Endeavour Mining PLC (EDV)

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SA: Endeavour Mining Has Beat Its Guidance

Jan. 17, 2015 11:31 AM ET | 3 comments | About: Endeavour Mining Corporation (EDVMF)

Disclosure: The author is long EDVMF. (More...)
Summary

Endeavour Mining produces 466,000 ounces of gold and is guiding for a higher output at a lower cost in 2015.
I’m positively surprised by the production rate in Q4, as the Agbaou mine continues to outperform my expectations.
I will update my investment thesis shortly, as Endeavour Mining is still too cheap to ignore.

Endeavour Mining (OTCQX:EDVMF) has announced it has produced almost half a million ounces of gold in 2014, as the production rate in Q4 came in stronger than expected at 120,000 ounces of gold, bringing the total output for the year at 466,000 ounces. That's a very nice outperformance as Endeavour has exceeded the upper level of its production guidance by approximately 6% which is obviously very nice. This outperformance was mainly caused by a higher than expected output at the new Agbaou mine which produced in excess of 47,000 ounces of gold.

I'm truly impressed with the continuous outperformance at the Agbaou mine, as the total production for the year was 147,000 ounces, whereas I was expecting just 100,000 ounces to have been produced. The AISC will be in line with the production cost in Q3 2014, and Endeavour is thus guiding for an average AISC of $1,025-1,040 per produced ounce. This production cost will very likely decrease further in 2015, as the company expects to increase its output even further to 475,000-500,000 ounces of gold at an AISC of $930-980/oz. This means that at the current gold price, Endeavour Mining should generate $70-80M in free cash flow (after-tax) which would be a great performance for a company valued at just $205M by Mr. Market. I do agree the risk level of Endeavour Mining is a bit higher than average, as all of its mines are located in Africa, but I do believe the risk/reward ratio is fantastic here. As long as gold stays around the $1,150-1,300 levels, Endeavour should continue to do well and the cash on its balance sheet should grow at a continuous rate.

All major capital expenditures have now been funded and/or completed, and I think Endeavour Mining will surprise quite a few people in 2015. I have a long position in Endeavour Mining and will very likely add some shares shortly. As the company will produce almost half a million ounces of gold, I don't think it'd be a bad idea to hedge a part of its production at the current gold level, but unfortunately 'hedging' still is a dirty word in the mining industry.

http://seekingalpha.com/article/2828146-update-endeavour-mining-has-beat-its-guidance