Endeavour’s Youga Life of Mine Increases 80%

When Adamus Resources merged with Endeavour Mining Corp (EDV-TSX; EVR-ASX) on December 19, 2011 they became a $600 million gold mining company focussed on West Africa.

On January 30, 2012 EDV announced it met 2011 production targets producing 177,290 ounces of gold at a cash cost per ounce of $614 (excluding royalties), comprised of 90,026 ounces from Nzema (Ghana) and 87,264 ounces from Youga (Burkina Faso).

The exploration program at the Youga mine resulted in the Life of Mine being extended from 4 years to 7.2 years – creating about half a billion dollars in additional projected revenue at current spot prices.

For 2012, Endeavour expects production to be in the range of 170,000 to 190,000 ounces at a cash cost per ounce (excluding royalties) of $645 to $685, with additional near-term production growth of approximately 100,000 ounces per year anticipated from its Agbaou Gold Project.

Endeavour’s 2012 exploration budget of $30 million includes over 200,000 metres of drilling with objectives including resource delineation at its two mines, testing of multiple additional targets within the mine permit areas, resource expansion on two development projects, and early stage exploration of key properties in Burkina Faso, Côte d’Ivoire, Ghana, Liberia, and Mali.

Most exploration companies would have to raise money in the market to pay for such an aggressive program but EDV’s current 180,000 ounces of production will provide sufficient cash flow.

EDV currently has a cash balance of $115 million and has drawn $100 million of its $200 million revolving corporate credit facility.

With $215 million of cash and credit facilities and a forecast cash operating margin from mining operations of approximately $150 million during 2012, Endeavour has the financial resources for capital expenditures, exploration programs and acquisitions.

The tables below present the 2011 production results by mining operation, on a 100% basis:

“2011 was an exceptional year of growth for our company,” states CEO Neil Woodyer, “Youga mine life has been extended to 7.3 years, and we were able to meaningfully increase the scale of our gold business.”

The engineering studies for the Agbaou Gold Project in Côte d’Ivoire are on schedule.  A construction decision in expected in late Q1 2012. Endeavour will utilize the same mine building team that created the low cost Nzema mine.

The Agbaou projected gold production rate has increased from 72,400 ounces per year to approximately 100,000 ounces per year.  Currently, capital cost estimates do not indicate significant increases over the 2009 Feasibility Study.  The Agbaou mine capex should be about $120 million

Endeavour’s goal is to produce approximately 250,000 ounces of gold per year by the end of 2013 from existing properties.  It has a disciplined acquisition growth strategy focused on West Africa.

The spot price of gold has surging 31% in the last 12 months, from $1,335 to $1,748.  EDV’s current Price to Earnings ratio is 3.9.  With expanding Life of Mine, low cash costs, and growing production profile, EDV is in a very sweet spot.