March 17, 2015 6:49AM Nana Sangmuah: NS: The market is missing a huge opportunity with Endeavour Mining Corp. ($EDV:CA). It's a 500 Koz producer with 2015 all-in sustaining costs below $1,000/oz. It has a market cap of $250M, so its production and cost profile is comparable to B2Gold Corp. (BTG) ($BTO:CA), but it's trading at about 10% of B2Gold's market cap.
The reason why people are cautious on the stock is because it has some debt and the fear is that it might not be able to service it. Yet Endeavour probably has the highest free cash flow yield in the industry in 2015, about 40% based on consensus estimates. The company would easily generate enough cash to fund its payments in 2016. It is going to be building cash flow and that should bring some more love to the stock. More important, Endeavour just put out an update on Houndé, a development asset in Burkina Faso that sits on the same belt as SEMAFO's Mana gold mine. Houndé is a company maker on its own right.
TGR: What do you make of Endeavour's Agbaou mine?
NS: I just visited Agbaou and was blown away. This mine was built on time and under budget. It's ramped up well and is producing above feasibility study numbers at all-in site costs of around $700/oz. My visit to the site revealed more exploration upside that could extend the mine life and would allow Endeavour to continue to generate cash that would help service debt and build Houndé.
TGR: It acquired Houndé in a takeover. Is Endeavour likely to be among the acquirers or the acquired?
NS: It has done a great job of growing its production base from 80 Koz to 500 Koz since 2010 through a good acquisition strategy. There's still a lot of growth there for it. Houndé and Agbaou are assets that would survive even $1,000/oz gold. That puts it in the target category, if the stock doesn't move up quickly. As far as acquiring assets, Endeavour's valuation would not support an accretive transaction at this point.