Endeavour offloads non-core mine interests in $300m deal

Endeavour Mining announced the successful sale of its 90% interests in the Boungou and Wahgnion non-core mines in Burkina Faso on Friday.

The FTSE `00 company said the agreement was made with Lilium Mining, a subsidiary of Lilium Capital, an African and frontier markets focused strategic investment vehicle led by West African entrepreneurs.

It said the total consideration for the sale was expected to exceed $300m, comprising upfront and deferred cash considerations, as well as net smelter return royalties.

Under the terms of the agreement, the total consideration was structured to include $130m in the form of a reimbursement of historical shareholder loans, to be received by 31 July.

Beyond that, $25m in deferred cash consideration would payable in two instalments of $10m and $15m by the end of the fourth quarter of 2023 and the first quarter of 2024, respectively.

Deferred cash consideration equal to 50% of the net free cash flow generated by the Boungou mine would also be due until $55m was paid.

Based on the current gold price environment and mine plan, Endeavour said it expected that milestone would be reached by the fourth quarter of 2024.

A net smelter return royalty would meanwhile start immediately on both the Boungou mine and the Wahgnion mine, amounting to 4.0% of gold sold.

As a result of the sale, Endeavour Mining updated its 2023 full-year production and all-in sustaining cost (AISC) guidance.

The removal of the Boungou and Wahgnion mines from its guidance led to a decrease in production expectations for continuing operations from between 1,325,000 and 1,425,000 ounces to between 1,060,000 and 1,135,000 ounces.

However, its all-in sustaining costs guidance for continuing operations improved by $45 per ounce to between $895 and $950 per ounce.

The firm said it expected the sale of the non-core assets to be offset by the progress of its ongoing construction activities.

It said the Sabodala-Massawa brownfield expansion in Senegal and the Lafigué greenfield project in Côte d'Ivoire were expected to be commissioned in the second quarter of 2024 and the third quarter of 2024, respectively, significantly improving its production and all-in sustaining costs.

“In line with our strategy of actively managing our portfolio to focus management efforts on higher quality assets, we are pleased to announce the sale of our non-core Boungou and Wahgnion mines to Lilium Mining,” said president and chief executive officer Sébastien de Montessus.

“We believe that Lilium Mining is well positioned to continue to unlock value at the Boungou and Wahgnion mines, for the benefit of all stakeholders.

“Moreover, Lilium is a trusted Burkinabe-focused business that shares our commitment to operate the mines in the best interests of employees and local stakeholders.”

At 1042 BST, shares in Endeavour Mining were down 1.66% at 1,833p.

Reporting by Josh White for Sharecast.com.