Endeavour Mining to grow gold production to half a million ounces with Avion Gold acquisition
Friday, August 31, 2012 by Angela Kean Endeavour Mining
(ASX: EVR, TSX: EDV) is aggressively pursuing a nearly half a million ounce gold profile within two years which is expected to deliver annual cash margins of around US$350 million following the acquisition of Avion Gold Corporation (TSX: AVR, OCTQX: AVGCF).
Endeavour is acquiring all the shares in Avion via a court-approved plan of arrangement valuing Avion at C$389 million (A$380.7 million).
The acquisition of Avion will create one of the largest West African mining companies with three producing mines, a fourth mine currently in construction, and an attractive pipeline of exploration and resource development properties.
The merging of the two operations will propel Endeavour to a market cap. bordering on US$1 billion.
Avion owns the Tabakoto mine in Mali, and two advanced gold exploration projects in Mali and Burkina Faso.
Speaking at the 2012 Paydirt Africa Downunder conference, Mark Connelly, Perth-based chief operating officer of Endeavour Mining, said the acquisition would combine the growth prospects for the assets of both companies and generate substantial cash flow and a pro forma 2012 gold production range of 282,000 to 304,000 ounces of gold.
This is a 50% increase in Endeavour’s current production volumes. The company operates two gold mines in Ghana and is building a third mine in the region, in Cote d’Ivoire.
“We have focused through 2012 on cash costs and cost cutting, and have been working hard to keep our total costs, through this acquisition process, in the range of US$640-790 an ounce and are achieving that,” Connelly said.
“On a cash flow generation basis with all combined assets producing, we anticipate annual gold production moving to above 450,000 ounces to deliver annual cash margins of $350 million based around a $1,600 an ounce gold price.
“Critically, Endeavour’s strong financial strength at present can help address the immediate cash needs of Avion which includes resumption of work to double the capacity of the Tabakoto gold mill in Mali to 4,000 tonnes per day at a cost of around $15 million.”
Endeavour’s growth plans are comfortably supported by a US$200 million corporate facility.
Mali operations
Connelly said the recent conflicts in Mali were 1,000 kilometres north of Avion’s Tabakoto mine and the situation was now stabilising, including the reinstatement of constitutional law and the in progress formation of a unity government.
“Mining and milling operations at Tabakoto have been uninterrupted and we are confident the mill expansion can be reinstated by the end of this year once new contractors have been mobilised.
“All components and supplies to complete the expansion are now on site.
“Tabakoto is exciting as all of its zones are open at depth and some 31 mineralised structures have been identified for further assessment and development.”
Agbaou gold mine
Major siteworks have begun at Endeavour’s new Agbaou gold mine in Cote d’Ivoire, with first gold production now anticipated in the March quarter of 2014.
Earlier this month the company was granted a mining permit for the project from the Cote d’Ivoire Government.
There are no other permits required for construction and production at the Agbaou Gold Project, which is set to add an additional 100,000 ounces to Endeavour’s gold production from 2014.
Comment
Endeavour’s acquisition of Avion Gold will create one of the largest West African mining companies with three producing mines, a fourth mine currently in construction, and an attractive pipeline of exploration and resource development properties.
The merging of the two operations will propel Endeavour to a market cap. bordering on US$1 billion, and raise the company’s production profile to nearly half a million ounces, which is anticipated to deliver annual cash margins of $350 million based on a $1,600 an ounce gold price. |
