscow, Chief operating officer has.
A very large and strong underground competences, and therefore has been able to attract progressively.
Some good guys to help us ramp up that that skills and capacities.
And then just last question believes Sebastian.
Switching gears to the exploration program at Thunder Gorilla.
You are looking to complete close to around.
180000 meters of drilling.
In 2023.
Into 2024.
Yeah.
Sure I think there is an expression in English, which is proof in the pudding. So.
We obviously, putting pressure on journal and the team to try to integrate as much results as possible for the for the release in the.
Coming weeks.
That's something that we might have ready.
By end of November beginning of December.
I would say that we would expect at least I mean, all the results by end of Q3, So end of September drilling.
To be included into.
Into that release.
It means that the drillings in October November and results wouldn't be included into it but.
But I think the surprise in the quality of what we are expecting will be good enough in order to confirm that this is.
Clearly heading to become a tier one asset in one of our best assets in the portfolio.
We will on the basics of.
This release.
And I'll try to start looking at.
A scoping study in 2024 at the same time, we're trying not to rush too much as it is.
Important for us to really understand the size of what we're looking at so that the scoping study.
Constrain us at the beginning in certain options that would still be a variable for US you know as we grow a better understanding of the of the deposit.
Okay, that's great color Sebastian Thats. It from me thanks for taking my questions.
Thank you.
Thank you as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
We are going to take our next question.
Your next question comes from the line of Richard Hatch from Diamondback. Please go ahead. Your line is open.
Yeah. Thanks, Hey, good morning, 17, thanks to the crew and just got a few questions and first one is just on <unk>. Congrats on a really strong quarter, but it would appear that you're going to have to have a really bad quarter to Avon.
Top patent guidance if not exceeded.
We would put our numbers above the range.
Wildly crazy or is there a valid reason if you don't mill maintenance or something on that you think is just going to bring that fourth quarter down.
Thanks, Richard I think it's a fair point that.
We are expecting a stronger Q4 better than Q3 in terms of production and with this production level expecting significantly lower all in sustaining costs for Q4 than for Q3, allowing us at the end to.
To meet our guidance, both for production and Orient sustaining costs.
Okay.
Okay. Thanks, and then just on Manta and.
So am I right in saying the target underground mining rate is about two 2 million tons a year correct me if I'm wrong on that.
And if that is the case what are you doing.
To get to that level of the case.
The other assets in the portfolio and then I look at how mine is performing and I hear what you're saying about the.
Then it can be used as a training and more.
For some of the other assets in the portfolio and maybe some other ones as well.
Okay.
How much how much longer can you sort of withstand this connection ohmic performance and I'd say, just don't matter as well.
24, cask cost number should we be putting in to our models.
Please thanks.
So what we're targeting for manner is with C. And then with three declines at Weiner, we're sort of looking in the range of about 60000 tonnes, a month plus or minus for each day Con C will gradually decrease as we come towards the end of the of the year.
Loss of the current asset and then the wine side.
<unk> continued to increase to compensate for that.
And then there is a period of time, where we'll be.
<unk> and underground mining operation.
But we're confident that we can get the production up to the.
Required level.
Okay and then.
And then what about what about cost Mark.
While we are still working through the budget for next year, the cost will be better than this year.
Okay.
I mean, clearly I mean production ramping up.
We will see again, a significant drop in.
In cost of goods for next year.
Yes, okay.
Is it is the kind of if I just staying with you or is it kind of development.
Right.
Having the flexibility in the underground where the key areas where you were.
Cracking the whip so to speak.
So we've got to take volume that we're progressing to get into.
Third section of the underground at <unk> and so that is an all yet and so that's obviously an important part to get moving and then on the on the stoping side, it's just getting the.
Our new contract to getting their performance up to the sort of levels, where we want to save we've seen some fairly encouraging results in November.
Which is good.
We obviously continue to push them.
Okay. Thanks, and then the last one and just go ahead, sorry, if I missed this on the MRI minority interest cash payments out the door and tax outdoor Q4.
Where are you on that what's the state please.
Guys do you want to give some.
Sure thing.
If we're looking at Q4, specifically, we are looking at a withholding tax and minority dividend total of around somewhere between 60 and $60 million to $65 million.
Okay.
Thanks, very much for your time.
Great.
Richard just a last one on your first question there I believe Sebastian's response was at the group level.
As youre, asking where Hyundai so.
<unk> had a good Q Q3, given the higher grades coming through from Kari pump and that.
It's why we stated earlier this year that we expected a stronger second half given the stripping that was being done in the first half and we expect grades to normalize in the fourth quarter as we blend your with some kari west and some vindaloo there.
Thank you.
Take our next question.
Thanks. Your next question comes from the line of Daniel Major from UBS. Please go ahead. Your line is open.
Hi, Thanks for the questions.
Yes.
Follow ups on the cash flow statement.
From Richard's question on the tax and minorities.
I look at the cash tax payment.
Today, it's about $270 million and if you sort.
Factoring in.
Around half of that 60% to $65 million in a normal kind of rate of income tax and then on the.
On the withholding tax it looks like you're on track to pay somewhere in the region of $350 million in overall tax.
The seasonally high payment of withholding tax this quarter, but that would be a sort of 60% to 70% effective tax rate.
And then obviously on top of that you've got the dividend distribution to minorities. I guess my question is when we look into next year.
Based on your plans for up streaming of cash et cetera.
What should we be thinking about the withholding tax payment overall cash effective tax rate and then a similar kind.
Kind of question on the minority dividends because at the moment, it's a pretty big cash drag those combined this year.
Sure.
Sure if you want to.
Give some clarification on that.
Sure thing.
So if we look at it on a go forward basis, which I think was the thrust of the question.
We should be lower looking into next year.
And that's essentially because we will be putting in place some intercompany debt.
The development projects, which effectively provides at least some shields to minority interest dividend.
And.
Thereby.
Reducing the overall tax.
Burden that we've seen in this year. So I think the look forwards is significantly different this year as this year has been to prior years as a result.
Okay can you can you give us any steer on the magnitude of that.
I would prefer if you don't mind to probably give you a shout offline because I'd like to walk you through the splits between the withholding tax and corporate income tax I think the there are variations.
<unk> both by host nation.
As well as then our intended distributions, which against fundamentally effect that it might be fact easier. If I just provide you some more gritty data rather than try and covered on the call.
Sure that that's fine.
And then just second question just to clarify again, the cash flow question. So the payment.
Receipts for <unk> slipped into Q4.
What's the number we should be putting in now after any adjustments and so total cash inflow you would expect in the fourth quarter.
Comprising of any kind of deferred payments and the initial lump sum.
Okay.
Yeah.
Sure.
So in terms of the asset sell proceeds for <unk> and when you also far we have received $33 million from the sale from Nielsen goes and we expect to receive the remaining $97 million.
The upfront consideration before year end, so it's a $100 million I mean is expected before year end.
The delay in receiving the payment is simply due to <unk> mining unexpected delays in Sydney syndicating the shareholder loan.
Which has now been resolved.
We've been discussing directly with their bank and the legal documentation is nearly completed.
Despite these delays we are confident that we should be receiving that in the next in the next few weeks and that leaves before Christmas.
And beyond that.
Clearly.
From the view that the sale was clearly in line with our strategic objective.
And overall confidence given the dialogue with William that they'll have the ability to deliver value to our stakeholders.
Okay. Thanks, and just one more if I could squeeze in hopefully a simple one.
I will say about the exploration run rate.
How are you seeing that into next year relative to this year I mean this year is.
About $100 million, how would you expect that to trend into next year.
Well.
China will be who is in front of me, we will be presenting his budget in two weeks time, So we'll review that.
And looking at the overall equilibrium I mean for the balance sheet and the P&L.
But.
Expecting that it will be at least $80 million.
Plus or minus around this number.
Then it might evolve during the year, depending on priorities surprises and stuff like that a bit like we did in this year.
Very good thanks.
Thanks, Dan.
We will take our next question.
Your next question comes from the line of Wayne Lam from RBC. Please go ahead. Your line is open.
Yeah. Thanks, good morning, guys.
Yes.
Just wondering in Burkina Faso.
On the recent revision.
Sliding scale on the royalty structure.
Can you kind of discuss.
Behind the renegotiation there.
And when those discussions have started and does that come with any permanent stability agreement of reassurance on the overall terms or just wondering if there's any potential for change in the carried interest there as well versus the current 10%.
Sure Howard.
<unk>.
If I mean, if you recall I mean.
Bookings.
<unk> has in our scaling scaling approach to other countries.
To the loyalty scheme.
Schema.
Obviously, it was capped at 1300 gold price per ounce.
As opposed to for example to cut you off if we look at goodwill.
We had a cap at $2000 per ounce.
So there has been ongoing engagements over the last few months is between the government the chamber of mines and mining companies.
Alongside also with suppliers lenders I mean, the oldest stock held stakeholders, which are involved in the mining sector.
Guarding the royalty rate regime.
Following several iterations.
We're able to settled on the wider to change that was published.
And we are expected to become effective sometimes in November or early December.
Overall.
We have what is important is the.
The impact for Endeavour is relatively minimal because we're talking about less than three 5% impact to our group all in sustaining cost.
And it's important to reiterate that we have stability agreements in place.
The free carried interest so we do not expect any changes there so.
Overall, it's been a.
Good dialogue between the different parties, and and not surprise, where where we've been lending.
Okay, great. Thanks, and then maybe just add Massawa looking ahead to production ahead of the box plant coming online.
Just curious if the bulk of the material until that is going to be continued to be sourced from naphtha.
<unk> east versus the higher grade northern central zones in <unk>.
So just wondering if we should continue to.
We anticipate a relative decline in grades before youre able to start processing higher grade refractory ore.
Sure Mark do you want to yes. So if you look at how we've gone year to date, we do expect quarter four to be stronger and we do anticipate that.
We will be able to maintain a similar sort of level in the lead up to the box coming online.
Okay, great. Thanks, and then.
Maybe just last question at <unk>.
The higher throughput rates there.
How much runway do you have on the tailings capacity currently and just wondering if you can just kind of a step ups.
In sustaining spend next year I think you had said $250 million.
On a consolidate basis, but just wanted to confirm that for 'twenty 'twenty four and I'm just wondering if there is.
Step up in spend at <unk>.
Attribute to the construction of the new of the new staff to support the higher run rates.
No.
Got more than sufficient capacity.
On CSF, one and tier two is progressing very well. So we will have that really well ahead of time and from an overall capital perspective.
It will be similar to what we're doing this year from a sustaining capital.
Perspective.
Yeah, I mean, the good news I mean at <unk> and we're currently at ETE is obviously the re sign.
Projects, which has been now commissioned and starting to perform in a well.
Next year I mean, we've launched already I mean, the studies in some key procurements for the mineral sizer.
And I think once we've got all that the mineral side, there will be critical to improve throughput during in particular rainy season.
So I think.
Those two projects are giving us very strong confidence that the type of rates and throughput that we've seen over the last 12 18 months I mean at ETE.
We'll become more sustainable.
Post 2025, one dose one of those two projects are up and running at the right rate.
Okay got it and on that $2 50 for 2024 was that the number that was quoted earlier.
Is that just in reference to the sustainable.
Guy I think you were commenting on 2000 and for sustaining.
So the $2 50 is for sustaining plus non sustaining on a look forward basis.
Excluding crop.
Okay, great perfect. Thank you very much.
Okay.
Thank you we will take our next question.
Your next question comes from the line of Sandeep <unk> from Morgan Stanley. Please go ahead. Your line is open.
Thank you operator.
Thank you seven team for taking my questions I have few I just take one at a time. So firstly on again on cash flow. So I look at the balance sheet. It looks like you have.
Working capital of around USD 90 million nine zero in 2022, and another 19 million year to date, if we exclude the proceeds from asset sales.
Do you expect that to completely reverse in coming quarters are there it's more of a medium term.
Guy do you want to comment certainly sandeep. Thank you for the question I think if we just sort of zoom out.
You're right there has been a buildup I think the key element to the growth in working capital has been as we've been building stocks ahead of <unk>.
<unk>.
And yes, you will see a reduction, but it's not going to be an unwind in the next one or two quarters, it's going to be progressively through.
The start of 'twenty four into the back.
Back half 'twenty four as we as we ramp up the buyouts.
Okay.
Perfect. Thank you.
I think you answered partly the question on proceed I had a follow up on that so what should we be expecting in terms of cash flows for the deferred cash consideration net smelter revenue during <unk>.
So $97 million cash consideration.
Are you expecting on top of that something would.
Sure so as part of the agreement.
The $97 million, which is the remaining part of the upfront.
Then there are a few million dollars as expected, which is linked to <unk> on the production.
For one <unk>.
During Q3 and Q4.
And then it will be a payment that will be received.
Beginning of <unk>.
Q1, because there is a $10 million payment.
Contingent payments expected in the city first of December this year, and then another $15 million at the end of Q1. So those are I would say the non contingent.
So $97 million in Q4 $10 million at the end of December and $15 million at the end of Q1, and then on top of that.
We'll be expecting the contingent, but which is directly linked to production.
Production.
Perfect. Thank you and then final question one on production.
Production gains for 2023 has been maintained and this implies that currently it needs to improve by approximately 9% versus Q level to achieve the midpoint of the guidance range. Do you think this is a terrible if we need to be more conservative.
Now Thats achievable.
So you've got you've got Mark's immediate feedback achievable.
Okay.
Thanks.
Thank you we.
We will take our next question.
Your next question comes from the line of Don Demarco from National Bank Financial. Please go ahead. Your line is open.
Hello, operator, thank you for taking my call.
Sebastian team.
Yes, just a couple of questions from me.
And building on the last Caller's question Sandy's question about.
Q4 being stronger than Q3, what are the mines that are going to rebound and drive that stronger production in Q4.
Sure Mark.
See better performance as Abdullah if you will be stronger quarter on quarter.
<unk> achieved record production like it did in Q3, but it will still be a good quarter and we do it.
Great to see a better performance from memory.
Okay, great so really all.
All three except for one day.
Is it fair now going back to Richard I'd ask a question on human rights report production and marketing you mentioned it would normalize.
But we see even 45000 ounces kind of puts you above the top end of guidance.
So I'm just wondering about.
What is the production in Q2 was it off sequence.
And is there any is there any implications on production or grades looking ahead in 2024 today.
No.
Performance from Honda in quarter three was note our statements at all it was just a very.
High grade pocket in the in the pit and.
With your resource modeling there is always a top cut applied and I guess, we did achieve a we'll get a very good outcome from that particular part of the ore body.
A very positive reconciliation.
So it's not something that we expect over time going forward. Yeah. It was it was planned for this year and this is why we're insisting that we had some.
Hi productions towards H, two rather than each one and it's really on the back of the stripping that was made that at Hyundai.
In Q1 in particular, the large stripping with it.
So we're getting the benefits and the interest free and the and somehow also a bit in Q4.
Okay perfect.
So you are getting some positive reconciliation there, but we're looking at Q4, you've got the leavers to blend it and so even if you hit another high grade pockets I mean.
You can adjust those repurchases you see Pat I suppose.
Yes, I mean, what we what mark was anything to us.
We're not expecting Q4, and you Shouldnt expect Q4 for Hyundai to be our strongest Q3.
It will still be a good quarter, but what is interesting in Q4 for us is <unk>.
Seeing.
Again.
Sure.
With stronger performance and some other MSR.
Okay. Thank you.
And while you have the mic maybe if I could just ask you a final question on your perspective on M&A at this point.
It's been topical in recent call on other calls.
What is your sense at this point in time.
Well on M&A, what is what is interesting is.
I keep repeating the same but we don't feel pressure.
Due to the M&A.
In particular, while we are doing and are strong.
Strong organic growth with two with the focus right now on completing both left and subdued on Massawa.
As we are shaping nicely 10, <unk> and <unk>.
That.
The press release, we will do in the coming weeks.
Right on time they.
We will show that.
We have a very interesting projects to build in the coming years.
So.
As mentioned before.
In terms of adding production through M&A.
Assets that fit our portfolio of Italian are not readily available and tend to sit sometimes with larger companies.
So we first need to see what's in our strategic direction. These companies are going to take so we need to continue to monitor the market.
No no pressure.
We will continue to be extremely disciplined.
If if any if any opportunities arise in that that we should have a look at.
Okay, Great. That's all from thank you very much.
Thank you we will take.
Ms Cheng.
Your next question comes from the line of Raj Ray from MDI.
I apologize.
Please go ahead your line is open.
Operator could arise you changed.
You changed bank Raj.
And yes.
With BMO.
Okay.
Thanks for taking my question. So first first of all to use Sebastian on the the new royalty in routine.
My question is has there been any other ask from the from the interim government there in terms of changing.
Any other attributes of the mining code I know you have a stability agreement with respect to the 10% carried interest, but with respect to income tax and any other attributes in cell therapy.
Any of that asked that didn't make it to the final.
The agreement.
We can talk to that and then I have a couple of operational questions for Mark.
Sure No Raj I mean, there hasnt been any any other.
Particular request coming from the from the government.
I think thats something that has been pending.
Pending.
For some time to review for them.
Scale for the loyalty scheme.
So there hasnt been a complete surprise.
Good is that it was debated and discussed so it didn't came as a.
Blanket decision without proper.
Discussion coordination with the difference in this.
Three representatives.
I mean, obviously this is something that will help the government in their current.
Fight against against terrorism, So it's not something that.
We can't we can't support.
So yes.
No other no other specific items requested.
Okay, that's great and then Mark a couple of questions. My first time on the recovery.
Head grade was up substantially about recovery dropped now to the comment on the blending the ore.
Plus there was a comment on the retention time being lower.
Any comment on that and why.
That's impacting our how the retention time is being impacted by your.
Or mix and the second question was on.
Mana underground grade if you can give us some idea of what the Q3 underground grade was an overall as you're ramping up your underground.
Output, how your grade is reconciling versus your.
The reserve grade.
Yeah, Thanks for that.
At Hyundai as we increase throughput will have a slight impact on retention time and depending on the mix. It will obviously vary so when we're in the.
Good oxide ore and we still get very good recoveries the recovery impact that we're talking about there is.
Some graffiti designs in the Kari pump pit.
At times.
We do tend to see a slight recovery penalty when we in the in the graphite.
Yes.
So mark just two follow ups, if I looked at your floor process for Q3 versus Q2 is slightly lower so that's why I was a bit confused with the retention time comments.
Look all of that.
Come back to you on that one in December.
Exactly what might be driving that unless its availability related as well.
Okay utilization.
Okay.
Yes.
On the.
On the ground lease.
Yeah, so Matt or underground.
Striping perspective.
We had a mill shutdown recently and after that we did some batches of the underground just to compare just to confirm because sometimes when you're blending you don't necessarily know.
Any single source is doing and we were certainly we were happy with the results.
To know that what we were climbing going in from the underground perspective.
As it was planned.
Okay. That's great. Thank you very much that's it for me.
Okay.
Thank you. Thanks Raj that will conclude today's Q&A session I would now like to turn the call back to Martino de <unk> for any closing remarks.
Thank you everyone for joining our webcast today, we of course remain available offline for more questions. Thank you and have a good day.
And that will conclude today's conference call. Thank you for your participation you may now disconnect.
Okay.
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Okay.
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