Endeavour Mining plc

Hello, everyone. I am Martino, Deputy CFO and Head of Investor Relations, and I'd like to welcome you to our Q1 2023 results webcast. Before we start, please note our usual disclaimer. On the call, I am joined by Sebastian, Mark, Guy, and Jono. Today's call will follow our usual format, where we'll first go through the quarter's highlights, then the financials, and finally, we'll walk you through our operating results by mind. We'll try to be as quick as possible to leave time for questions at the end. And now, I'll hand it over to Sebastian to walk you through our Q1 highlights.

Thank you, Martino, and hello, everyone. 2023 is an exciting year for Endeavor, and we are pleased to be delivering against our key objectives. Driven by last year's strong operational performance, we began the year with financial strength, which provides the flexibility to deliver against this year's capital allocation priority, which is to maintain an attractive shareholder returns program while unlocking our growth potential. Given that the Sabadola-Massawa expansion and the Lafigue-Greenfield builds are expected to both increase the group's production and lower our cost base, they will further enhance our capability to reward our shareholders. As such, Our goal is to increase our shareholder return program once our organic growth projects are completed, thereby ensuring that our efforts to unlock growth immediately benefit all our stakeholders. We are therefore pleased to report that both projects are progressing on time and on budget, with first production expected in Q2 of next year for the Sabadola-Massawa expansion and shortly afterwards for the La Figue project. And looking further ahead, our exploration program continues to provide us with a strong platform for future growth. Further drilling at last year's Tenda Iguala discovery in Côte d'Ivoire continues to demonstrate its potential to become another cornerstone asset, and we will provide a resource update later this year. On the operational front, we're tracking in line with our guidance, as we expect production weighted towards the second half of the year due to mine sequencing across the group. On the financial front, our business continues to operate with low leverage, and thanks to our strong balance sheet, we were able to settle the principal on our $330 million convertible notes in cash, thereby minimizing shareholder dilution. Meanwhile, we are continuing to progress on our ESG initiatives, which have been well received by external agencies. Over the next slide, I'll touch upon our progress against this year's strategic objectives, starting with our safety performance. So looking at the next slide, safety remains, of course, our top priority. And while our lost time injury frequency rate remains industry leading, we're continuing to put significant emphasis on our zero harm target. Any time we have construction activities, the potential for incidents increases as the nature of the work changes, and more man hours are worked as there are significantly more people on site. It is for these reasons that we are amplifying our safety campaign and training to ensure everyone gets home safely. Turning to the next slide, you see our quarterly production and cost trend. As mentioned, we're tracking in line with our guided trend, as we expect production weighted towards the second half of the year. As we enter 23, with considerable financial strength, we were able to implement the optimal mine sequence to take advantage of the dry season in the first half of the year and accelerate stripping activities. This meant mining in Q1 was focused on the lower-grade areas, specifically at Sabadola-Massawa, where we started to develop the Sabadola pit for in-pit tailings deposition and started developing new non-refractory pits at Massawa, as you can see in the call-out box on the slide. Marc will detail performance by mine later in the presentation. Speaking of Sabadola-Massawa, we see on slide 9 that its expansion project is progressing on budget with 70% of the $290 million initial capital cost now committed. It is also tracking on schedule with first gold from the biox plant expected during the second quarter of next year. On the slide, you can see a picture of the processing plant construction progress, but I'll let Marc provide further details on the project built within his section. Of course, we are extremely excited about this project because of its strategic and financial benefits. Once this expansion is completed, the Savadra-Massawa mine will rank as a Tier 1 asset capable of producing over 400,000 oz per year, thereby increasing the quality of our portfolio and further diversifying our production base. Moving to our next growth project, which is our Lafiguier Greenfield development in Côte d'Ivoire. As a reminder, Lafayette will be another cornerstone asset for the company, with an envisaged annual production of over 200,000 oz over the initial 13-year mine life, at a low oil and sustaining cost of below $900 per oz. Its construction is also progressing on budget, as 46% of the initial capex has been committed, and pricing is in line with expectations. It's also progressing on schedule, with first gold expected beginning of the third quarter of next year. Thanks to the two growth projects, within just over 12 months from now, we will have more lower-cost production from Sabo de la Massawa in Senegal and another cornerstone asset in production with La Figue coming online in Côte d'Ivoire. I will let Marc walk you through a more detailed update later on. Turning to slide 11, to touch upon our ongoing exploration efforts, we continue to be very pleased with our results, which have yielded over 15 million ounces of discoveries since 2016. This year, we have a $70 million budget and have already used a third of it during the first quarter to drill intensively ahead of the rainy season. As you see in the top left pie chart, the largest focus has been on drilling the major Tenda Iguala green trail discovery we made last year. In addition, we're continuing to focus on extending the mine lives of our producing assets. Overall, we are thrilled to remain on track to discover our target of between 15 to 20 million answers of indicated resources by 2025, with already 6.5 million answers discovered over the last two years. Given its increasing importance, I'd like to touch upon Tenda Iguala on the next slide. Based on the ongoing drill results, we are more and more convinced that it will not only be another flagship asset for Endeavor, But it also has the potential to be a Tier 1 asset in the region. So far, we have 1.1 million ounces in the indicated category and another 1.9 million ounces of inferred, all achieved in less than 15 months at a cost of less than $10 per ounce. Last year, we drilled 60,000 meters. And this year, we're planning to drill a further 70,000 meters. And based on what we are seeing, we might increase our drilling budget as well. As shown with the yellow dots on the map, our main goal this year is to infill drill and extend the resources at the Asafo deposit, and in Q1 we completed over 40,000 meters of drilling. Based on this drilling, we expect to publish an updated resource later this year, which will form the basis of the first study on the property. In addition, we are also seeing good success by drill testing other highly prospective targets identified on the property with similar structural and geological settings. Beyond the exploration potential, what is nice with Tenda Iguala is the fact that it appears to be amenable to open pit mining and that the metallurgical test work indicates high gold recovery rates of more than 95%. In addition, it is located near good infrastructure as both the main road and grid power are nearby and there are limited relocation requirements. So given everything that I just said about TENDA, I feel obliged to reiterate that it would be difficult for us to justify buying a project and paying over a billion dollars for three, four million ounces when we are capable of discovering something similar directly in our backyard. On slide 13, you can see details of our shareholder returns program, which is a capital allocation priority for us. Last year, we delivered nearly $300 million of dividends and share buybacks, which was double our minimum dividend commitments of $150 million for the year. We paid out our H-222 dividend in March of this year and expect to announce and pay the H-123 dividend during the third quarter. Given the strong gold price environment and our healthy balance sheet, we again expect to pay out more than the minimum dividend commitment, which was set at $175 million this year. In addition, we've been continuing to supplement our minimum dividend commitment with share buyback. During the quarter, we bought $11 million worth of shares, which on a cumulative basis means that we have repurchased $244 million worth of shares since the program began two years ago. On slide 14, you can see that at the end of last year, our shareholder returns program had already delivered $633 million in the form of dividends and buyback, or $200 for every ounce of gold produced. And this amount is expected to surpass the $800 million mark by the end of this year. On a similar theme, in order to minimize shareholder dilution, in February of this year, we settled our convertible notes of $330 million in cash for the principal amount. We also issued 835,000 shares worth $20 million, an equivalent of 0.3% of shared outstanding for the in-the-money option value, as you see in the pie chart on page 15. The convertible note ended up being a low-cost financing solution which had a 3% coupon and an implicit cost of capital of less than 4% over the life of the notes once incorporating the value of the in-the-money option. Turning to slide 16, you see that our business continues to have low leverage despite the cash outflows experience during the quarter relating to the shareholder return payment, gross capital, and the contingent payment made. Thanks to our strong cash regeneration and disciplined capital allocation, we expect to maintain low leverage throughout our current construction phase. Turning to slide 17 to provide a quick update on our ongoing sustainability initiatives. Given that there are many initiatives, it's nice to have the opportunity to describe a few of them on each webcast. Starting with the top left, we have a big focus on diversity this year with a target of 15% female new hires. to try and address the perception that the mining industry is for men, we launched our Woom Mines initiative, which is an outreach program focused on promoting mining as a career to young women. This event was held at our regional office in Abidjan and was very successful with over 230 students attending. Staying with the education theme, we also launched the start of a six-month vocational training program near our Lafigue project, This will improve their employability, and we also hope to hire some of them. Moving to the top right, as you know, plastic waste is an issue in West Africa, and we are playing a part in reducing the consumption of single-use water bottles. We organized a big awareness campaign in Dakar with our NGO partners, Plastic Odyssey, who are developing recycling technologies that can be used by entrepreneurs. Now the fun part. We've mentioned many times that mining has the potential to be one of the most impactful industries in contributing to improvements in living standards, particularly in West Africa. And it is now very rewarding to see that our gold is being used by the jewelry industry for the same reason. We are delighted and extremely proud to have supplied the gold worn by Michaela Cole, Wakanda Forever, on the red carpet at the Met Gala in New York last Monday. Both she and MFA Cole, who crafted the jewelry, have West African origins and were keen to use fully traceable and ethically sourced gold, which we provide through the Single Mine Origin Initiative. The gold came from our ET mine, and a specific QR code has been developed, which takes the consumer on a journey from the mine to the end product. In addition, last week we were pleased to host jewelry designer Fernando Jorge, who also uses single-mineraging gold in his jewelry pieces, and Vanity Fair at our ET mine. It was a great opportunity for them to see firsthand our high standards and the social and economic benefits that we provide to our host communities. We hope that efforts such as these will help raise awareness for the importance of responsibly sourced gold, We already have several jewelry brands that have adopted our goals, such as Messika, and we're excited to see others wanting to follow. A lot more ESG initiatives will be detailed in our sustainability report, which will be published later this month. Turning to slide 19 now, given we are approaching our two-year anniversary of our listing on the premium segment of the LSE, we'd like to share a few stats. We're very pleased with our listing given that approximately 40% of our trading volume has occurred in the UK over the last 12 months. This is a great outcome given that we didn't issue equity into the UK along with our listing. As you see on the chart, getting included in the FTSE 100 has clearly helped drive appetite for our stock. The volume increase is also reflective of the change in our shareholder base, which has seen UK and European shareholders climb up the register. And now I'd like to formally welcome Guy to the team and hand the webcast over to him to run you through the quarter's financial performance. And what a perfect day for you to start, Guy. So may the force be with you.

Thank you, Sebastian. And hello to everyone. I'm very pleased to have joined Endeavor at such an exciting time for the company. It's now roughly my second month in the role. and I've had the opportunity to visit some of our mines and regional offices that has allowed me to see firsthand the potential which remains to be unlocked throughout the business as well as the quality of the teams across the group. If I could turn to our Q1 results, slide 21 summarizes both our operational and financial highlights for the quarter and underlines our previously communicated expectation for a second half-weighted production profile in 2023. Rather than spending too much time on this slide, I'll take you through the detail in subsequent slides, starting with our operating cash flow before working capital on slide 22. As depicted in the chart, we continue to generate strong quarterly cash flows of $242 million during the first quarter, despite lower volumes. The 14% decrease on the prior quarter is broadly in line with the lower gold sales and partially offset by the higher realized gold price. If we could turn to slide 23, to review the operating cash flow variances between Q1 and Q4. Our operating cash flow for the quarter was $206 million, which is a decrease of some $105 million versus Q4 last year. Looking at the variances from left to right, we benefited from a $128 higher realized gold price, offset by 43,000 ounces of lower gold sales due to our production, again, being weighted towards the second half of the year. Lower production meant that cash operating expenses were also lower in absolute terms. Income taxes paid increased by $25 million, largely due to the prior period, including tax payment deferrals across Bungu, Iti, and Sabadala-Masawa. And finally, working capital was an outflow of $67 million and a reversal of the prior course's inflow, largely due to lower trade and other payables. an increase in stockpiles at Sabadala, and an increase in VAT receivable due to the timing of sales. Turning to the next slide, you see that we continue to have a very healthy financial position, ending the quarter with $50 million of net debt and a low leverage ratio of 0.04 times net debt to adjusted EBITDA, well below our targets of 0.5 times. Taking a look at the waterfall charts, you see the net debt bridge between Q4 and Q1. During the quarter, we generated $206 million in operating cash flow, of which we invested some $200 million to fund both our mine capital expenditure and growth. On the financing side, we used $186 million to settle our convertible notes for $330 million and paid $100 million in shareholder dividends. In addition, we paid $46 million to Barrick Gold for Taranga's acquisition of Massawa, which had a three-year look-back gold price-linked contingent payment component. As a result of the timing of these cash outflows, we drew down $360 million on our RCF to manage short-term offshore cash flows. And finally, owing to the appreciation of the Euro against the US dollar, the value of our cash on hand increased by around $9 million. Moving to slide 25 in our debt structure, as Sebastian detailed earlier, during the quarter we improved our capital structure by setting the principle of our convertible notes in cash, locking in a 4.1% cost of capital over the life of the notes. Our capital structure is now composed of our $500 million 5% senior notes and our $645 million unsecured RCF, which we upsized from $575 million during the quarter while maintaining the same favorable terms. While our gross debt position hasn't changed significantly, we have a clear capital structure in place with long-term visibility and no upcoming maturities. Our debt structure therefore positions us well to deliver our near-term growth with significant liquidity headroom. In terms of profitability, slide 26 shows our quarterly adjusted EBITDA. In Q1, we delivered $279 million of adjusted EBITDA, which compares favorably with our performance in the last two quarters as a higher gold price, strong earnings from mine operations, and lower share-based compensation offset increased exploration costs and lower volume sold. Our strong EBITDA has helped maintain our attractive margins close to 50%. It remains competitive, not only within our peer group, but across other sectors as well. Moving to slide 27 and our net earnings, rather than focusing on each and every line item, I'll just touch upon the key items which we circled on the slide. Regarding the loss on financial instruments of $73 million, this includes unrealized losses on gold hedges of $41 million, losses on the settlement of the conversion option on convertible debt of $19 million, realized losses on the gold collars and forward contracts of $6 million, and losses on forward exchange contracts amounting to some $7 million. Secondly, adjustments in the quarter were $67 million and included the unrealized losses on financial instruments and the loss on other expenses, which was partially offset by gain on non-cash, tax, and other adjustments. It's also worth noting the NCI portion decreased by $11 million, while the adjusted net earnings decreased by only $6 million. This is due to the impairment added back in the prior quarter resulting in higher earnings attributable to non-controlling interests. Overall, this meant that adjusted net earnings per share amounted to 28 cents, which represents an increase of two cents per share over the prior quarter. This is due to the benefits of the higher gold price, lower total costs, lower taxes, and share-based expenses, which were offset by the increase in exploration costs. I'd now like to hand over to Mark, who'll go through the details of our operations on a mind-by-mind basis.