Endeavour Mining starts construction of its Houndé Project, its next low-cost gold mine
- Houndé to raise Endeavour's overall portfolio quality- Average annual production of 235,000 ounces at All-In Sustaining Costs ("AISC") of $610/oz over the first 4 years
- 10 year mine life based on current reserves
- Significant exploration upside to extend mine life
- Expected to increase the Group's production to approximately 900,000 ounces per year and lower average AISC to below $800/oz by 2018(1)
> $328 million capex, fully funded from existing sources of capital
- 18-month construction period with gold pour expected Q4-2017
- 15-month Gold Revenue Protection Program implemented to increase cash flow certainty during peak construction period
George Town, April 11, 2016 - Endeavour Mining (TSX:EDV) (OTCQX:EDVMF) is pleased to announce that its 90%-owned Houndé Project in Burkina Faso has entered the construction phase of its development, following approval from its Board of Directors.
The Houndé Project is expected to deliver average production of 190,000 ounces per year over a 10-year mine life at an AISC of US$709/oz, based on current reserves. The project is an open pit mine with a 3.0Mtpa gravity circuit/ Carbon-In-Leach plant. The initial capital cost is estimated at $328 million, inclusive of $47 million for the owner-mining fleet. The Project is permitted to commence operations and early earthworks have begun.
Neil Woodyer, CEO of Endeavour, stated:
"With the ramp-up of Karma soon underway, and our operations delivering a strong performance, we are now well positioned to build the Houndé project, which will further lift the overall quality of our portfolio. Once in production, it will become our flagship low-cost mine and will rank amongst West Africa's top tier cash generating mines. Furthermore, Houndé will benefit both from our construction track-record, demonstrated most recently at Agbaou, and our team's operating experience in Burkina Faso.
The Project is fully-funded based on our expected pro-forma cash position following the completion of the True Gold acquisition, the mine equipment financing, and the undrawn portion of our revolving credit facility. However, rather than draw on our revolving facility, our objective is to fund the remaining capital needs from free cash flow. We have therefore prudently implemented a short-term Gold Revenue Protection program to secure and de-risk the necessary cash flows, providing comfort even if the gold price were to fall to $1,000/oz."
Houndé Project Highlights
During the past year, a thorough review and optimization of the Houndé Project was completed and an implementation plan was established. The mining and ore processing schedules have remained unchanged since February 2015 while the operating and capital costs were fully scoped and optimized by Endeavour, with assistance from Lycopodium Minerals ("Lycopodium").
| Table 1: Houndé Project Highlights | |
| Ownership | 90% Endeavour, 10% Burkina Faso |
| Reserve and Resources(2) | |
| P+P Reserves | 31Mt at 2.1 g/t Au for 2.1Moz |
| M+I Resources (inclusive of reserves) | 38Mt at 2.1 g/t Au for 2.5Moz |
| Inferred Resources | 3Mt at 2.6 g/t Au for 0.3Moz |
| Mine type | Open pit |
| Mill type | Gravity / CIL plant |
| Production | |
| Mine life | 10 years |
| Strip ratio, W:O | 8.4 |
| Processing rate | 3.0 Mtpa |
| Average LOM Recovery rate | 93% |
| Total LOM gold production | 1,906 koz |
| Average annual production | 190 koz |
| Average LOM AISC | $709/oz |
| Upfront Capital | $328m, inclusive of $47m for owner mining fleet |
| Gold Price (US$/oz) | $1,150 | $1,200 | $1,250 | $1,300 | 1,350 |
| After-tax Project NPV5% | $230 | $286 | $342 | $398 | $437 |
| After-tax Project IRR | 24% | 28% | 32% | 36% | 39% |
| Payback, years(4) | 2.7 | 2.4 | 2.2 | 2.0 | 1.8 |
Houndé Operating Cost Optimization
As shown in the table below, AISC per ounce has remained fairly stable following the completion of a comprehensive review and optimization of life of mine operating costs and sustaining capital requirements.
Table 3: Operating Cost Optimizations
| 2015 Case(5) | 2016 Optimization | Change | |
| Mining costs, $/t moved | 2.03 | 2.17 | +7% |
| Processing costs, $/t | 14.31 | 13.36 | (7%) |
| Site G&A costs, $m/yr | 10.6 | 9.8 | (8%) |
| LOM Sustaining capital, $m | 89 | 77 | (13%) |
| AISC, US$/oz | 714 | 709 | (1%) |
Following cost and business risk comparisons, the "Owner Operator" option was selected over the "Contractor Mining" approach. The fully scoped mining costs were revised upward mainly due to increased cost assumptions for ore re-handling, blasting and fixed cost re-allocation.
During the optimization process both the Run of Mine ("ROM") pad and the Tailings Storage Facility ("TSF") were relocated to more favorable locations. Furthermore, the TSF was changed from basin to paddock style to optimize the usage of waste material and generate nearly $25 million in reclamation and closure cost savings.
The processing costs estimate decreased due to the positive impacts of i) reagents use optimization; ii) power demand optimizations; and iii) relocation of the TSF, which more than offset the power costs increasing from $0.15 to $0.18 per kWhr.
Site General and Administrative ("G&A") costs have decreased due to favorable exchange rate variations and re-allocation of fixed labour costs into mining costs.
Houndé Capital Costs and Project Management
The optimized and fully scoped upfront capital cost has been estimated at $328 million, inclusive of $47 million for the owner-mining fleet and $28 million for contingencies, which is in line with the 2015 estimate of $32 million.
| Table 4: Project Capital Cost Summary in US$m | |
| Mining (inclusive of $47 million for the fleet) | 75 |
| Owner Project Costs | 68 |
| Treatment Plant Costs | 57 |
| Infrastructure (inclusive of $17 million for the 91kv overhead power line) | 47 |
| EPCM Management Costs | 17 |
| Owner Operation Costs | 15 |
| Construction Indirect Cost | 14 |
| Reagents and Services | 7 |
| Sub-Total | 300 |
| Contingency | 28 |
| Total | 328 |
The current upfront capital cost estimate is based on power supply from Sonabel, the national electricity utility, consisting of a 38 kilometer, 91kv overhead power line.
Project capital commitment in 2016 is expected to be approximately $180 million, with the remainder in 2017. Within the coming weeks, Endeavour expects to lock-in approximately 25% of the total capital cost by placing firm orders for the SAG and Ball mills, purchasing the mining fleet and paying land compensation and related taxes.
Replicating its successful construction partnership at both Nzema and Agbaou, Endeavour has awarded the EPCM contract to Lycopodium Minerals, and detailed engineering is now commencing. Lycopodium has already had detailed involvement in the Houndé Project, through the completion of the Detailed Feasibility Study and the recently completed optimization reviews.
The overall duration of the Project construction is estimated to be 18 months. Endeavour plans to self-perform 72% of the project build, while Lycopodium will focus primarily on the processing facility which is the remaining 28% of the total capital commitment for the project. Endeavour's Project Management Team will include approximately 90 personnel to perform all remaining construction tasks. Endeavour's team will also be responsible for all concrete work, which was the successful approach employed at Agbaou.
The contingency allocation for the Houndé Project is based on evaluating the risk level of confidence and experience of the Construction Services Team, for every line item. This method for determining contingency is deemed to be more realistic as opposed to applying a single, all-encompassing contingency for the entire Project. The design of the processing plant and supporting infrastructure for the Project has been carried out in sufficient detail to arrive at cost estimates of appropriate accuracy of +/-10%.
Houndé Project Funding and Gold Revenue Protection Strategy
The Houndé Project is expected to be funded from internal and existing sources of capital, as well as the planned mining equipment financing (as per Table 5). In addition, the free cash flow generated during 2016 and 2017 from Endeavour's five operating mines is expected to increase total financing sources to above 1.5 times the total capital cost, representing in excess of 50% financing headroom.
| Table 5: Funding Sources in US$m | |
| Cash Balance (as at Dec 31, 2015) | 110 |
| Undrawn RCF (as at Dec 31, 2015)(6) | 110 |
| Proceeds from Youga Sale | 20 |
| La Mancha Anti-dilution Equity Investment (True Gold acquisition) | 62 |
| Mining Equipment financing | 50 |
| Total Existing Sources of Capital Excluding 2016-17 Cash Flow | 352 |
| Houndé Initial Capex | 328 |
Endeavour's objective is to fund Houndé utilizing its free cash flow generated over the construction period rather than accessing its Revolving Credit Facility ("RCF"). To support this funding approach it has put in place a short-term Gold Revenue Protection Strategy consisting of Gold Option Contracts evenly spread over a 15-month period, to increase the certainty of its upcoming free cash flow. The Gold Option Contracts have been structured to limit Endeavour's debt requirements even if the gold price drops to $1,000/oz.
A deferred premium collar strategy using written call options and bought put options has been put in place for the 15-month period from April 2016 to June 2017. The program covers a total of 400,000 ounces, representing approximately 50% of Endeavour's total estimated gold production for the period. The total premium payable for entering into this program was $9.2 million, which is deferred and settled as monthly contracts mature.
The advantages of the Gold Option Contacts during the construction period include:
- ~50% of production will be protected if the gold price falls below $1,200/oz
- 100% of production will benefit from gold price upswings between $1,200 and $1,400/oz
- ~50% of production benefits from gold price upswings beyond $1,400/oz
Once the Gold Option Contracts program ends, Endeavour will return to a position where its gold production is fully exposed to spot gold prices.
Houndé Reserves and Resources
The Vindaloo deposits represent 88% of reserve ounces and benefits from the 2003 Burkina Faso Mining Code tax rate of 17.5%, while Bouéré and Dohoun, which make up the remainder of reserve ounces, are under the 2015 Mining Code tax rate of 27.5%
Table 6: Houndé Project Reserves and Resources(7)
| Vindaloo Deposits | Bouéré | Dohoun | Total | ||||||||||||
| Mt | Au g/t | koz | Mt | Au g/t | koz | Mt | Au g/t | koz | Mt | Au g/t | koz | ||||
| P&P Reserves | 28.3 | 2.00 | 1,822 | 1.1 | 5.20 | 181 | 1.2 | 1.90 | 72 | 30.6 | 2.11 | 2,075 | |||
| M&I Resources | 35.7 | 1.98 | 2,276 | 1.1 | 5.37 | 189 | 1.2 | 2.35 | 87 | 37.9 | 2.09 | 2,551 | |||
| Inferred Resources | 3.0 | 2.57 | 247 | 0.2 | 3.43 | 20 | 0.1 | 2.91 | 6 | 3.2 | 2.62 | 274 | |||
Resources inclusive of Reserves, on a 100% basis as at Dec 31, 2015
Exploration Upside to Significantly Extend Houndé's Mine Life
The Houndé exploration tenement covers over 1,075km² within Burkina Faso's highly prospective Birimian belt. However, in light of the Project's already robust economics, limited exploration has been done over the past years, aside from the short 2014 drilling campaign which outlined the Bouéré and Dohoun deposits and resulted in a 34% increase in Mineral Reserves to 2.1 million ounces.
Historically, exploration focused mainly on the Vindaloo trends, however at least 15 significant targets located within 20km of the planned mill that have been identified by previous limited drilling campaigns. Most of these targets are untested and Endeavour expects to explore high grade targets of greater than 5 g/t as its priority.
The Houndé long-term exploration strategy is currently being integrated in Endeavour's ongoing exploration strategic review.
Community and Social Responsibility Actions
Endeavour recognizes that an active CSR program is the foundation of long-term success. As such, it established a dedicated Houndé Project Safety, Occupational Health and Environment department and hosted a significant amount of stakeholder meetings. Endeavour has also launched community development programs including livelihood restoration and community derived micro-project initiatives, and is currently reviewing its extensive Human Resources database to promote local employment.
The Project continues to benefit from strong stakeholder support. The Provincial Resettlement Committee, which was set up two years ago, re-validated and approved the resettlement plans at the end of February and the compensation process began shortly after, in April 2016.
Conference call and live webcast
Management will host a conference call and live webcast on April 11, 2016, at 11:30am Toronto time (EST), 4.30pm London time (GMT); 5.30pm Paris time (CET), to discuss the Houndé Project.
The live webcast can be accessed through the following link:
http://edge.media-server.com/m/p/tzxdg664
Analysts and interested investors are also invited to participate and ask questions using the dial-in numbers below:
| International: | +1 212 444 0895 |
| North American toll-free: | 1 877 280 2342 |
| UK toll-free: | 0800 279 4992 |
| Australian toll-free: | 1 800 040 158 |
| Confirmation code: | 249724 |
A replay of the conference call and webcast will be available on Endeavour's website.
Contact Information| Vincent Benoit EVP - Strategy & Business Development +33 (0)1 70 38 36 96 vbenoit@endeavourmining.com | DFH Public Affairs in Toronto John Vincic (416) 206-0118 x.224 jvincic@dfhpublicaffairs.com |
| Martino De Ciccio VP - Strategy & Investor Relations +33 (0)1 70 38 36 95 mdeciccio@endeavourmining.com | Brunswick Group LLP in London Carole Cable, Partner +44 7974 982 458 ccable@brunswickgroup.com |
Qualified Persons and Technical Note
Adriaan "Attie" Roux, Pr.Sci.Nat, Endeavour's Chief Operating Officer, is a Qualified Person under NI 43-101, and has reviewed and approved the operational analysis, operating and capital estimates, and other technical information in this news release.
M. Zammit MAIG (Cube Consulting) is an independent Qualified Person for the Vindaloo mineral resources. Kevin Harris CPG (Endeavour) is a Qualified Person for the Bouéré and Dohoun mineral resources. R.M. Cheyne FAusIMM (Orelogy) is an independent Qualified Person for the Vindaloo mineral reserves and the overall mining schedule. Michael Alyoshin MAusIMM CP Min (Endeavour) is a Qualified Person for the Bouéré and Dohoun mineral reserves. Most recent filed report is "Houndé Gold Project - Burkina Faso, Feasibility Study NI 43-101 Technical Report" effective date October 31, 2013, prepared by M. Zammit MAIG (Cube Consulting), M. Warren MIEAust CPEng (Lycopodium), R.M. Cheyne FAusIMM (ORELOGY), D. Morgan CPEng (Knight Piésold), P. O'Bryan MAusIMM (CP) (Peter O'Bryan and Associates).
The Houndé Mineral Resource has been estimated using a gold price of Us$1,500/oz and a lower cut-off grade 0.5 g/t Au. The Houndé Mineral Reserve has been estimated using a gold price of Us$1,300/oz and a lower cut-off grade between 0.4 and 0.8 g/t Au, varying by distance from deposit to the mill and ore type.
About Endeavour Mining CorporationEndeavour Mining is a TSX-listed intermediate gold mining company which operates 4 West African mines in Côte d'Ivoire, Mali, and Ghana. In 2016, it expects to produce between 535,000 and 560,000 ounces at an all-in sustaining cost of US$870 to US$920 per ounce, after adjustment of the recent Youga sale and excluding the Karma mine (where the transaction with True Gold is expected to close at the end of April 2016). Endeavour Mining is focused on effectively managing its existing assets to maximize cash flow as well as pursuing organic and strategic growth opportunities that benefit from its management and operational expertise.
Endeavour Mining | Executive Office | Bureau 76, 7 Boulevard des Moulins, Monaco 98000This news release contains "forward-looking statements" including but not limited to, statements with respect to Endeavour's plans and operating performance, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of future production, future capital expenditures, future financing sources, and the success of exploration activities. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "expects", "expected", "budgeted", "forecasts" and "anticipates". Forward-looking statements, while based on management's best estimates and assumptions, are subject to risks and uncertainties that may cause actual results to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the successful integration of acquisitions; risks related to international operations; risks related to general economic conditions and credit availability, actual results of current exploration activities, unanticipated reclamation expenses; changes in project parameters as plans continue to be refined; fluctuations in prices of metals including gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in the completion of development or construction activities, changes in national and local government regulation of mining operations, tax rules and regulations, and political and economic developments in countries in which Endeavour operates. Although Endeavour has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Please refer to Endeavour's most recent Annual Information Form filed under its profile at www.sedar.com for further information respecting the risks affecting Endeavour and its business. AISC, all-in sustaining costs at the mine level, cash costs, operating EBITDA, all-in sustaining margin, free cash flow, net free cash flow, free cash flow per share, net debt, and adjusted earnings are non-GAAP financial performance measures with no standard meaning under IFRS, further discussed in the section Non-GAAP Measures in the most recently filed Management Discussion and Analysis for the year ended December 31, 2015.
Appendix 1: Mine Plan Based on Reserves
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Total | |
| Mining | ||||||||||||
| Ore mined | kt | 3,537 | 2,875 | 2,853 | 5,133 | 3,079 | 3,018 | 1,501 | 7,727 | 0 | 0 | 29,723 |
| Waste mined | kt | 27,101 | 29,125 | 29,147 | 17,813 | 38,618 | 38,893 | 37,774 | 32,432 | 0 | 0 | 250,903 |
| Total mined | kt | 30,638 | 32,000 | 32,000 | 22,946 | 41,697 | 41,911 | 39,275 | 40,159 | 0 | 0 | 280,626 |
| Strip ratio | ratio | 7.7 | 10.1 | 10.2 | 3.5 | 12.5 | 12.9 | 25.2 | 4.2 | 0.0 | 0.0 | 8.4 |
| Processing | ||||||||||||
| Ore processed | kt | 3,000 | 2,997 | 3,000 | 3,000 | 3,000 | 3,000 | 3,000 | 2,979 | 3,000 | 2,748 | 29,723 |
| Feed grade | g/t | 2.92 | 2.68 | 2.59 | 2.44 | 1.92 | 2.46 | 1.39 | 2.41 | 1.36 | 1.29 | 2.15 |
| Contained gold | koz | 282 | 258 | 250 | 235 | 185 | 237 | 134 | 231 | 131 | 114 | 2,057 |
| Recovery | % | 94% | 90% | 89% | 93% | 95% | 94% | 92% | 94% | 95% | 94% | 93% |
| Recovered gold | koz | 265 | 231 | 223 | 219 | 176 | 222 | 123 | 217 | 124 | 108 | 1,906 |
| AISC | US$/oz | 506 | 645 | 662 | 648 | 1,007 | 773 | 1,239 | 755 | 495 | 497 | 709 |
Appendix 2: Updated Site Layout
Appendix 3: Houndé Exploration Targets
[1] Including the Karma mine, assuming a successful completion of the True Gold acquisition as announced on March 4, 2016.
[2] Full details and notes provided in Endeavour's February 29th, 2016, press release entitled "Endeavour Mining Increases P&P Reserves and M&I Resources by 32% and 39%, respectively" available on the Company's website.
[3] Based on 100% equity funding and equipment lease financing
[4] Payback period calculated starting from production start
[5] In February 2015, Endeavour updated the Houndé Project economics following an increase in Mineral Reserves. In this update, operating unit costs for mining ($/t mined), processing ($/t processed), site G&A costs, and sustaining capital were unchanged from the November 2013 Feasibility Study.
[6] RCF of US$350 million, maturity date March 2020, semi-annual reductions commencing September 2018, annual interest based on LIBOR + a 3.75% to 5.75% margin
[7] Full details and notes provided in Endeavour's February 29th, 2016, press release entitled "Endeavour Mining Increases P&P Reserves and M&I Resources by 32% and 39%, respectively" available on the Company's website. Totals may vary slightly due to rounding.
Updated Site Layout
Houndé Exploration Targets
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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Endeavour Mining Corporation via Globenewswire HUG#2002257
