ENDEAVOUR REPORTS STRONG FY-2022 RESULTS Production of 1.4Moz at AISC of $928/oz
NEWS RELEASE – LSE & TSX: EDV All amounts in US$, preliminary results (unaudited)
ENDEAVOUR REPORTS STRONG FY-2022 RESULTS Production of 1.4Moz at AISC of $928/oz • Operating cash flow of $1.0 billion • FY-2022 shareholder returns of $299m OPERATIONAL AND FINANCIAL HIGHLIGHTS (for continuing operations)
- Q4-2022 production of 355koz at an AISC of $954/oz; totalling 1,400koz at an AISC of $928/oz for FY-2022
- 10th consecutive year of achieving or beating production and AISC guidance
- Adjusted Net Earnings of $65m, or $0.26/sh in Q4-2022; totalling $405m, or $1.63/sh for FY-2022
- Net loss attributable to shareholders of $256m, or $1.04/sh, in Q4-2022 (including impairment of $360m); totalling $66m, or $0.27/sh, for FY-2022
- Operating Cash Flow of $311m, or $1.26/sh, in Q4-2022; totalling $1,017m, or $4.10/sh, for FY-2022
- Strong financial position at year-end with $121m of net cash, up $45m over the previous year
SHAREHOLDER RETURNS
- FY-2022 dividend of $200m represents $50m more than the minimum committed dividend for the year
- Share buybacks continued to supplement shareholder returns with $99m completed in FY-2022
ORGANIC GROWTH
- Sabodala-Massawa expansion and Lafigué greenfield project construction are both on budget and on schedule for production in Q2 and Q3-2024, respectively
- Continued strong exploration focus in 2023 with $70m Group budget; key focus area is the new Tanda-Iguela discovery
- Group M&I resources remained flat year-on-year at 27.3Moz, while P&P reserves decreased by 1.0Moz to 16.8Moz as near mine exploration partially replaced depletion
London, 9 March 2023 – Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) (“Endeavour”, the “Group” or the “Company”) is pleased to announce its FY-2022 operating and financial results, with highlights provided in Table 1 below.
Table 1: Highlights for Continuing Operations1 THREE MONTHS ENDED YEAR ENDED
| All amounts in US$ million unless otherwise specified | 31 December 2022 | 30 September 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 | Δ FY-2022 vs. FY-2021 |
|---|---|---|---|---|---|---|
| OPERATING DATA Gold Production, koz Gold sold, koz All-in Sustaining Cost2, $/oz Realised Gold Price, $/oz3 | 343 378 338 370 960 894 1,737 1,775 | 1,436 1,478 864 1,781 | ||||
| 355 | 1,400 | (3)% | ||||
| 352 954 | 1,393 | (6)% | ||||
| 928 | +7% +1% | |||||
| 1,758 | 1,807 | |||||
| CASH FLOW Operating Cash Flow before Changes in WC Operating Cash Flow before Changes in WC2, $/sh Operating Cash Flow Operating Cash Flow2, $/sh | 195 318 0.79 1.28 154 341 0.62 1.37 | 1,133 4.72 1,132 4.72 | (2)% (5)% (10)% (13)% | |||
| 281 | 1,109 | |||||
| 1.14 | 4.47 | |||||
| 311 | 1,017 | |||||
| 1.26 | 4.10 | |||||
| PROFITABILITY EBITDA2 Adj. EBITDA2 Net (Loss)/Earnings Attributable to Shareholders Net (Loss)/Earnings, $/sh Adj. Net Earnings Attributable to Shareholders2 Adj. Net Earnings2, $/sh | 302 128 275 358 58 (87) 0.23 (0.35) 54 148 0.22 0.59 | 1,113 1,464 245 1.02 605 2.52 | ||||
| (110) | 827 | (26)% (12)% | ||||
| 288 | 1,284 | |||||
| (256) | (66) | (127)% (126)% (33)% (35)% | ||||
| (1.04) | (0.27) | |||||
| 65 | 405 | |||||
| 0.26 | 1.63 | |||||
| SHAREHOLDER RETURNS Shareholder dividends paid Share buybacks Total Shareholder Returns | 100 — 37 44 137 44 | 130 138 268 | +31% (28)% | |||
| — | 170 | |||||
| 24 | 99 | |||||
| 24 | 269 | —% | ||||
| ORGANIC GROWTH Growth capital spend2 | (30) (12) | (63) | ||||
| (55) | (127) | +102% | ||||
| FINANCIAL POSITION HIGHLIGHTS Cash Principal debt Net Cash2 | 833 906 (830) (830) 3 76 | 906 (830) 76 | ||||
| 951 (830) | 951 (830) | +5% | ||||
| —% | ||||||
| 121 | 121 | +59% |
1From Continuing Operations excludes the Karma mine which was divested on 10 March 2022 and the Agbaou mine which was divested on 1 March 2021. 2This is a non-GAAP measure. Refer to the non-GAAP measure section in this press release. 3 Realised gold price are inclusive of the Sabodala-Massawa stream and the realised gains/losses from the Group’s revenue protection programme. Please refer to non-GAAP measures section for the calculation of the realised gold price for all periods presented.
Management will host a webcast and conference call today, 9 March 2023, at 8:30 am EST / 1:30 pm GMT. For instructions on how to participate, please refer to the webcast and conference call section at the end of the news release. The Q4 and FY-2022 MD&A and audited Financial Statements will be filed on the Company’s website, SEDAR and the National Storage Mechanism on or around 16 March 2023.
Sebastien de Montessus, President and CEO, commented: “2022 was another successful year for Endeavour during which we delivered on all our objectives and met guidance for a tenth consecutive year.
We produced 1.4Moz of gold, achieving the top end of our production guidance range and we are particularly pleased to have achieved our all-in sustaining cost guidance of below $930/oz as a result of our strong production performance and optimisation initiatives, despite the inflationary pressures impacting the industry. This strong operating performance generated over $1.0 billion in operating cash flow which has allowed us to deliver significant value to all stakeholders while continuing to fund our organic growth and improving our balance sheet strength with more than $120 million of net cash at year end.
As a trusted partner, we were pleased to contribute approximately $400 million to our host countries through tax, royalty and minority interest dividend payments, in addition to continuing our focus on local procurement. Through our commitment to reward shareholders, we returned approximately $300 million in the form of dividends and share buybacks to shareholders, equivalent to $212/oz of gold produced, which represents double our minimum target for the year.
We are also pleased to report that the Sabodala-Massawa expansion and the Lafigué greenfield build are progressing well with both projects on track for first production in 2024, with costs in line with expectations. Moreover, our exploration programme continues to provide a platform for future growth with the discovery of the promising Tanda-Iguela deposit in Cote d’Ivoire, which has the potential to become another cornerstone asset for the Company.
We have entered 2023 with considerable momentum and we look forward to continuing to deliver against our strategic objectives for the benefit of all our stakeholders.”
FY-2022 SCORECARD
The key targets set for FY-2022, along with the results achieved, are summarised in Table 2 below.
Table 2: FY-2022 Scorecard
| 2022 TARGET | 2022 ACHIEVEMENT | |
| Production, koz AISC, $/oz Leverage Total shareholder capital returns | 1,315 - 1,400 880 - 930 <0.5x Net Debt/adj. EBITDA LTM $150m minimum dividend | 1,400 928 $121m Net Cash $299m shareholder returns |
SHAREHOLDER RETURNS PROGRAMME
- Endeavour’s shareholder returns programme is composed of a minimum progressive dividend that may be supplemented with additional dividends and share buybacks, providing the prevailing gold price remains above $1,500/oz, and that Endeavour’s leverage remains below 0.5x Net Debt / adjusted EBITDA. The minimum dividend commitment was set at $150.0 million and $175.0 million for FY-2022 and FY-2023 respectively.
- As previously announced, Endeavour’s FY-2022 dividend amounts to $200.0 million or approximately $0.81 per share, which represents $50.0 million or 33% more than the minimum dividend commitment for the year. The ex-dividend date for the H2-2022 interim dividend was 23 February 2023 and the record date was 24 February 2023. The dividend will be paid on or about 28 March 2023.
- Shareholder returns were further supplemented with a total of $98.7 million or 4.6 million shares repurchased through the Company’s share buyback programme in FY-2022, of which $24.2 million or 1.2 million shares were repurchased in Q4-2022. Since the commencement of the buyback programme in April 2021, a total of $237.0 million, or 10.6 million shares have been repurchased and cancelled as at 31 December 2022.
- As shown in Table 3 below, Endeavour returned $299.0 million to shareholders for FY-2022 through dividends and share buybacks, equivalent to $212 per ounce produced. Since the launch of the Company’s shareholder returns programme in early 2021, a cumulative $637 million (including the upcoming H2-2022 dividend) has been delivered to shareholders in the form of dividends and share buybacks.
Table 3: Actual Shareholder Returns vs. Minimum Commitment
| All amounts in US$ million | MINIMUM DIVIDEND COMMITMENT | ACTUAL SHAREHOLDER RETURNS BUYBACKS TOTAL DIVIDENDS COMPLETED RETURNS | SUPPLEMENTAL |
|---|---|---|---|
| SHAREHOLDER RETURNS2 | |||
| FY-2020 FY-2021 FY-20221 | 60 125 150 | 60 0 60 140 138 278 200 99 299 | 0 |
| +153 | |||
| +149 | |||
| TOTAL | 335 400 237 637 | +302 |
1H2-2022 dividend declared on 23 January 2023, to be paid on or about 28 March 2023. 2Dividends in excess of Endeavour’s minimum dividend commitment plus share buybacks completed.
CASH FLOW SUMMARY
The following table presents the cash flow and cash position for Endeavour, with accompanying explanations below.
Table 4: Cash Flow and Cash Position THREE MONTHS ENDED YEAR ENDED
| All amounts in US$ million unless otherwise specified | 31 December 2022 | 30 September 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 | |
|---|---|---|---|---|---|---|
| Net cash from/(used in), as per cash flow statement: Operating cash flows before changes in working capital from continuing operations Changes in working capital Cash generated from discontinued operations | 195 318 (41) 23 — 12 | 1,133 (1) 24 | ||||
| 281 | 1,109 | |||||
| 30 | (92) 5 | |||||
| — | ||||||
| Cash generated from operating activities [1] Cash used in investing activities [2] Cash used in financing activities [3] Effect of exchange rate changes on cash | 311 | 154 353 (111) (132) (256) (68) (52) (7) | 1,022 | 1,156 (512) (421) (32) | ||
| (172) | (521) | |||||
| (54) 34 | (385) (71) | |||||
| INCREASE/(DECREASE) IN CASH | 119 (264) 146 | 45 192 | ||||
| Cash position at beginning of period | 833 | 1,097 760 | 906 | 715 | ||
| CASH POSITION AT END OF PERIOD | 951 833 | 906 | 951 | 906 |
NOTES:
1) Operating cash flows increased by $157.1 million from $153.7 million (or $0.62 per share) in Q3-2022 to $310.8 million (or $1.26 per share) in Q4-2022 largely due to higher gold sales at higher realised gold prices, a working capital inflow and a decrease in operating expenses and income taxes paid.
Operating cash flows decreased by $134.3 million from $1,156.3 million (or $4.82 per share) in FY-2021 to $1,022.0 million (or $4.12 per share) in FY-2022 largely due to a higher working capital outflow, and the impact of slightly lower gold sales at higher operating costs in FY-2022.
Notable variances are summarised below:
- Working capital was an inflow of $30.0 million in Q4-2022, an increase of $71.4 million over Q3-2022, largely due to an increase in inflows from trade and other payables, partially offset by higher outflows from inventories. Trade and other payables were an inflow of $32.5 million in Q4-2022 and primarily related to the timing of supplier, social development fund and royalty payments at Ity, Houndé, Sabodala-Massawa and Mana. Prepaid expenses and other were an inflow of $5.0 million in Q4-2022 related primarily to decreased prepayments at Houndé. Trade and other receivables were an inflow of $8.8 million for Q4-2022, primarily related to inflows from receivables from contractors, partially offset by an increase in VAT receivables at Sabodala-Massawa. Inventories were an outflow of $16.3 million in Q4-2022 driven by an increase in stockpiles at Sabodala-Massawa and an increase in consumables across the Group, partially offset by stockpile drawdowns at Wahgnion, Ity, Boungou and Houndé.
Working capital was an outflow of $91.6 million in FY-2022, an increase of $91.1 million over FY-2021, mainly due to an increase in stockpiles at Sabodala-Massawa, Houndé and Ity, and an increase in VAT receivables at Sabodala- Massawa following the expiry of the VAT exemption status at Massawa in Q2-2022. Trade and other payables was an outflow of $10.6 million in FY-2022 compared to an outflow of $64.1 million in FY-2021 largely due to the prior period including increased payments related to the Teranga acquisition. Inventories were an outflow of $57.5 million in FY-2022 mainly due to an increase in stockpiles at the Houndé and Ity mines, and the stockpiling of refractory ore at the Sabodala-Massawa mine ahead of startup of the BIOX® Project in Q2-2024, as well as an increase in consumables across the Group to help mitigate any potential supply chain challenges. Prepaid expenses and other was an outflow of $9.9 million in FY-2022 mainly related to advanced security payments. Trade and other receivables were an outflow of $13.6 million in FY-2022 mainly due to an increase in VAT receivables at Sabodala-Massawa as well as increased advanced royalty payments at Houndé and Boungou.
- Gold sales from continuing operations increased from 338koz in Q3-2022 to 352koz in Q4-2022 due to increased sales at the Ity, Sabodala-Massawa and Wahgnion mines as a result of increased production. The realised gold price from continuing operations for Q4-2022 was $1,758 per ounce compared to $1,737 per ounce for Q3-2022. Total cash cost per ounce decreased slightly from $839 per ounce in Q3-2022 to $829 per ounce in Q4-2022, primarily related to higher sales and lower operating expenses compared to the prior quarter.
Gold sales from continuing operations decreased from 1,478koz in FY-2021 to 1,393koz in FY-2022 due to lower sales at the Boungou, Mana, Wahgnion and Sabodala-Massawa mines, which was partially offset by higher sales at the Ity and Houndé mines. The realised gold price from continuing operations was $1,807 per ounce for FY-2022 compared to $1,781 per ounce for FY-2021. Total cash cost increased from $718 per ounce in FY-2021 to $803 per ounce in FY-2022 largely due to the higher fuel and explosive costs, when compared to the prior period, and the lower number of ounces sold.
Income taxes paid decreased by $66.6 million from $81.4 million in Q3-2022 to $14.8 million in Q4-2022, primarily
•
due to the timing around payments of withholding taxes on dividends from mine sites, which are generally incurred in Q3-2022, and the timing of provisional tax payments.
Income taxes paid decreased by $36.5 million from $225.7 million in FY-2021 to $189.2 million in FY-2022, primarily due to lower tax payments in the year due to lower taxable income, in particular at the Boungou mine, which was partially offset by higher payments of withholding taxes on dividends from mine sites.
2) Cashflows used in investing activities increased by $61.4 million from $110.8 million in Q3-2022 to $172.2 million in Q4-2022 largely due to increased growth capital spend at the Sabodala-Massawa Expansion and Lafigué development projects.
Cashflows used in investing activities for FY-2022 were consistent with FY-2021.
- Sustaining capital from continuing operations increased slightly from $28.8 million in Q3-2022 to $29.6 million in Q4-2022 primarily due to increased capitalised waste stripping activity at the Houndé and Sabodala-Massawa mines. Sustaining capital from continuing operations decreased from $166.4 million in FY-2021 to $127.3 million in FY-2022, largely due to reduced capitalised waste stripping at the Boungou, Houndé, Ity and Sabodala-Massawa mines.
- Non-sustaining capital from continuing operations decreased slightly from $80.1 million in Q3-2022 to $77.1 million in Q4-2022, largely due to reduced resettlement costs at the Sabodala-Massawa mine as that project neared completion and lower pre-stripping activities at the Houndé and Sabodala-Massawa mines, which was partially offset by increased spending on the Recyn project at Ity.
Non-sustaining capital from continuing operations increased from $209.9 million in FY-2021 to $251.7 million in FY-2022 due to the construction of the Recyanidation project at Ity, additional pre-stripping activity at Ity and Houndé mines as production exceeded the guided ranges and TSF raises at the Boungou, Wahgnion and Sabodala-Massawa mines.
- Growth capital, inclusive of the non-cash movements in project working capital, increased from $29.7 million in Q3-2022 to $54.6 million in Q4-2022, as construction activities at the Lafigué project were launched, activity at the Sabodala-Massawa Expansion project accelerated and the Definitive Feasibility Studies (“DFS”) were finalised at Lafigué and continued at Kalana. In Q4-2022, the cash outflow related to growth projects amounted to $66.6 million. Growth capital, inclusive of the non-cash movements in project working capital, was $126.5 million in FY-2022 due to the construction of the Sabodala-Massawa Expansion project and the Lafigué project, which both commenced during the year, as well as costs related to the DFS’s for the growth projects. In FY-2022, the cash outflow related to growth projects amounted to $111.5 million.
3) Cash flows used in financing activities decreased by $202.0 million from $255.5 million in Q3-2022 to $53.5 million in Q4-2022, following the payment of the $97.3 million interim shareholder dividend, $57.2 million paid to minority shareholders and repayment of $50.0 million under the Company’s revolving credit facility during Q3-2022. Financing activities for Q4-2022 primarily consisted of $24.2 million for share buybacks, $16.0 million for the settlement of employee share plan liabilities, $15.6 million payments of financing and other fees, and $5.0 million repayment of finance and lease obligations, which was partially offset by $7.3 million in proceeds received from the exercise of options and warrants.
Cash flows used in financing activities decreased by $36.3 million from $421.3 million in FY-2021 to $385.0 million in FY-2022, and included dividend payments of $166.6 million, share buybacks of $98.7 million, dividends to minority interests of $57.2 million and payment of financing fees of $46.6 million.
EARNINGS SUMMARY
The following table presents the earnings and adjusted earnings for Endeavour, with accompanying explanations below.
Table 5: Earnings from Continuing Operations THREE MONTHS ENDED YEAR ENDED
| All amounts in US$ million unless otherwise specified | 31 December 2022 | 30 September 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 | |
|---|---|---|---|---|---|---|
| Revenue [6] Operating expenses [7] Depreciation and depletion [7] Royalties [8] | 617 (250) (173) (39) | 570 666 (256) (230) (151) (191) (35) (42) | 2,508 (980) (616) (153) | 2,642 (983) (600) (162) | ||
| Earnings from mine operations | 156 | 128 203 | 760 | 898 | ||
| Corporate costs [9] Impairment of mining interests and goodwill [10] Share-based compensation Other expense Exploration costs | (15) (360) (18) | (12) (20) — (248) (4) (7) (8) (4) (12) (5) | (48) | (63) (248) (33) (46) (24) | ||
| (360) | ||||||
| (33) | ||||||
| (29) | (52) | |||||
| (7) | (34) | |||||
| (Loss)/earnings from operations | (273) | 91 (82) | 233 | 486 | ||
| (Loss)/gain on financial instruments [11] Finance costs | (10) | 60 19 (19) (25) | (22) (66) | 28 (66) | ||
| (16) | ||||||
| (Loss)/earnings before taxes | (299) 132 (88) | 145 | 448 | |||
| Current income tax expense [12] Deferred income tax recovery [13] | (57) 89 | (77) (38) 12 34 | (273) 98 | (195) 52 | ||
| Net comprehensive (loss)/earnings from continuing operations | [14] | (267) | 67 | (92) | (31) | 305 |
| Add-back adjustments [15] | 361 | 5 237 | 482 | 385 | ||
| Adjusted net earnings from continuing operations | 93 | 72 144 | 451 | 689 | ||
| Portion attributable to non-controlling interests [16] | 29 | 18 (4) | 47 | 84 | ||
| Adjusted net earnings from continuing operations attributable to shareholders of the Company | [17] | 64 54 148 | 405 | 605 | ||
| Earnings per share from continuing operations Adjusted net earnings per share from continuing operations | (1.04) | 0.23 (0.35) 0.22 0.59 | (0.27) | 1.02 2.52 | ||
| 0.26 | 1.63 |
NOTES:
6) Revenue increased by $47.0 million from $570.0 million in Q3-2022 to $617.0 million in Q4-2022 mainly due to higher gold sales from the Sabodala-Massawa, Ity and Wahgnion mines and a higher realised gold price. Gold sales from continuing operations increased from 338koz in Q3-2022 to 352koz in Q4-2022. The realised gold price, including the realised gain on the gold forward contract and gold collars, increased from $1,686 per ounce in Q3-2022 to $1,751 per ounce in Q4-2022. When excluding the impact of the realised gains on the gold forward contracts and gold collars, the realised gold price increased from $1,679 per ounce in Q3-2022 to $1,742 per ounce in Q4-2022.
Revenue decreased by $134.0 million from $2,642.1 million in FY-2021 to $2,508.1 million in FY-2022 due to the lower gold sales compared to the prior period, which was partially offset by the higher realised gold price. Gold sales from continuing operations decreased from 1,478koz in FY-2021 to 1,393koz in FY-2022. The realised gold price, including the impact of the Group’s revenue protection programme, increased from $1,781 per ounce for FY-2021 to $1,807 per ounce in FY-2022.
7) Operating expenses were stable at $249.5 million in Q4-2022 compared to the prior period. Depreciation and depletion increased by $21.8 million from $151.2 million in Q3-2022 to $173.0 million in Q4-2022 mainly due to increases at the Sabodala-Massawa, Ity and Wahgnion mines, which was partially offset by decreases at the Houndé and Boungou mines. Increases at the Sabodala-Massawa mine were due to the commencement of mining at the Bambaraya deposit, while the increase at Ity was due to high production during the period and at Wahgnion due to the decrease in the reserve base. Operating expenses of $979.5 million in FY-2022 were largely consistent with the prior period as increased operating costs at the Sabodala-Massawa and Wahgnion mines, in addition to higher fuel and consumable costs across the portfolio, were offset by the decrease in expenses related to the reversal of fair value adjustments to inventory that impacted FY-2021. Depreciation and depletion for FY-2022 increased by $16.2 million from $599.8 million in FY-2021 to $616.0 million in FY-2022 largely due to increases at the Houndé, Mana, Sabodala-Massawa and Wahgnion mines, which was partially offset by decreases at the Boungou and Ity mines. Increased depletion at the Sabodala-Massawa and Wahgnion mines is due to a full year of operations in FY-2022, following the acquisition of Teranga in February 2021. The increase at the Mana mine is due to a slight reduction in the depletable base this year, and the increase at Ity mine is due to the commencement of mining at new deposits. This was partially offset by decreases at the Boungou and Ity mines due to lower production and a higher depletable reserves base, respectively.
8) Royalties increased from $35.3 million in Q3-2022 to $38.5 million in Q4-2022 largely due to more gold ounces sold at a higher realised gold price in Q4-2022.
Royalties decreased from $162.3 million in FY-2021 to $152.9 million in FY-2022 due to lower gold sales from the Group which was partially offset by the higher realised gold price.
9) Corporate costs increased slightly from $12.4 million in Q3-2022 to $14.5 million in Q4-2022 primarily due to increased professional fees and seasonally higher employee costs.
Corporate costs decreased from $62.5 million in FY-2021 to $47.7 million in FY-2022 due to the non-recurring costs associated with the LSE listing in Q2-2021.
10)The Group recognised a non-cash impairment of $360.3 million in FY-2022 consisting of $163.3 million and $197.0 million in relation to the mining interest at the Boungou and Wahgnion mines, respectively. The impairments follow updates to the life of mine plans which reflect an updated estimate of the reserve and resources and estimated operating costs, with further details found in Note 19.
11)The loss/gain on financial instruments decreased from a gain of $60.1 million in Q3-2022 to a loss of $10.4 million in Q4-2022 largely due to the impact of unrealised losses on gold forwards and collars of $62.9 million, among other items, which were partially offset by foreign exchange gains of $43.9 million.
During Q4-2022, the loss on financial instruments consisted of an unrealised loss on gold forwards and collars of $62.9 million, an unrealised loss on the fair value of call rights of $6.3 million, an unrealised loss on other financial instruments of $1.8 million, and an unrealised loss on the change in the fair value of contingent considerations of $0.9 million. These items were partially offset by an unrealised foreign exchange gain of $43.9 million, an unrealised gain on foreign currency contracts of $11.1 million as detailed below, an unrealised gain on the revaluation of the conversion option on the convertible senior notes (the “Convertible Notes”) of $4.0 million and an unrealised gain on the fair value of receivables of $3.2 million. In addition, during Q4-2022, the Group realised a gain on gold collars and forwards of $5.7 million. The loss on financial instruments in FY-2022 was $22.3 million compared to a $28.0 million gain in FY-2021. The loss in FY-2022 is due primarily to the impact of unrealised foreign exchange losses of $45.7 million as the Euro weakened against the USD, unrealised losses on gold forwards and collars of $23.8 million reflecting the higher gold price, an unrealised loss in the change of fair value of warrants of $3.3 million, an unrealised loss on the change in fair value of contingent consideration of $1.2 million, and an unrealised loss on the change in fair value of call rights of $0.3 million. In addition, during the year, the Group realised a loss on the early redemption of senior notes of $4.6 million and a realised loss on foreign exchange contracts of $0.4 million. These losses were partly offset by an unrealised gain on conversion options on the Convertible Notes of $30.3 million, a realised gain on gold collars and forward contracts settled during the year of $19.8 million an unrealised gain on foreign exchange contracts of $5.1 million, and a realised gain on the sale of financial assets of $4.5 million upon disposal of certain NSR’s by the Company during the year.
See the Revenue Protection Programme section for further details about the gold collar and forward sales contracts. In addition, the Group has entered into certain foreign exchange forward contracts to increase cost certainty for a portion of its upcoming growth capital expenditure at its Sabodala-Massawa Expansion and Lafigué growth projects. Foreign exchange forward contracts are across both the Euro and the Australian Dollar for a total notional quantum of approximately €148.4 million at a blended rate of 0.98 EUR:USD split over 2022, 2023 and 2024 at approximately 39%, 53% and 9% respectively and approximately AU$58.9 million at a blended rate of 0.69 AUD:USD split approximately 28%, 62% and 10% respectively over the same period.
12)Current income tax expense decreased by $20.1 million from $77.0 million in Q3-2022 to $56.9 million in Q4-2022 largely due to the withholding tax expense recognised on dividends declared during Q3-2022 as part of the cash upstreaming process. The Group increased the amount of cash offshore ahead of the Company settling its Convertible Notes at maturity through a combination of $330.0 million in cash for the principal amount and 835,254 shares which were delivered to settle the in-the-money option value.
Current income taxes increased by $78.2 million from $195.1 million in FY-2021 to $273.3 million in FY-2022, primarily due to higher taxes at Sabodala-Massawa following the cessation of the tax holiday at Massawa in 2022 and increased withholding tax expense associated with the upstreaming of cash as detailed above.
13)Deferred income tax recovery increased by $76.9 million from $11.9 million in Q3-2022 to $88.8 million in Q4-2022, due primarily to the reversal of deferred tax liabilities recognised on mining interests as a result of the impairment expense recognised for the Wahgnion and Boungou mines.
Deferred income tax recovery increased by $45.9 million from $51.8 million in FY-2021 to $97.7 million in FY-2022, which was primarily due to the reversal of deferred tax liabilities recognised on mining interests as a result of the impairment expense recognised for the Wahgnion and Boungou mines.
14)Net comprehensive earnings from continuing operations decreased by $334.5 million from $67.1 million in Q3-2022 to a loss from continuing operations of $267.4 million in Q4-2022 largely due to the impairment of $360.3 million and higher other expenses mainly related to higher provisions for claims, offset by the higher earnings from gold sales in the quarter. For FY-2022, the Group recognised a net comprehensive loss from continuing operations of $31.0 million compared to net comprehensive earnings from continuing operations of $304.6 million in FY-2021, due primarily to an increase in the impairment expense of $112.6 million relative to the prior year, a decrease in earnings from mine operations of $137.8 million due to lower gold ounces sold and higher costs in the year, and an increase in the loss on financial instruments of $44.0 million due to foreign exchange losses in the year, primarily on cash held in non-US dollar currencies.
15)For Q4-2022, adjustments made to calculate adjusted net earnings from continuing operations include the impairment charge on mineral interests of $360.3 million as outlined in Note 10, other expenses of $29.4 million that are detailed in Note 14, the net unrealised loss on financial instruments of $16.1 million largely related to foreign exchange movements as the euro strengthened against the dollar through Q4-2022, and positive non-cash, tax and other adjustments of $45.1 million that mainly relate to the impact of the foreign exchange remeasurement of deferred tax balances.
For FY-2022, adjustments made to calculated adjusted net earnings from continuing operations include an impairment charge on mineral interests of $360.3 million, other expenses of $51.9 million that were primarily related to expenses for the provisions for legal claims and the write-off of Group receivables, the net loss on financial instruments of $42.1 million largely related to remeasurement of foreign exchange, and negative non-cash, tax and other adjustments of $28.1 million that mainly relate to the impact of the foreign exchange remeasurement of deferred tax balances.
16)Adjusted net earnings from continuing operations attributable to non-controlling interests increased to $28.8 million in Q4-2022 from $18.5 million in Q3-2022 due to higher earnings from mine operations during Q4-2022.
Adjusted net earnings from continuing operations attributable to non-controlling interests decreased to $46.7 million in FY-2022 from $84.2 million in FY-2021 due to lower earnings from operations compared to the prior period.
17)Adjusted net earnings attributable to shareholders for continuing operations increased by $11.0 million to $64.5 million (or $0.26 per share) in Q4-2022 compared to $53.5 million (or $0.22 per share) in Q3-2022 due largely to higher earnings from mining operations as a result of lower taxes and higher group production at a higher realised gold price, partially offset by higher depreciation.
In FY-2022, adjusted net earnings attributable to shareholders for continuing operations decreased to $404.7 million (or $1.63 per share) from $605.2 million (or $2.52 per share) in FY-2021 due to lower gold production, higher operating expenses and higher taxes, due in part to the higher withholding taxes paid during the year.
FINANCIAL POSITION AND LIQUIDITY SUMMARY
The following tables present the summarised statement of financial position and liquidity for Endeavour, with accompanying explanations below.
Table 6: Summarised Statement of Financial Position
| All amounts in US$ million unless otherwise specified | As at 31 December 2022 | As at 31 December 2021 |
|---|---|---|
| ASSETS Cash and cash equivalents Other current assets [18] | 951.1 | 906.2 459.8 |
| 495.3 | ||
| Total current assets Mining interests [19] Other long term assets [20] | 1,446.4 | 1,366.0 4,980.2 424.7 |
| 4,517.0 451.3 | ||
| TOTAL ASSETS 6,414.7 6,770.9 | ||
| LIABILITIES Other current liabilities [21] Current portion long-term debt [22] Income taxes payable [23] | 461.9 | 397.8 — 169.3 |
| 336.6 | ||
| 247.1 | ||
| Total current liabilities Long-term debt [24] Other long-term liabilities Deferred income taxes | 1,045.6 | 567.1 841.9 303.9 672.3 |
| 488.1 | ||
| 219.1 | ||
| 574.6 | ||
| TOTAL LIABILITIES | 2,327.4 2,385.2 | |
| TOTAL EQUITY | 4,087.3 | 4,385.7 |
| TOTAL EQUITY AND LIABILITIES 6,414.7 | 6,770.9 |
1Net debt and Adjusted EBITDA are Non-GAAP measures. Refer to the non-GAAP measure section in this press release.
NOTES:
18) Other current assets as at 31 December 2022 consists of $320.7 million of inventories, $106.9 million of trade and other receivables, $56.5 million of prepaid expenses and other and $11.2 million of other financial assets.
- Inventories increased by $9.4 million due primarily to an increase in consumables across all sites as a preventative measure for potential supply chain delays.
- Trade and other receivables of $106.9 million was consistent with the prior year.
- Prepaid expenses and other increased by $21.4 million due to an increase in pre-payments at the Mana and Boungou mines during the year.
- Other financial assets of $11.2 million was consistent with the prior year.
19) Mining interests decreased by $463.2 million compared to the prior year, primarily due to the recognition of a $360.3 million impairment associated with the Boungou and Wahgnion mines.
- At the Boungou mine, a non-cash impairment of $163.3 million was recognised as the recoverable value exceeded the carrying value of the mining interest following the evaluation of a revised life of mine plan, which reflects increased operating costs, the current estimated recoverable reserves and resources, including exploration potential, and higher waste stripping required over the life of mine.
- At the Wahgnion mine, a non-cash impairment of $197.0 million was recognised as the recoverable value exceeded the carrying value of the mining interest following the evaluation of a revised life of mine plan, which reflects increased operating costs and the current estimated recoverable reserves and resources, including exploration potential.
20) Other long-term assets consist of $229.6 million of long-term stockpiles not expected to be processed in the next twelve months at the Houndé, Ity and Sabodala-Massawa mines, $134.4 million of goodwill which has been allocated to the Sabodala-Massawa and Mana mines, $40.0 million related to Allied Gold shares received as consideration upon the sale of Agbaou, $39.5 million of restricted cash relating to reclamation bonds, and an NSR of $6.5 million received as consideration upon the sale of the Karma mine.
21) Other current liabilities are made up of $354.6 million of trade and other payables, $89.1 million of other financial liabilities consisting of the contingent consideration which was paid in March 2023 and other share based cash settled liabilities, and $18.2 million of lease liabilities.
22) The current portion of long-term debt is made up of the $330.0 million 3.00% Convertible Senior Notes (“Convertible Notes”) and the associated conversion option that matured on 15 February 2023. To minimise dilution to equity holders, the Company settled the Convertible Notes at maturity through a combination of $330.0 million in cash for the principal amount and 835,254 shares (worth $20.0 million and equivalent to 0.3% of shares outstanding) were delivered to settle the in-the-money option value. The Convertible Notes were a low cost financing solution which had a 3.00% coupon and an implicit cost of capital of 4.11% over the life of the notes after taking into account the value of the in-the-money option.
23) Income taxes payable were $247.1 million, an increase of $77.8 million compared to the prior year due to increased income tax expense for 2022 at the Ity and Sabodala-Massawa mines. The increase in taxes payable at the Ity mine is due to taxable profits at the newly commissioned Floleu deposit, and at the Sabodala-Massawa mine following the expiry of the tax holiday at Massawa in 2022.
24) The non-current portion of long-term debt was $488.1 million for the outstanding $500.0 million corporate bond. Noncurrent long-term debt decreased by $353.8 million compared to the prior year due to the reclassification of the Convertible Notes as current at 31 December 2022. The Company has upsized its unsecured revolving credit facility (“RCF”), which was fully undrawn at year-end, from $500.0 million to $575.0 million to provide additional liquidity headroom during the Company's ongoing construction phase. The RCF has an interest rate between 2.40 - 3.40% plus Secured Overnight Financing Rate (“SOFR”), which varies on a sliding scale with the Company’s leverage, and is due in 2025.
Table 7: Summarised Financial Position and Leverage Ratio
THREE MONTHS ENDED YEAR ENDED
| All amounts in US$ million unless otherwise specified | 31 December 2022 | 30 September 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 | |
|---|---|---|---|---|---|---|
| Cash and cash equivalents [24] Principal amount of Senior Notes Principal amount of Convertible Notes | 951.1 | 832.5 906.2 (500.0) (500.0) (330.0) (330.0) | 951.1 | 906.2 (500.0) (330.0) | ||
| (500.0) | (500.0) | |||||
| (330.0) | (330.0) | |||||
| NET CASH | [25] | 121.1 | 2.5 76.2 121.1 | 76.2 |
Adjusted EBITDA (LTM) 1,284.2 1,365.1 1,536.6 1,284.2 1,536.6
Net cash/Adjusted EBITDA (LTM) ratio1 0.09x 0.00x 0.05x 0.09x 0.05x [25]
1Net cash, Adjusted EBITDA and cash flow per share are Non-GAAP measures. Refer to the non-GAAP measure section in this press release.
25) At year-end, Endeavour’s liquidity remained strong at $1.53 billion, consisting of $951.1 million of cash and cash equivalents and $575.0 million available through the Company’s undrawn revolving credit facility.
26) Endeavour’s net cash position has increased by $44.9 million in FY-2022, to $121.1 million and the net debt / Adjusted EBITDA (LTM) leverage remains well below the Company’s long-term target of less than 0.50x, which provides flexibility to continue to supplement its shareholder return programme while maintaining headroom to fund its organic growth.
REVENUE PROTECTION PROGRAMME
- In order to increase cash flow visibility during its construction phase, the Company recently extended its revenue protection programme, using a combination of zero premium gold collars and forward sales contracts, to cover a portion of the 2024 production, in addition to the 2023 production for which the Company already had gold collars and forward sales contracts in place.
- In FY-2022, approximately 300koz were settled in a collar with a call price of $2,100/oz and a put price of $1,750/oz. In addition, approximately 514koz in forward sales contracts were settled with an average price of $1,831/oz. The realised gain on these contracts was $19.8 million for the year.
- For FY-2023, approximately 300koz (75koz per quarter) are expected to be delivered into a collar with a call price of $2,100/ oz and a put price of $1,750/oz. In addition, approximately 120koz (30koz per quarter) are scheduled to be settled in forward sales contracts at an average gold price of $1,828/oz.
- For FY-2024, approximately 450koz are expected to be delivered into a collar with a call price of $2,400/oz and a put price of $1,807/oz. In addition, during H1-2024, a total of approximately 70koz (approximately 35koz per quarter) are expected to be settled in forward sales contracts with an average gold price of $2,033/oz.
2022 OPERATIONAL PERFORMANCE OVERVIEW
- Regrettably, a fatal accident occurred at the Ity mine in Côte d’Ivoire on 27 October 2022 as a contractor passed away as a result of injuries sustained in an incident that occurred during blasting activities. While the Group’s Lost Time Injury Frequency Rate (“LTIFR”) improved significantly from 0.20 for FY-2021 to 0.02 for FY-2022, Endeavour will continue to prioritise safety in accordance with its Zero-harm target.
- FY-2022 production from continuing operations amounted to 1,400koz, achieving the top end of the guided 1,315-1,400koz range. FY-2022 AISC from continuing operations amounted to $928/oz, achieving the guided $880-930/oz range in spite of industry-wide inflationary pressures. The strong production performance was mainly due to the Houndé and Ity mines which benefitted from higher than planned throughput, and the Mana mine where higher than expected open pit mining tonnages were extracted from the Wona open pit prior to its depletion. Inflationary pressures on costs were partially offset by favourable foreign exchange movements as the Euro declined against the Dollar as well as group-wide optimisation initiatives.
- FY-2022 production from continuing operations decreased by 36koz or 3% from 1,436koz in FY-2021 to 1,400koz in FY-2022 due to lower production at Boungou, Mana and Wahgnion as a result of mining and processing of lower grade ore. AISC from continuing operations increased, in line with guidance, from $864/oz in FY-2021 to $928/oz in FY-2022.
Table 8: Consolidated Group Production
THREE MONTHS ENDED YEAR ENDED
| (All amounts in koz, on a 100% basis) | 31 December 2022 | 30 September 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 |
|---|---|---|---|---|---|
| Boungou Hounde Ity Mana Sabodala-Massawa1 Wahgnion1 | 26 63 82 46 103 36 | 29 35 72 77 81 60 42 54 86 105 32 47 | 116 295 313 195 358 124 | 174 293 272 205 345 147 | |
| PRODUCTION FROM CONTINUING OPERATIONS | 355 | 343 378 | 1,400 | 1,436 | |
| Karma2 Agbaou3 | — | — 20 — — | 10 | 88 13 | |
| — | — | ||||
| GROUP PRODUCTION | 355 | 343 398 | 1,410 | 1,536 |
1Included for the post acquisition period commencing 10 February 2021. 2Divested on 10 March 2022. 3Divested on 1 March 2021.
Table 9: Consolidated All-In Sustaining Costs1
THREE MONTHS ENDED YEAR ENDED
| (All amounts in US$/oz) | 31 December 2022 | 30 September 31 December 2022 2021 | 31 December 2022 | 31 December 2021 |
|---|---|---|---|---|
| Boungou Hounde Ity Mana Sabodala-Massawa2 Wahgnion2 Corporate G&A | 1,118 | 1,219 825 716 874 773 854 1,098 1,116 779 591 1,647 1,066 39 51 | 1,064 | 801 843 836 1,026 645 994 34 |
| 969 847 | 809 812 | |||
| 999 661 1,376 | 994 | |||
| 691 1,525 | ||||
| 43 | 36 | |||
| AISC FROM CONTINUING OPERATIONS | 954 | 960 894 | 928 | 864 |
| Karma3 Agbaou4 | — | — 1,300 — — | 1,504 — | 1,193 1,131 |
| — | ||||
| GROUP AISC | 954 | 960 915 | 933 | 885 |
1This is a non-GAAP measure. 2Included for the post acquisition period commencing 10 February 2021. 3Divested on 10 March 2022. 4Divested on 1 March 2021.
2023 OUTLOOK
- As published on 23 January 2023, the production guidance for FY-2023 amounts to 1,325-1,425koz, which marks an increase over the FY-2022 guidance of 1,315-1,400koz, while Group AISC is expected to remain consistent with that achieved over recent quarters at $940-995/oz. Group production is expected to be more heavily weighted towards H2-2023. More details on individual mine guidances have been provided in the below sections.
- Total mine capital expenditure for FY-2023 is expected to remain consistent with that achieved in FY-2022 at approximately $370 million, consisting of $165.0 million for sustaining capital expenditure and $205.0 million for non-sustaining capital expenditure.
- Growth capital spend for FY-2023 is expected to amount to $400 million, consisting of $170 million for the Sabodala- Massawa BIOX® Expansion project and $230 million for the Lafigué project. Further details are provided in the sections below.
- Exploration will continue to be a strong focus in FY-2023 with a company-wide exploration budget of $70 million, of which approximately 50% is expected to be expensed and 50% is expected to be capitalised. For FY-2023, approximately $22 million will be spent on greenfield exploration with an increased focus on the Tanda-Iguela property.
OPERATING ACTIVITIES BY MINE
Boungou Gold Mine, Burkina Faso
Table 10: Boungou Performance Indicators
| For The Period Ended | Q4-2022 | Q3-2022 | Q4-2021 | FY-2022 | FY-2021 |
|---|---|---|---|---|---|
| Tonnes ore mined, kt Total tonnes mined, kt Strip ratio (incl. waste cap) Tonnes milled, kt Grade, g/t Recovery rate, % Production, koz | 256 3,497 12.66 295 2.85 | 210 3,559 15.95 338 2.84 94 29 | 301 4,294 13.27 352 3.36 | 990 18,505 17.69 1,348 2.80 | 1,437 26,439 17.40 1,352 4.07 95 174 |
| 93 | 95 | 94 | |||
| 26 | 35 | 116 | |||
| Gold revenue1 | 42.3 | 50.9 | 60.6 | 212.0 | 304.8 |
| Operating expenses Royalties By product revenue Non-cash operating expenses | (22.5) (2.6) | (32.4) (3.0) — — | (22.6) (3.8) | (105.6) (12.7) | (105.1) (18.5) 0.4 4.4 |
| 0.1 — | 0.1 — | 0.3 — | |||
| Total cash cost1 Sustaining capital1 | (25.0) (1.5) | (35.4) (1.4) | (26.3) (1.6) | (118.0) (6.6) | (118.8) (18.1) |
| Total AISC1 Non-sustaining capital1 | (26.5) (6.0) | (36.8) (4.0) | (27.9) (9.0) | (124.6) (27.5) | (136.9) (22.9) |
| Total all-in costs1 | (32.5) | (40.8) | (36.9) | (152.1) | (159.8) |
| Total cash cost/oz | 1,054 | 1,172 | 778 | 1,008 | 695 |
| AISC/oz | 1,118 | 1,219 | 825 | 1,064 | 801 |
1 Non-GAAP measure. Refer to the non-GAAP Measures section for further details.
2 Non-cash operating expenses include reversal of the fair value adjustment of inventory on hand at the acquisition date.
Q4-2022 vs Q3-2022 Insights
- Production decreased from 29koz in Q3-2022 to 26koz in Q4-2022 due to lower tonnes milled and a slightly lower recovery rate, while processed grades remained flat.
- Total ore tonnes mined increased due to greater ore availability and lower stripping in the West Pit compared to the prior quarter.
- Tonnes milled decreased due to downtime experienced during the quarter due to the previously disclosed supply chain delays in getting fuel and some consumables to site.
- Average grade processed remained flat compared to the prior quarter as a decrease in the average grade of mined ore was offset by reduced reliance on lower grade stockpiles in the mill feed.
- Recovery rates decreased slightly due in part to the impacts of downtime on the processing circuit.
- AISC decreased from $1,219 per ounce in Q3-2022 to $1,118 per ounce in Q4-2022 due to lower mining unit costs driven by reduced haulage and blasting, partially offset by lower ounces sold during the quarter.
- Sustaining capital expenditure increased slightly from $1.4 million in Q3-2022 to $1.5 million in Q4-2022 and was mainly related to borehole installations and processing infrastructure.
- Non-sustaining capital expenditure increased from $4.0 million in Q3-2022 to $6.0 million in Q4-2022 and was mainly related to pre-stripping activities at the West Flank pit.
FY-2022 Insights
- FY-2022 production totalled 116koz which, though in-line with the previously disclosed outlook, stands below the guided 130-140koz range mainly due to lower than expected mining activities, which limited access to higher grade ore, as a result of supply chain challenges. FY-2022 AISC amounted to $1,064/oz, which is above the guided $900-1,000/oz range due to the lower than expected production, higher fuel prices and increased security costs.
- Production decreased from 174koz in FY-2021 to 116koz in FY-2022 due to the impact of lower grade material available as a result of delays in supplies arriving on site causing unplanned downtime. AISC increased from $801/oz in FY-2021 to $1,064/ oz in FY-2022 due to the lower grades processed, and fuel, consumable and security cost increases.
2023 Outlook
- Boungou is expected to produce between 115-125koz in FY-2023 at an AISC of between $985-1,075/oz.