My look at EDV reverse split numbersOK, I have taken a quick look at EDV, My response to that look is below.
Excerpts from September 21, 2015 news release (see previous post)
1 - “On a pro forma basis, Endeavour will have an annual gold production rate of 580,000 ounces from five operations across West Africa, a strengthened balance sheet and further growth opportunities in Africa.”
My concerns – A “pro forma basis” report tells us there are exclusions in the report – What are they not reporting? – The `new’ Endeavour, (EDVMF) will only realize 70% of profit from 580,000 ounces gold production, (see #2 below) – Or, do we have the complete picture at this stage of discussion? Digging a bit deeper into the ‘pro forma basis’ it appears that we must deduct more from `basis of profits’, (see #3 below).
2 - Endeavour will acquire La Mancha's indirect 55% interest in Ity Gold Mine, plus various regional exploration properties, and La Mancha will contribute US$63 million cash into the acquired businesses.
My concerns – This is what La Mancha paid for 30% of EDV (Endeavour) – Logically, this tells us EDV investors, surrendered 30% of EDV for La Mancha gem, (defined above in #2).
3 – Endeavour will have an annual gold production rate of 580,000 ounces from five operations across West Africa
My concerns – Annual gold production 580,000 ounces – What percentage of production will EDV retail investors realize profits? 70% - The `new’ Endeavour now surrenders 30% of production profits to La Mancha. Additionally, the ‘pro forma basis’ report failed to make clear the following:
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Gold production is on a 100% consolidated basis.
Actual mine ownership (and production) is as follows (See Endeavour website, Production page)
Agbaou – 85%
Nzema – 90%
Tabakoto – 80%
Youga – 90%
Ity – 55%
Let’s develop ownership numbers for further enlightenment
Agbaou
2015 - Produced 181,365 ounces of gold.
2016 - Expected production 165,000 to 175,000 ounces (mid-point # used – 170,000)
85%* - 2016 expected production = 140,250 to 148,750 ounces (mid-point # used – 144,500)
ITY GOLD MINE
2015 - Produced 80,807 ounces of gold
2016 - Expected production is 65,000 and 75,000 ounces (mid-point # used – 70,000)
55%* - 2016 expected production = 35,750 to 41,250 ounces (mid-point # used – 38,500)
NZEMA GOLD MINE
2015 – Produced 110,302 ounces of gold
2016 - Expected production is 110,000 and 130,000 ounces (mid-point # used – 120,000)
90%* - 2016 expected production = 99,000 to 117,000 ounces (mid-point # used – 108,000)
TABAKOTO GOLD MINE
2015 – Produced 152,186 ounces of gold
2016 - Expected production is 155,000 to 175,000 ounces (mid-point # used – 165,000)
80%* - 2016 expected production = 124,000 to 140,000 ounces (mid-point # used – 132,000)
YOUGA GOLD MINE
2015 – Produced 68,407 ounces of gold
2016 - Expected production is 40,000 to 45,000 ounces (mid-point # used – 42,500)
90%* - 2016 expected production = 36,000 to 40,500 ounces (mid-point # used – 38,250)
2016 – Total expected 100% production (mid-point # used) = 567,5000 ounces (Endeavour says 580,000 ounces? They are using # between average and maximum – I won’t pursue this)
*% gross production EDVMF derives profit from (mid-point # used) = 461,250 ounces**
**Deduct 30% gross production, (for profit calculation) profit for La Mancha = 461,250 – 138,375 = 322,875 ounces – This is the production number, (322,875 ounces) that EDVMF will extract profit from.
With no reverse split, no La Mancha acquisition EDV would derive 2016 profit from 422,750 ounces of gold, (all of % gross production owned by EDV) – 422,750 ounces reflects subtraction of 2016 production of 38,500 ounces from Ity Gold Mine.