Endeavour Mining Promises a 2018 Full of Surprises

Endeavour Mining jumped 12%, beating consensus on 4th quarter earnings

Article's Main Image

Endeavour Mining Corp. (EDV.TO, Financial) has jumped 1.2% on the Toronto Stock Exchange to an estimated $18.87 per share on the heels of the financial results for the fourth-quarter and full year 2017.

Thanks to the successful start-up at Houndé mine, the production of gold was boosted in 2017. The out-performance of the gold mine in Burkina Faso, which became the flagship low-cost asset of Endeavour Mining, pushed the company’s figures on fourth quarter earnings far ahead of consensus. But that’s not all since the company promises a surprising year 2018.

From a 19.7% year-over-year growth in fourth quarter revenue to $207 million, economics dropped an adjusted net profit of 55 cents (+67% from 2016) and the miner beat consensus by 34 cents. The beat induced a +161.90% surprise among the community of analysts.

The operating cash flow benefited as well from the Houndé mine, which was commissioned by Endeavour Mining ahead of schedule and below the company’s budget. From full fiscal 2016, the issue increased by 24% to $235 million.

During fiscal 2017 the company has sold at a loss of $44 million its non-core Nzema mine in Ghana.. The closing was pursued by Endeavour with the intention to enhance the overall quality of the company’s portfolio of assets. For the same reason the company has also invested $317 million for project growth purposes and achieved a great breakthrough with the acquisition of the Kalana project, Endeavour Mining reports that Kalana is a “low AISC, long life, high exploration potential and attractive equity IRR’’ project in Mali.

On the balance sheet side, the company says that “Endeavour negotiated better terms for its revolving credit facility in 2017, remaining well-funded to push forward its growth pipeline". The pipeline also includes near-mine explorations at Houndé, the construction of Ity CIL in Côte d'Ivoire and the optimization of Karma in Burkina Faso.

Thanks to the successful close of an issuance of convertible corporate loan in February, Endeavour Mining’s total liquidity rose to $503 million. The company closed full fiscal 2017 with a net debt position of $323 million, which massively increased a net debt position of $26 million in 2016 because of the Houndé construction. Nevertheless, the net debt to adjusted EBITDA ratio, which has been computed over the last 12 months, remains healthy at 1.05 times, the company says.

Catalysts to watch in 2018 are:

  • A production of gold which is expected to be higher at 670,000 to 720,000 ounces.
  • An all-in sustain cost which is anticipated to be lower at $840 to $890 per ounce of metal sold.
  • A new feasibility study for the Kalana project with which the miner expects to update its shareholders before the end of 2018.
  • The release of an updated resource estimate for Kalana before the end of the first half of 2018.
  • With regard to the strategy of enhancing the quality of Endeavour Mining’s assets base, a decision concerning Tabakoto mine in Mali is expected by the company before July 2018.

All these catalysts are expected to trigger appreciation in the market value of Endeavour Mining in 2018. As of March 17, the stock has a market capitalization of approximately $2.03 billion. Since the last week of February, the stock is up trending again and has surpassed the 200, 100 and 50-SMA lines.

543713598.jpg

Source: Yahoo Finance

For the 52-weeks through March 15, Endeavour Mining has gained 1.74% and beat the Van Eck Vectors Gold Miners (ETF) by 8.15%. The 52-week range is 15.21 to $20.66 per share versus a current share price of $18.87.

The recommendation is 1.6 out of 5 and the average target price is about $20 per share. Eight analysts were surveyed on the recommendation rating while the average target price is a mean of nine estimates ranging from $16.03 to $25.39 per share.

(Disclosure: I have no positions in any security mentioned in this article).