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Endeavour Reports Q2 Results: On-Track to Meet Full-Year Guidance

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ENDEAVOUR REPORTS Q2 RESULTS;
ON-TRACK TO MEET FULL-YEAR GUIDANCE

Picture 1: Construction of Processing Plant.jpg
Picture 1: Construction of Processing Plant



Figure 1: Ity CIL Construction Milestones.jpg
Figure 1: Ity CIL Construction Milestones



OPERATIONAL AND FINANCIAL HIGHLIGHTS

NB: Following a strategic assessment of Tabakoto, the mine was deemed to be non-core and a sale process was therefore launched, in-line with Endeavour's portfolio management and capital allocation strategy. The asset was classified as held-for-sale, included as part of the Company's discontinued operations.

  • Production from continuing operations of 147koz in Q2 and 299koz for H1-2018,
    well on-track to meet FY-2018 guidance of 555-590koz
  • AISC from continuing operations of $780/oz in Q2 and $732/oz for H1-2018,
    well on-track to meet FY-2018 guidance of $760-810/oz
  • All-In Margin of $48m for Q2 totalling $116m for H1-2018, up 81% over H1-2017
  • Operating Cash Flow per share (before non-cash working capital) of $0.64 for Q2 totalling $1.52 for
    H1-2018, up 34% over H1-2017 
  • Adjusted EPS from continuing operations of $0.09 in Q2 and $0.31 in H1-2018, up from $0.02 in H1-2017
  • Net Debt of $410m at quarter-end, up from $335m at end of Q1 due to Ity CIL construction
  • Well positioned to finance remaining Ity CIL construction cash outflow of ~$190m with $339m in available sources of financing and liquidity in addition to cash flow being generated from operations

PROJECT HIGHLIGHTS

  • Ity CIL construction progressing on-budget and on-time with first gold pour expected by mid-2019;
    SAG and Ball mills arrived at site 3 months early
  • Kalana drilling program was completed and the updated resource is expected to be published in Q3-2018

View News Release in PDF Format
View Presentation in PDF Format

George Town, August 1, 2018 - Endeavour Mining (TSX:EDV) (OTCQX:EDVMF) is pleased to announce its financial and operating results for the second quarter of 2018, with highlights provided in the table below.

Table 1: Key Operational and Financial Highlights

  QUARTER ENDED   SIX MONTHS ENDED
Jun. 30,
2018
Mar. 31,
2018
Jun. 30,
2017
  Jun. 30,
2018
Jun. 30,
2017
Var. H1-18
vs. H1-17
PRODUCTION AND AISC HIGHLIGHTS (from continuing operations only)               
Gold Production, koz 147 152 84   299 173 +72%
Realized Gold Price2, $/oz 1,257 1,293 1,188   1,275 1,176 +8%
All-in Sustaining Cost1, $/oz 780 685 791   732 824 (11%)
All-in Sustaining Margin1,3, $/oz 478 608 397   543 352 +54%
CASH FLOW HIGHLIGHTS (includes discontinued operations) 1              
All-in Sustaining Margin4, $m 72 94 34   165 61 +170%
All-in Margin5, $m 48 68 35   116 64 +81%
Operating Cash Flow Before Non-Cash Working Capital, $m  69 95 55   163 107 +53%
Operating Cash Flow Before Non-Cash Working Capital, $/share 0.64 0.88 0.57   1.52 1.13 +34%
PROFITABILITY HIGHLIGHTS (from continuing operations only)                
Revenues, $m 190 199 101   388 205 +90%
Adjusted EBITDA1, $m 68 92 36   160 64 +151%
Adjusted EBITDA Margin1,6, % 36% 46% 36%   41% 31% +32%
Adjusted Net Earnings Attr. to Shareholders1, $m 9 24 7   34 2 n.a.
Adjusted Net Earnings1, $/share 0.09 0.23 0.07   0.31 0.02 n.a.
BALANCE SHEET HIGHLIGHTS1              
Net Debt, $m 410 335 183   410 183 +125%

 1This is a non-GAAP measure. Refer to the non-GAAP measure section of the MD&A. 2Realized Gold Price inclusive of Karma stream; 3Realized Gold Price less AISC per ounce; 4Net revenue less All-in Sustaining Cost; 5Net revenue less All-in Sustaining Costs and Non-Sustaining capital; 6Adjusted EBITDA divided by Revenues.

Sébastien de Montessus, President & CEO, stated: "As we reflect on the first half of 2018, Endeavour is tracking well against all of its key performance metrics, most notably production and All-In Sustaining Costs, and we remain on-track to meet our full year guidance.

Construction progress at the Ity CIL project remains on time and on budget and we continue to anticipate the first gold pour by mid-2019. This is an important project for Endeavour, which, along with Houndé, has the potential to deliver step-change improvements across key metrics.

We also continued to deliver strong exploration success, notably with the announced discoveries at Houndé in the Kari area where we anticipate a maiden resource for the Kari Pump target by year-end. We have significantly progressed our stand-alone greenfield exploration targets where we expect to start generating maiden resources later this year. 

Lastly, our strategic assessment of Tabakoto demonstrated the potential to reduce its AISC, mainly through capital investment to renew the underground fleet. These investments, however, do not meet our capital allocation criteria and therefore we have launched a sale process, as we ultimately believe that the asset is better suited to the portfolio of another company with an alternative strategy, as we continue to focus on lower-cost and long-life assets.

We believe that we are very well positioned to meet our 2019 strategic objective of achieving an annual production of more than 800koz at AISC of below $800/oz and with a visibility of more than 10 years, as set in early 2016. This confidence is due to the important strategic milestones both already achieved - which include: the start-up of Houndé, the sale of non-core Youga and Nzema mines, the purchase of the Karma mine and Kalana project, and the important exploration success achieved notably at Ity - and upcoming milestones which include the sale of Tabakoto, start-up of Ity CIL and delineating the significant recent discoveries made at Houndé."

PRODUCTION & AISC ON-TRACK TO MEET GUIDANCE

  • Group production from continuing operations totaled 147koz in Q2-2018 and 299koz for H1-2018, well on track to meet full year guidance of 555-590koz.
    • Production from continuing operations significantly increased in Q2-2018 compared to Q2-2017 due to the addition of the Houndé mine and an increase at the Ity mine (due to higher grades) which more than offset the expected declines at Agbaou (due to temporary lower grades as mining focused on waste capitalization) and Karma (due to a temporary change in ore type).
    • The Tabakoto strategic assessment completed in Q2 demonstrated the potential to reduce its AISC, mainly through capital investment to renew the underground fleet. These investments, however, do not meet Endeavour's capital allocation criteria and therefore a sale process has been launched and non-binding offers have been received. As at June 30, the Tabakoto mine has been classified as an asset held for sale.
    • Inclusive of Tabakoto, group production amounted to 174koz in Q2-2018 and 358koz for H1-2018, also on-track to meet full year guidance of 670-720koz
  • Group AISC from continuing operations amounted to $780/oz in Q2 and $732/oz for H1-2018, on track to meet full year guidance of $760-810/oz.
    • AISC from continuing operations decreased significantly in Q2-2018 compared to Q2-2017 mainly due to the addition of Houndé and a decrease at Ity (due to better grades) which more than offset the anticipated increases at Agbaou (due to a harder ore mix and lower grade), and Karma (due to temporary lower grade and lower recovery).
    • Group AISC inclusive of Tabakoto amounted to $878/oz in Q1-2018 and $825/oz for H1-2018, also on track to meet full year guidance of $840-890/oz.

Table 2: Group Production

(All amounts in koz, on a 100% basis) QUARTER ENDED   SIX MONTHS ENDED 2018 FULL-YEAR
GUIDANCE
Jun. 30, Mar. 31, Jun. 30,   Jun. 30, Jun. 30,
2018 2018 2017   2018 2017
Agbaou 34 32 45   66 87 140 - 150
Ity 25 18 14   43 30 60 - 65
Karma 21 28 24   49 56 105 - 115
Houndé 67 74 -   141 - 250 - 260
PRODUCTION FROM CONTINUING OPERATIONS 147 152 84   299 173 555 - 590
Tabakoto (asset held for sale) 27 32 41   59 84 115 - 130
Nzema (divested in December 2017) - - 27   - 53 n.a. - n.a.
TOTAL PRODUCTION 174 185 152   358 311 670 - 720

Table 3: Group All-In Sustaining Costs

(in US$ million) QUARTER ENDED   SIX MONTHS ENDED 2018 FULL-YEAR
GUIDANCE
Jun. 30, Mar. 31, Jun. 30,   Jun. 30, Jun. 30,
2018 2018 2017   2018 2017
Agbaou 818 752 606   786 631 860 - 900
Ity 713 829 780   759 838 790 - 850
Karma 885 869 755   875 751 780 - 830
Houndé 617 433 -   521 - 580 - 630
Corporate G&A 41 42 75   41 71 30 - 30
Sustaining Exploration 21 15 42   10 48 10 - 10
GROUP AISC FROM CONTINUING OPERATIONS 780 685 791   732 824 760 - 810
Tabakoto (asset held for sale) 1,397 1,208 1,054   1,298 1,013 1,200 - 1,250
Nzema (divested in December 2017) - - 985   - 967 n.a. - n.a
GROUP AISC 878 774 896   825 900 840 - 890

HOUNDÉ MINE

Q2-2018 vs Q1-2018 Insights

  • Production decreased mainly due to an expected decrease in the average head grade fed to the plant. However, the operation continued to perform ahead of expectations as plant throughput increased from 20% to 30% above nameplate capacity.
    • Tonnes of ore mined remained steady as mining activities continued to perform with a decrease in the strip ratio.
    • Transitional and fresh ore from the Vindaloo Main deposit continued to be the ore source, supplemented by oxide ore from the Vindaloo North deposit where mining began in late Q1-2018, and from the Vindaloo Central deposit where mining began ahead of schedule in Q2-2018.
    • Tonnes milled increased while the ore blend continued to be primarily transitional/fresh ore with oxide ore, representing 25% of the mill feed.
    • The average grade milled decreased slightly due to the anticipated mine sequence.
    • Recovery rates remained steady at 95%.
  • AISC increased mainly due to the lower processed grades, as well as higher unit costs and increased sustaining capital spend.
    • Mining unit costs increased from $1.58 to $2.00 per tonne due to the volume effect of lower tonnes mined, slightly higher fuel prices, as well as additional blasting requirements.
    • Processing unit costs increased from $10.91 to $11.41 per tonne milled mainly due to the transition to fresh ore.
    • Sustaining capital spend increased by $3.3 million from $0 due to waste capitalisation.
  • Non-sustaining capital increased by $1.1 million to $2.7 million due to pre-stripping activities in the Vindaloo pit.

H1-2018 vs H1-2017 Insights

  • Commercial production began in Q3-2017.

Table 4: Houndé Quarterly Performance Indicators

For the Quarter Ended Q2-2018 Q1-2018 Q2-2017
Tonnes ore mined, kt 1,312 1,361 n.a.
Strip ratio (incl. waste cap) 6.13 6.57 n.a.
Tonnes milled, kt 982 898 n.a.
Grade, g/t 2.20 2.59 n.a.
Recovery rate, % 95% 95% n.a.
PRODUCTION, KOZ 67 74 n.a.
Cash cost/oz 484 340 n.a.
AISC/OZ 617 433 n.a.

Table 5: Houndé Half Year Performance Indicators

For the Half Year Ended H1-2018 H1-2017
Tonnes ore mined, kt 2,673 n.a.
Strip ratio (incl. waste cap) 6.36 n.a.
Tonnes milled, kt 1,880 n.a.
Grade, g/t 2.39 n.a.
Recovery rate, % 95% n.a.
PRODUCTION, KOZ 141 n.a.
Cash cost/oz 409 n.a.
AISC/OZ 521 n.a.

H2-2018 Outlook

  • Houndé is well on track to meet full-year 2018 guidance of 250-260koz at an AISC of $580-630/oz.
  • Production is expected to decline slightly and AISC to increase to the guided range due to the rainy season, lower expected grades, and an increase in the strip ratio.
  • Relocation activities at the higher grade Bouere deposit are progressing well. To minimize Houndé's non-sustaining capital spend while building the Ity CIL project, pre-stripping is expected to occur in early 2019.

Exploration Activities

  • Houndé is the strongest exploration focus for Endeavour in 2018 with more than 121,000 meters already drilled in H1-2018, mainly focused on the Kari anomaly.
  • As announced in May, the Kari mineralized zone has been significantly extended to a large area now measuring 4km long and 3km wide with three discoveries made and approximately 20% of the gold-in-soil anomaly remaining to be drilled.
  • A further 60,000-meter drilling campaign is underway to delineate the two latest discoveries, with in-fill drilling ongoing on the Kari Pump target where a maiden resource is expected by year-end.

AGBAOU MINE

Q2-2018 vs Q1-2018 Insights

  • Production slightly increased due to the higher grades of material milled as low-grade stockpiles continued to supplement the mine feed to allow waste capitalisation activities to progress.
    • Tonnes of ore mined decreased as greater emphasis was given to waste mining, thereby increasing the total strip ratio from 10.7 to 11.8 (operating strip ratio increased from 6.6 to 9.4) while total tonnes moved remained fairly flat at 7.8Mt.
    • Mill throughput was unchanged, however remaining at a high level as the proportion of fresh ore processed decreased slightly to 28% from 31%.
    • Average processed grades increased mainly due to higher grade stockpiles supplementing the mine feed, while mined grades remained fairly constant.
    • Recovery rates slightly decreased to 92%.
  • All-in sustaining costs increased mainly due to the aforementioned increase in operating strip ratio which was partially offset by lower mining and processing costs as well as lower sustaining costs
    • Mining unit costs decreased from $2.88 to $2.65 per tonne as higher elevations of the West pit were mined.
    • Processing unit costs decreased from $7.80 to $7.54 per tonne mainly due to continued cost savings realised on reagents following the implementation of a group procurement strategy.
    • Sustaining capital costs decreased by $0.6 million to $1.8 million due to a reduction in the capitalised waste.
  • Non-sustaining capital decreased by $5.1 million to $2.9 million as lower pre-stripping at West pit 5.

H1-2018 vs H1-2017 Insights

  • As guided, production decreased and AISC increased as low-grade stockpiles supplemented the mine feed to allow waste capitalisation activities to progress more quickly.

Table 6: Agbaou Quarterly Performance Indicators

For the Quarter Ended Q2-2018 Q1-2018 Q2-2017
Tonnes ore mined, kt 611 682 709
Strip ratio (incl. waste cap) 11.77 10.66 8.81
Tonnes milled, kt 727 726 693
Grade, g/t 1.60 1.43 2.23
Recovery rate, % 92% 93% 94%
PRODUCTION, KOZ 34 32 45
Cash cost/oz 720 629 528
AISC/OZ 818 752 606

Table 7: Agbaou Half Year Performance Indicators

For the Half Year Ended H1-2018 H1-2017
Tonnes ore mined, kt 1,293 1,333
Strip ratio (incl. waste cap) 11.18 8.98
Tonnes milled, kt 1,453 1,376
Grade, g/t 1.52 2.16
Recovery rate, % 93% 94%
PRODUCTION, KOZ 66 87
Cash cost/oz 675 538
AISC/OZ 786 631

H2-2018 Outlook

  • Agbaou is on track to meet full-year 2018 guidance of 140-150koz at an AISC of $860-$900/oz.
  • 2018 is expected to be a transitional year for Agbaou with a focus on waste capitalisation activities that are expected to provide future access to high grade areas.
  • Production is expected to increase in the latter portion of the year as waste capitalization activities provide access to higher grade areas, while costs are expected to continue trending towards the guided range as the hard ore blend and strip ratio increase.

Exploration Activities

  • In H1-2018 more than 26,000 meters were drilled with the majority occurring in Q2.
  • A total of more than 20,000 meters, representing most of the drilling, was focused on open pit targets located along extensions of known deposits and on parallel trends. Mineralization was confirmed at the extensions of several deposits including the MPN, North Pit Satellite 3, West Pit 5 and Beta, with 5,000 meters of follow-up drilling planned in H2-2018.
  • The at-depth potential of the North pit was tested and mineralization was confirmed. However, as a potential resource in this area may not be suitable for open pit operations, the focus was directed to the abovementioned open pit targets.

KARMA MINE

Q2-2018 vs Q1-2018 Insights

  • Production decreased due to lower stacked tonnage despite an increase in grades and recovery rate.
    • Tonnes mined increased as expected as mining activity ramped up in anticipation of the rainy season in Q3-2018 and to expose higher grade ore to be mined in future periods. Mining at the GG2 pit was completed during the quarter and mining increased at the Kao pit where mining began in late Q1-2018.
    • Stacking decreased due to a change in ore characteristics and ore flow through the leach pad conveying and stacking circuit.
    • Stacked grade increased due to transition to the higher-grade area of the Kao pit.
    • As expected, recovery rates increased due to mining activities focusing mainly on oxide ore from the Kao deposit.
  • AISC increased mainly due to higher processing unit costs associated with lower tonnes stacked.
    • Mining unit costs decreased from $2.51 to $2.08 per tonne due to the volume effect of more waste mined which has resulted in lower drill and blast costs at the Kao deposit.
    • Processing unit costs increased from $7.84 to $10.50 per tonne due to lower tonnes stacked.
    • Sustaining capital costs decreased by $0.1 million to $0.5 million mainly due to a decrease in capital stripping costs.
  • Non-sustaining capital spend increased by $2.3 million to $5.5 million mainly due to pre-stripping at the Kao deposit.

H1-2018 vs H1-2017 Insights

  • Production decreased and AISC increased due to the lower recovery rate associated with treating the GG2 transitional ore in H1-2018, while H1-2017 benefited from higher recovery rates associated with oxide ore and high-grade ore from the Rambo deposit.

Table 8: Karma Quarterly Performance Indicators

For the Quarter Ended Q2-2018 Q1-2018 Q2-2017
Tonnes ore mined, kt 1,636 1,536 1,035
Strip ratio (incl. waste cap) 2.02 1.48 2.49
Tonnes stacked, kt 838 1,241 852
Grade, g/t 0.93 0.88 1.24
Recovery rate, % 78% 74% 83%
PRODUCTION, KOZ 21 28 24
Cash cost/oz 782 757 657
AISC/OZ 885 869 755

Table 9: Karma Half Year Performance Indicators

For the Half Year Ended H1-2018 H1-2017
Tonnes ore mined, kt 3,172 2,085
Strip ratio (incl. waste cap) 1.76 2.82
Tonnes stacked, kt 2,079 1,806
Grade, g/t 0.90 1.15
Recovery rate, % 76% 85%
PRODUCTION, KOZ 49 56
Cash cost/oz 768 659
AISC/OZ 875 751

H2-2018 Outlook

  • Karma is on track to meet full-year 2018 guidance of 105-115koz at an AISC of $780-830/oz as the second half of the year is expected to benefit from oxide ore from the Kao deposit. This is expected to have higher grades, higher recovery rates and lower unit costs.

Exploration Activities

  • In H1-2018, more than 23,000 meters were drilled, mainly focused on the Eastern extension of the North Kao deposit, on Yabonsgo and on Rambo West where indicated resources are expected to be delineated by year-end. In addition, auger drilling and soil geochemical sampling was conducted on earlier stage targets such as Rounga and Zanna.
  • A further 5,000 meters of drilling are expected to be completed in H2-2018.

ITY MINE: HEAP LEACH OPERATION

Q2-2018 vs Q1-2018 Insights

  • Production increased significantly due to higher grades stacked as mining activities at Bakatouo has produced higher grades as well an increased recovery rate.
    • Tonnes of ore mined decreased to match stacking capacity. Fewer tonnes were mined at the Ity and Zia North East pits as mining ramped-up at the Bakatouo pit following its start in Q1-2018.
    • Ore stacked slightly decreased due to the focus on stacking the high-grade Bakatouo ore.
    • The stacked grade increased significantly also due to the focus on Bakatouo ore.
    • Recovery rates increased significantly due to the improved leach kinetics associated with changes in ore type as well as reagent optimisation.
  • AISC decreased mainly due to an increase in ounces sold and lower sustaining capital costs, which were partially offset by increased unit mining and stacking costs.
    • Mining unit costs increased from $4.98 to $7.72 per tonne mainly due to longer haul distances and costs associated with fleet rentals. 
    • Processing unit costs increased from $14.67 to $16.81 per tonne due to lower tonnes stacked and greater reagent consumption associated with the increase in recovery rates.
    • Sustaining capital costs stayed flat at $0.8 million mainly due to the decrease in waste capitalisation.
  • There was no non-sustaining capital spend in the quarter.

H1-2018 vs H1-2017 Insights

  • Production increased and AISC decreased mainly due to increased stacked tonnage and higher grades from the Bakatouo pit, which more than compensated for lower recovery rates.  

Table 10: Ity Quarterly Performance Indicators

For the Quarter Ended Q2-2018 Q1-2018 Q2-2017
Tonnes ore mined, kt 304 370 374
Strip ratio (incl. waste cap) 2.61 3.25 4.32
Tonnes stacked, kt 308 357 243
Grade, g/t 2.81 2.17 2.15
Recovery rate, % 88% 73% 84%
PRODUCTION, KOZ 25 18 14
Cash cost/oz 639 728 625
AISC/OZ 713 829 780

Table 11: Ity Half Year Performance Indicators

For the Half Year Ended H1-2018 H1-2017
Tonnes ore mined, kt 674 703
Strip ratio (incl. waste cap) 2.96 4.37
Tonnes stacked, kt 665 510
Grade, g/t 2.46 2.02
Recovery rate, % 82% 91%
PRODUCTION, KOZ 43 30
Cash cost/oz 675 697
AISC/OZ 759 838

H2-2018 Outlook

  • Ity is on track to meet full-year 2018 guidance of 60-65koz at an AISC of $790-$850/oz.
  • As guided, 2018 is expected to be a transitional year for the heap leach operation with greater priority given to the CIL construction activities. Open pit mining activities for the heap leach operation are expected to continue until the end of Q3-2018. The aim is to create a stockpile sufficient to feed stacking requirements for the latter portion of the year. Short mining campaigns may then be opportunistically conducted based on equipment availability and progression of the Ity CIL mining activities. 

Exploration Activities

  • A $3 million exploration campaign has been planned in 2018 to further explore near-mill targets (including testing of extensions at the Mont Ity, Bakatouo, Daapleu, and Le Plaque deposits) with the aim of delineating additional resources for the CIL project.
  • In H1-2018, more than 35,000 meters have been drilled, mainly focused on:
    • The Le Plaque target where additional resources are expected to be delineated in H1-2019.
    • The Daapleu deposit where mineralization was confirmed at-depth.
    • In addition, a deep hole was drilled below the heap leach pad which confirmed the occurrence of mineralization 200 meters southwest of the Bakatouo deposit.
    • In H2-2018, the focus is expected to be the Le Plaque target, with over 10,000 meters of drilling planned.

TABAKOTO MINE (ASSET HELD-FOR-SALE)

Strategic assessment update

  • The strategic assessment completed in Q2 demonstrated the potential to reduce the mine's AISC mainly through capital investment to renew the underground fleet.
  • These investments, however, do not meet Endeavour's capital allocation criteria and therefore a sale process has been launched and non-binding offers were received.
  • As at June 30, the Tabakoto mine has been classified as an asset held for sale

Q2-2018 vs Q1-2018 Insights

  • Production decreased mainly due to lower average head grades and slightly lower throughput and recovery rates.
    • Open pit ore mined decreased as the Kofi B pit approached its end of life while extraction of the oxide portion at the Tabakoto North pit was ongoing.
    • Underground tonnes mined decreased as lower equipment availability slowed production. 
    • Processing activities continued to perform well, with throughput remaining steady.
    • The average gold grade milled decreased as lower-grade stockpiles were used to supplement the plant feed. 
    • The recovery rate decreased due to the change in ore fed to the plant associated with milling the low-grade stockpile.
  • AISC increased due to increased sustaining capital and higher mining unit costs which were partially offset by lower processing and underground mining costs.
    • Open pit mining costs increased from $2.65 to $3.45 per tonne due to additional blasting requirements at Kofi B.
    • Underground mining unit costs decreased from $71.38 to $68.32 due to lower costs associated with the cement rock fill at Tabakoto underground. 
    • Processing unit costs decreased from $18.41 to $17.76 per tonne as cyanide and lime consumption was reduced to interact with the characteristics of the ore blend processed.
    • Sustaining capital costs increased by $1.3 million to $7.6 million mainly due to increased spending on underground development.
  • There was no non-sustaining capital spending in the quarter.

H1-2018 vs H1-2017 Insights

  • Production decreased and AISC increased mainly due to a decrease in processed grades following the completion of the high-grade Kofi C pit in 2017. In addition, lower grade stockpiles supplemented the plant feed in H1-2018 to compensate for lower underground tonnage mined following decreased equipment availability.

Table 12: Tabakoto Quarterly Performance Indicators

For the Quarter Ended Q2-2018 Q1-2018 Q2-2017
OP Tonnes ore mined, kt 109 209 157
OP Strip ratio (incl. waste cap) 10.89 7.80 8.87
UG tonnes ore mined, kt 143 151 184
Tonnes milled, kt 423 441 407
Grade, g/t 2.11 2.51 3.32
Recovery rate, % 92% 93% 94%
PRODUCTION, KOZ 27 32 41
Cash cost/oz 1,054 930 802
AISC/OZ 1,397 1,208 1,054

Table 13: Tabakoto Half Year Performance Indicators

For the Half Year Ended H1-2018 H1-2017
OP Tonnes ore mined, kt 318 374
OP Strip ratio (incl. waste cap) 8.86 8.19
UG tonnes ore mined, kt 294 420
Tonnes milled, kt 864 812
Grade, g/t 2.32 3.41
Recovery rate, % 92% 94%
PRODUCTION, KOZ 59 84
Cash cost/oz 989 786
AISC/OZ 1,298 1,013

H2-2018 Outlook

  • Tabakoto is on track to meet its full-year 2018 guidance of 115-130koz. The AISC however is expected to be above the guided $1,200-$1,250/oz due to increased sustaining capital development work planned.
  • H2-2018 is expected to benefit from increased underground equipment availability following the arrival of new equipment.

Exploration Activities

  • During H1-2018 nearly 5,000 meters were drilled on open pit targets while more than 13,000 meters were drilled in the underground mines with the aim of replenishing depletion.
  • For H2-2018, a further 12,000 meters are expected to be drilled on both open-pit targets and in the underground mines.

ITY CIL PROJECT CONSTRUCTION: ON-TIME AND ON-BUDGET

  • Construction is progressing well and remains on-time and on-budget with the first gold pour expected by mid-2019.
  • The main milestones achieved to date include:
    • More than 3.1 million man-hours worked with zero lost-time injuries.
    • Overall project completion stands at over 50%, tracking well against schedule. 
    • Over 85% of the total capital cost of $412 million has already been committed. As at June 30, 2018, the remaining project spend amounted to $211 million, with the expected remaining cash outflow amounting to circa $191 million as an additional $30 million of equipment financing is expected to be drawn.
    • The Ball and SAG mills have arrived on site, three months earlier than initially planned.
    • Plant construction is progressing with all eight bolted CIL tanks installed with four already hydro tested. 
    • Tailings storage facility (TSF) earthworks are progressing well against schedule with over 60% already completed prior to the start of the rainy season.  
    • Camp construction progressed well with all 312 rooms completed and available for occupation.
    • The 90kv transmission line and power station construction are progressing well against schedule with over 60% already completed. The land compensation process and resettlement activities are progressing well.
    • More than 2,100 personnel, including contractors, are currently employed on-site, 95% of which are locals.
  • The main upcoming milestones are presented in Figure 1 below:

Figure 1: Ity CIL Construction Milestones

Picture 1: Construction of Processing Plant

KALANA PROJECT UPDATE

  • An intensive exploration program, consisting of 48,000 meters of drilling, was finalized in early Q2-2018 on the Kalana and Kalanako deposits. 
  • At the Kalana deposit:
    • Drilling confirmed the overall geological model and in-fill drilling is expected to convert a portion of the previously classified inferred resources in the North Eastern part of the deposit.
    • The remaining results from the last leachwell gold assays are expected to be received in the coming weeks following bottlenecks encountered in the labs.
    • Endeavour is rebuilding the geological model based on both the drilling done by the previous owners and that which was completed this quarter, while using a more conservative top-cut assumption and an ordinary kriging geostatistical approach. In total, more than 2,200 holes and more than 221,000 assays (including over 103,000 leachwell assays) will be used to build the geological model which will form the basis of the updated feasibility study.
    • An updated resource is expected to be published in late Q3-2018.
  • At the Kalanako deposit, drilling has confirmed the continuation of the mineralization and is expected to convert a portion of the previously classified inferred resources.
  • In parallel with completion of the resource model, initial work has commenced for the updated feasibility study which is expected to be published in Q1-2019.

EXPLORATION ACTIVITIES

  • Exploration continued to be a strong focus in Q2-2018 with a company-wide exploration spend of $15 million, for 98,000 meters drilled, with details by asset provided in the above mine sections.
  • More than 292,700 meters were drilled across the group in H1-2018, focusing mainly on the Kari discovery made at Houndé last year, with results published on May 24, 2018; on Kalana where an updated resource is expected to be published in late Q3-2018; and on the Le Plaque deposit where a global update of resources is planned for H1-2019. Initial work has also progressed on greenfield targets such as Kofi North, Fetekro, Randgold JV and in Greater Ity area.
     

Table 14: Exploration Guidance

(in US$ million) Q2-2018 EXPENDITURES Q1-2018 EXPENDITURES H1-2018
EXPENDITURES
2018 BUDGET ALLOCATION
Agbaou 2.2 1.4 3.6 4 8%
Tabakoto and greenfield Kofi areas 0.8 1.9 2.7 7 15%
Ity and greenfield areas on its 100km trend 4.2 5.0 9.2 8 18%
Karma 2.3 - 2.3 2 4%
Kalana 1.4 5.2 6.6 6 13%
Houndé 2.9 3.6 6.5 9 21%
Other greenfield properties 2.3 2.7 5.0 10 22%
TOTAL EXPLORATION EXPENDITURES* 16.1 19.8 35.9 40-45 100%

*Includes expensed, sustaining, and non-sustaining exploration expenditures

INCREASED CASH FLOW GENERATION

  • H1-2018 gold sales from continuing operations totalled 305koz, up from 174koz in H1-2017, mainly due to the increased production from Houndé.
  • The H1-2018 realized gold price was $1,275/oz (net of the impact of the Karma stream) compared to $1,176/oz in H1-2017. H1-2018 benefited from the revenue protection program, based on a collar with a floor at $1,300/oz and a ceiling of $1,500/oz, which generated a gain of $5.5m, representing an $18/oz in addition to the realized gold price.
  • The Group's H1-2018 All-In Sustaining Margin (inclusive of discontinued operations) increased by 68% from $99 million to $166 million due the inclusion of Houndé, higher realized gold prices, and an increase in gold sold at Ity, which offset the decrease in revenue generated by Agbaou.
  • Non-sustaining capital spending increased by $6 million in H1-2018 over H1-2017 mainly due to an increase at Agbaou for waste capitalization activities, while non-sustaining exploration efforts increased by $10 million, in line with the Group's strategic focus on exploration.
  • The All-In Margin increased by 81% in H1-2018 compared to H1-2017, amounting to $116 million, as the increased production at a lower AISC cost and higher realized gold price more than outweighed the increase in non-sustaining expenditures.
  • The working capital variation outflow increased from $23 million in H1-2017 to $55 million in H1-2018 mainly due to an increase in stockpiles at Houndé and Karma, prepayments for reagents at Houndé as well as an outflow due to trade and other receivables driven by gold sales received at Houndé.
  • Interest and financing fees paid increased from $7 million in H1-2017 to $22 million in H1-2018 due to the increase in debt outstanding related to the construction of Houndé and Ity CIL.
  • H1-2018 had a net cash variation of negative $161 million mainly due to $163 million spent on growth projects (comprised of $153 million on the Ity CIL project inclusive of its associated working capital, $5 million on a new group IT system, $5 million on Kalana construction).  
  • $280 million was repaid on the revolving credit facility ("RCF") in Q1-2018 following the reception of $330 million from the convertible notes issuance. In Q2-2018, $70 million was then redrawn on the RCF to fund the Ity CIL construction.

Table 15: Simplified Cash Flow Statement

    SIX MONTHS ENDED,
  Jun. 30, Jun. 30,
(in US$ million) 2018 2017
GOLD SOLD FROM CONTINUING OPERATIONS, koz 305 174
Gold Price, $/oz 1,275 1,176
REVENUE FROM CONTINUING OPERATIONS 388 205
Total cash costs (172) (105)
Royalties (22) (9)
Corporate costs (13) (12)
Sustaining capex (10) (8)
Sustaining exploration (5) (8)
ALL-IN SUSTAINING MARGIN FROM CONTINUING OPERATIONS 165 61
All-In-Sustaining Margin from discontinued operations 1 37
ALL-IN SUSTAINING MARGIN FROM ALL OPERATIONS 166 99
Less: Non-sustaining capital (25) (19)
Less: Non-sustaining exploration (25) (16)
ALL-IN MARGIN FROM ALL OPERATIONS 116 64
Working capital (55) (23)
Changes in long-term inventories (10) 0
Taxes paid (8) (11)
Interest paid and financing fees (22) (7)
Cash settlements on hedge programs and gold collar premiums (2) (4)
NET FREE CASH FLOW FROM OPERATIONS 18 19
Growth project capital (163) (128)
Greenfield exploration expense (5) (4)
M&A activities (1) (55)
Cash paid on settlement of share appreciation rights, DSUs and PSUs (4) (1)
Net equity proceeds 1 52
Restructuring costs 0 (1)
Other (foreign exchange gains/losses and other) (7) (1)
NET CASH/(NET DEBT) VARIATION (161) (119)
Convertible senior bond 330 0
Proceeds (repayment) of long-term debt (210) 80
CASH INFLOW (OUTFLOW) FOR THE PERIOD (41) (39)

Certain line items in the table above are NON-GAAP measures. For more information and notes, please consult the Company's MD&A.

NET CASHFLOW, NET DEBT AND LIQUIDITY SOURCES

  • Net cash flow from operating activities during Q2-2018 was $60 million, up $12 million over Q1-2018, despite slightly lower revenues, as Q2-2018 benefited from a lower negative working capital variation. 
  • Net cash used in investing activities during Q2-2018 was $127 million, which included $87 million of growth project capital, $16 million of sustaining and non-sustaining mine capital expenditures, and $1.4 million of sustaining and non-sustaining mine exploration.
  • Net cash generated in financing activities during Q2-2018 was $56 million, which was mainly due to $70 million drawn down on the RCF which was partially offset by $7 million of financing fees and $6 million of finance lease repayments.
  • Equipment lease financing decreased by $10 million from March 31, 2018 to $69 million as at June 30, 2018 due to a $6 million repayment of current period obligations and $4 million following the removal of Tabakoto leases.
  • As anticipated, net debt increased from $335 million as at March 31, 2018 to $410 million as at June 30, 2018, mainly due to growth project spending.
  • At quarter-end, Endeavour's available sources of financing and liquidity remained strong at $339 million which included its $79 million cash position and $260 million undrawn on the RCF. In addition to these liquidity sources, Endeavour also has strong cash flow generation, upcoming second half of Ity CIL equipment financing, and the remaining proceeds from the Nzema sale.

Table 16: Cash Flow and Net Debt Position

  THREE MONTHS ENDED
  Jun. 30, Mar. 31, Dec. 31,
(in US$ million unless stated otherwise) 2018 2018 2017
Net cash from (used in), as per cash flow statement:      
Operating activities 60 48 83
Investing activities (127) (119) (123)
Financing activities 56 42 34
Effect of exchange rate changes on cash 0 (0) 3
INCREASE/(DECREASE) IN CASH (12) (29) (2)
Cash position at beginning of period 94 123 125
Cash position at discontinued operation (3) - -
CASH POSITION AT END OF PERIOD AT CONTINUING OPERATIONS 79 94 123
Equipment financing (69) (79) (54)
Convertible senior bond (330) (330) -
Drawn portion of revolving credit facility (90) (20) (300)
NET DEBT POSITION 410 335 232
Net Debt / Adjusted EBITDA (LTM) ratio 1.49 1.24 1.05

Net Debt and Adjusted EBITDA are NON-GAAP measures. For a discussion regarding the company's use of NON-GAAP Measures, please see "note regarding certain measures of performance" in the MD&A.

OPERATING CASH FLOW PER SHARE

  • Due to the start-up of Houndé, operating cash flow per share (before non-cash working capital) for H1-2018 increased by 34% over H1-2017 to $1.52.

Table 17: Operating Cash Flow Per Share

(in US$ million unless stated otherwise) THREE MONTHS ENDED   SIX MONTHS ENDED
Jun. 30, Mar. 31, Jun. 30,   Jun. 30, Jun. 30,
2018 2018 2017   2018 2017
CASH GENERATED FROM OPERATING ACTIVITIES 60 48 27   108 84
Add back changes in non-cash working capital  (9) (46) (28)   (55) (23)
OPERATING CASH FLOW BEFORE NON-CASH WORKING CAPITAL 69 95 55   163 107
Divided by weighted average number of O/S shares, in millions 108 108 96   108 95
OPERATING CASH FLOW BEFORE NON-CASH WORKING CAPITAL PER SHARE 0.64 0.88 0.57   1.52 1.13

 Operating Cash Flow Per Share is a NON-GAAP measure. For a discussion regarding the company's use of NON-GAAP Measures, please see "note regarding certain measures of performance" in the MD&A.

ADJUSTED NET EARNINGS PER SHARE

  • H1-2018 adjusted net earnings per share from continuing operations amounted to $0.31, up from $0.02 in H1-2017.
  • H1-2018 total adjustments of $40 million were primarily related to losses from discontinued operations, deferred income tax recovery, gains on financial instruments, and stock-based expenses.

Table 18: Net Earnings and Adjusted Net Earnings

  THREE MONTHS ENDED   SIX MONTHS ENDED
(in US$ million unless stated otherwise) Jun. 30, Mar. 31, Jun. 30,   Jun. 30, Jun. 30,
2018 2018 2017   2018 2017
TOTAL NET EARNINGS (15) 28 17   12 15
Less adjustments (see MD&A) 30 11 (10)   40 (1)
ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS 15 38 8   53 14
Less portion attributable to non-controlling interests 6 14 1   19 13
ATTRIBUTABLE TO SHAREHOLDERS 9 24 7   34 2
Divided by weighted average number of O/S shares 108 108 96   108 95
ADJUSTED NET EARNINGS PER SHARE (BASIC) 0.09 0.23 0.07   0.31 0.02
FROM CONTINUING OPERATIONS

Adjusted Net Earnings is a NON-GAAP measure. For a discussion regarding the company's use of NON-GAAP Measures, please see "Note Regarding Certain Measures of Performance" in the MD&A.

CONFERENCE CALL AND LIVE WEBCAST

Management will host a conference call and live webcast on Wednesday August 1st at 8:30am Toronto time (EST) to discuss the Company's financial results.

The conference call and live webcast are scheduled at:
5:30am in Vancouver
8:30am in Toronto and New York
1:30pm in London
8:30pm in Hong Kong and Perth

The live webcast can be accessed through the following link:
https://edge.media-server.com/m6/p/72g4g9mx

Analysts and investors are also invited to participate and ask questions using the dial-in numbers below:
International: +1 929 477 0402 
North American toll-free: 800 289 0438
UK toll-free: 0800 279 7204

Confirmation code: 9762888

The conference call and webcast will be available for playback on Endeavour's website.

Access the live and On-Demand version of the webcast from mobile devices running iOS and Android:

QUALIFIED PERSONS

Jeremy Langford, Endeavour's Chief Operating Officer - Fellow of the Australasian Institute of Mining and Metallurgy - FAusIMM, is a Qualified Person under NI 43-101, and has reviewed and approved the technical information in this news release.

CONTACT INFORMATION

Martino De Ciccio

VP - Strategy & Investor Relations
+44 203 640 8665
mdeciccio@endeavourmining.com
Brunswick Group LLP in London

Carole Cable, Partner
+44 7974 982 458
ccable@brunswickgroup.com

ABOUT ENDEAVOUR MINING CORPORATION

Endeavour Mining is a TSX listed intermediate African gold producer with a solid track record of operational excellence, project development and exploration in the highly prospective Birimian greenstone belt in West Africa. Endeavour is focused on offering both near-term and long-term growth opportunities with its project pipeline and its exploration strategy, while generating immediate cash flow from its operations.

Endeavour operates 5 mines across Côte d'Ivoire (Agbaou and Ity), Burkina Faso (Houndé, Karma), and Mali (Tabakoto) which are expected to produce 670-720koz in 2018 at an AISC of $840-890/oz. Endeavour's high-quality development projects (recently commissioned Houndé, Ity CIL and Kalana) have the combined potential to deliver an additional 600koz per year at an AISC well below $700/oz between 2018 and 2020. In addition, its exploration program aims to discover 10-15Moz of gold between 2017 and 2021 which represents more than twice the reserve depletion during the period.

For more information, please visit www.endeavourmining.com.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

This 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, 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.

Corporate Office: 5 Young St, Kensington, London W8 5EH, UK


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