Avion Gold Corp.

Sunday, May 20 2012 by

This header is a stub. I hope to add more detail when I have time but I'm creating this thread as a place to post regarding this midcap gold producer. Only listed on the TSX, ticker AVR. Website here: http://www.aviongoldcorp.com/HomePage/default.aspx

PLEASE Stockopedia can we have a better way of "anchoring" international stocks? ;0)


Currently producing around 100koz p.a. in Mali, set to expand to 200koz as soon as political turmoil dies down (kit for expansion awaiting customs clearance and safe conditions for installation contractors to enter country and proceed). Share price trashed due primarily to Mailian turmoil IMO. 

Filed Under: Metals & Mining,


The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.

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marben100 31st Oct '12 18 of 37

RNS from Randgold Resources (LON:RRS) : http://www.investegate.co.uk/Article.aspx?id=201210311516130060Q

Bamako, Mali, 31 October 2012 - Gold mining companies in Mali will donate US$735 000 in emergency funding to avert an interruption of the Mass Drug Administration (MDA) programme fighting a range of neglected tropical diseases (NTDs) endemic to that country.


The donations by Randgold Resources, Avion Gold including personal donations by its shareholders Forbes & Manhattan and executives John Begeman and Don Dudek, AngloGold Ashanti, IAMGOLD, Resolute Mining, Gold Fields and African Mining & Exploration, are being made to The End Fund, a non-governmental organisation committed to providing access to treatment for these NTDs. ... 


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SteMiS 2nd Nov '12 19 of 37

Thanks for the link. Looks like Avion had a little bit of cash as the proforma net cash at 30 June 2012 per the narrative was $51m (cp $44m EDV). However the analysis in the body of the circular (C2) suggests it is $24m. Not a material difference on $958m market cap. Proforma tNAV is $916m.

Underlying proforma EBITDA in 6 months to 30 June 2012 was $87m and 12 months ended 31 December 2011 was $138m.

It's all about them getting production up and the market clearly has some degree of scepticism.

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marben100 2nd Nov '12 20 of 37

In reply to SteMiS, post #19

It's all about them getting production up and the market clearly has some degree of scepticism.

Another factor depressing first half EBIDTA at Avion is that costs became very high as operations moved underground at Tabakoto. If you check back on the thread, you'll see that I raised this at a post-result teleconference with management, who indicated that a cost reduction programme was underway and that they expected Tabako operating costs to fall to ITRO of $750/oz.

Last year, Endeavour (then with only the Youga mine) merged with Adamus, bringing the Nzema mine. Totalling the three companies production figures shows the 3 companies growth trend:

  Avion Adamus Endeavour Total
  (Tabakoto) (Nzema) (Youga)  
1Q11          20,272          13,521          20,056      53,849
2Q11          25,823          26,015          21,575      73,413
3Q11          21,687          26,480          24,047      72,214
4Q11          23,445            45,596      69,041
1Q12          26,257            51,963      78,220
2Q12          28,637            50,728      79,365
3Q12          32,137    ?   


As the Tabakoto mill expansion completes, I don't see too much risk in raising the production profile. Combined production in the first half of 2012 already comfortably exceeds the 300koz annualised figure - and Avion's reported Q3 figure augurs well. :0)



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marben100 14th Nov '12 21 of 37

Endeavour Q3 results released after market hours: http://files.newswire.ca/910/ENdeavourMDA.pdf 

The "?" above is 49,468oz, making the quarterly proforma figure (including Avion/Tabakoto) 81,605oz. Nicely ahead of the 300koz annualised target. Cash costs are satisfactory @ $644/oz across Youga/Nzema, leading to operating cashflow of US$25.6m for those properties in the quarter.

Conference call 16:00GMT tomorrow.

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marben100 15th Nov '12 22 of 37

Listened to Endeavour's Q3 call this afternoon. Picked up a couple of interesting snippets:

  • "Steady state" G&A (once Avion overheads folded in - e.g. closing Toronto office) expected to be $20m p.a.
  • Tabakoto CAPEX was $28m for Q3


There were a couple of key slides, IMO: 


Of course, that's before tax, G&A, D&D (depletion & depreciation)... interesting, nonetheless.

Mr Market not overly impressed, yet, so remains attractive to me, at a market cap. of $880m currently. Should see profits flowing, as integration of the companies proceeds, and expansion/new projects add further cashflow. Obv. a gold price above $1,700/oz helps too.




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marben100 28th Mar '13 23 of 37

Endeavour released 2012 results today. See http://web.tmxmoney.com/article.php?newsid=59087431&qm_symbol=EDV for a summary and download the full PDF here: http://stream1.newswire.ca/media/2013/03/27/20130327_C8867_DOC_EN_24884.pdf

I have also just participated in their analyst/investor conference call (slides can be viewed here)


Endeavour's share price performance since I last posted has been very disappointing, in common with that of many gold miners. Clearly, Mr Market is not confident that the current gold price will be sustained/increase.

The results look perfectly satisfactory to me, though an unadjusted loss is shown, due to non-cash factors. There are clearly "issues" to resolve at Tabakoto, but these are well explained in the reports and the measures being taken sound eminently sensible to me. Most importantly, the company achieved operating cashflows of over US$93m over the year (allowing for 75 days production from Tabakoto, since the Avion takeover)

I very much like the inclusion of a proper "all-in sustaining cash cost" figure. The actual for 2012 was $1,077/oz with a forecast range of $1,055-$1,155/oz for 2013. Various cost-reduction programmes are underway (especially improvement of ex-Avion operations), so I'd expect the costs to be higher in the early part of the year, reducing later. This was confirmed by the company in response to my question in the conference call, and they advised that they expected to exit 2013 with a cost run-rate towards the lower end of the guidance range (assuming no increase in raw materials or labour unit costs over the course of the year - if there is general costs inflation I would expect that to be reflected in a rising gold price in the medium term).

Also in response to my question, they advised that tax rates were 17.5% in Burkino Faso, 30% in Mali and 35% in Ghana.


These figures allow me to do a very crude back-of-fag-packet valuation.

A gold price of $1,600/oz and $1,100 of all-in costs leads to a per oz margin of $500. Knock off 30% tax and you're left with $350/oz. Assuming 300koz run rate, that's around $100m p.a. of net profit. Putting that on a multiple of 10 leads to a $1bn valuation.

So with a market cap. of $615m the current SP of $1.49 looks pretty cheap to me.


It is notable that the valuation is heavily geared to the gold price - but as I want some exposure to gold in my porty, this looks like a pretty good way of getting it to me. Endeavour's balance sheet looks pretty strong, with only around $50m of net debt and $150m of gross cash/bullion - meaning they are robust against a near term fall in the POG.

There is strong upside potential from two main sources:

1. A resurgence in the gold price

2. New projects coming on-stream. By mid-2014, we should be approaching 450koz of production with Agbaou coming on stream. Management confirmed in the conf call that they expect Agbaou ramp-up to be rapid, with full  production (100koz) being reached within one quarter of commencing mine/mill operations. At that point development of Hounde should begin, leading to a further 160koz p.a. by mid 2016.

When the Segala underground mine gets into production (confirmed to be late 2013/early 2014 in the cc), that should raise Tabakoto production beyond 160koz p.a.


I am very happy to hold here and may consider topping up. Management's track-record has been pretty good and the diversity of production (+strong balance sheet) should make this business robust. ISTM that it's a case of waiting and watching for delivery on targets (but expect better margins in the second half on 2013 than in the first!).



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marben100 11th Apr '13 24 of 37

In reply to marben100, post #23

Good to see the company, together with others, providing humanitarian assistance in Mali.

VANCOUVER, April 11, 2013 /CNW/ - Endeavour Mining Corporation ("Endeavour" or the "Corporation") (TSX:EDV, ASX:EVR, OTCQX:EDVMF) announces, in conjunction with other gold mining companies operating in Mali, its local operating subsidiary has contributed US$500,000 to humanitarian initiatives to be coordinated by the Ministry of Finance. The aggregate contribution of the industry group is US$3.15 million and a cheque for that amount was presented to President Dioncounda Traore and the Minister of Mines at a ceremony in Bamako this morning. In cooperation with AngloGold Ashanti, Avnel Gold Mining, IAMGOLD, Randgold Resources and Resolute Mining, Endeavour agreed to the terms of a funding structure with the Ministry of Finance. Under this structure, contributions will be administered by the Ministry of Finance through a special account for humanitarian initiatives in the areas of healthcare, education and agriculture...

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marben100 23rd Apr '13 25 of 37

Unsurprisingly, considering the rout in gold, Endeavour's share price has been hammered lately.

Last week I added some more @ C$0.90 - risky, should the gold price collapse altogether, but offering a substantial reward if it does not. IMO C$2.50* is easily achievable, if the gold price recovers a bit.

I see that CEO Neil Woodyer gave an interview to Reuters yesterday.

(Reuters) - Toronto-listed Endeavour Mining Corp said its Agbaou gold project in Ivory Coast remained on track for completion by the end of the year, unaffected by a record drop in the price of gold...

Consistent with management's past strong track record of delivery on expectations, Endeavour's latest project appears ahead of schedule and 450koz of production in 2014 is ahead of expectations.

I find it hard to see the gold price going below Endeavour's cost of production for long, as those costs are in line with industry averages. Many mines would be forced to close if the gold price fell below $1,100/oz for long. Given still-strong Asian demand, that scenario seems unlikely to me. Though Endeavour has some debt ($200m gross), it's balance sheet is strong, with $151m of cash and bullion offsetting that debt (so net debt only around $50m). Worth noting that the loss of value of that bullion will be more than offset by a strong reduction in gold hedge liabilities covering114koz due 2014 and beyond (2013 hedges were bought back last year). I would expect that diminution in hedge liabilities to have a strong positive effect on reported profits in the current quarter (Q2).

Hence, I do not expect Endeavour to encounter any near-term financial difficulties, or disruption to projects under construction, despite the gold price fall.


*Based on: all-in costs of $1,100/oz, 300koz annual production, $1,600 gold price, 30% average tax and a P/E of 10. That would rise to C$4.60 if 2016 production targets of 550,000oz are hit.



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marben100 24th Apr '13 26 of 37

Further confirmation of progress at Agbao: http://web.tmxmoney.com/article.php?newsid=59682683&qm_symbol=EDV

...To date, approximately 68% of the US$160 million construction budget has been committed, with US$59 million spent and the project is approximately 57% physically complete overall. At current gold prices, mine cash flows and balance sheet resources, including cash and bullion of approximately $130 million as of March 31, are sufficient to complete construction as planned...

That seems to have done the trick: SP up over 23% today to C$1.06 :0)

I hope that's just the start of recovery from these ludicrous levels - otherwise there's a distinct risk of a lowball T/O.



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marben100 15th May '13 27 of 37

Damn good Q1 results announced today! Key highlights:

  • 73,654oz produced (note that this is before Tabakoto mill expansion & whilst Nzema is transitioning between pits)
  • Costs controlled, with further cost improvement expected. All in sustaining cash cost $1,083/oz
  • Focus on cost improvement and reducing CAPEX, in a falling gold price environment.
  • Cash & bullion remains @ $128m (despite investments in Tabakoto expansion & construction of new mine at Agbao )
  • Net earnings of $15.1m ($9.0m, adjusted), boosted by impact of hedges (NB these hedges will have a major positive impactt in Q2, when the gold price fell substantially, assuming it remains low).
  • All in sustaining margin forecast for 2013 reduced to $127m, with a reduced gold price assumption of $1,400/oz vs $1,600/oz previously. Seems rather good against a market cap. that has now shrivelled to $371m!
  • Tabakoto mill expansion now complete. Improvement expected at Nzema in H2, once pit transition complete.
  • Agbao on track to start production in 1Q14


I observe from the full results that the company sold most of its bullion holding post the quarter end, increasing the level of protection against further gold price falls from its hedges.

V happy to continue holding here.



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marben100 17th May '13 28 of 37

In the Q1 conference call, Endeavour mentioned that it was seeking to divest some of its very large West African explo. land package that was surplus to requirements (so as to reduce costs associated with holding that land). The Q1 Presentation  shows that Endeavour has one of the largest land positons of any gold miner is West Africa (10,000km2 was mentioned in the presentation). Sensible, it seeks to reduce that by 50%.  It appears that work on that has already started:


Legend Gold Corp. (The "Company" or "Legend Gold") (TSX VENTURE:LGN) is pleased to announce that the Company is nearing completion of definitive agreements to acquire several exploration-stage properties located in Mali from Endeavour Mining Corporation ("Endeavour") (TSX:EDV)(ASX:EVR)...

...Endeavour Property Acquisition

  • Portfolio being acquired from Endeavour includes 10 exploration licenses and one permit application in Mali (1,043.2 square kilometers) which range from early to advanced stage gold properties.
  • Legend will issue 10,000,000 consolidated Legend shares and pay $750,000 to Endeavour.
  • Upon completion of both Endeavour and Corado acquisitions as well as the financing, Endeavour will own approximately 19.5% of Legend


Sensible control of costs, whilst retaining an interest. Legend will have ~50m shares in issue following this transaction (and a similar transaction wwith Corado and a placing to raise cash), leaving Endeavour with an ~20% interest which is, effectively, free carried.

I am really impressed by Endeavour's management, who seem to react promptly & effectively to changes in the gold market, protecting the company's balance sheet and P&L - as well as delivering on promised production & cost reduction programmes.



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marben100 13th Jun '13 29 of 37

Am I talking to myself on this thread? If so, I'll stop posting - just let me know.

Very interesting response to a shareholder enquiry from a shareholder nervous about the ever declining share price: http://www.stockhouse.com/bullboards/messagedetail.aspx?s=EDV&t=LIST&m=32664993&l=0&pd=2&r=0

The reasons given are precisely what I'd expect and the comparison with other Canadian listed goldies is fascinating. So, the $64,000 question is whither the gold price? If it continues down then I would expect Endeavour's SP to follow. However, if it turns (and Endevaour continues to deliver the promised production/cost levels) there could be massive gains to be made here.

I last added to my holding at C$0.88.

Finally, Endeavour has announced good progress on the new Agbao mine, which appears well on schedule for production start in 1Q14, as promised: http://web.tmxmoney.com/article.php?newsid=60813007&qm_symbol=EDV



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BobGe 13th Jun '13 30 of 37

"Am I talking to myself on this thread?" No :-)

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myrtle1 13th Jun '13 31 of 37

Keep up the good work Mark! Your efforts are always appreciated.

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marben100 25th Jun '13 32 of 37

Thanks for the encouragement! Endeavour now announces Tabakoto mill expansion complete and producing gold at expected rates: http://web.tmxmoney.com/article.php?newsid=61060636&qm_symbol=EDV

Well on the way to 450,000oz p.a. by mid-2014 now, with Agbaou also confirmed on track. Can it really be right that a producer of this scale is valued at just C$210m? I do appreciate the risks, should the gold price continue dropping, but I've been adding to my holding recently.

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Eric Rutanski 2nd Jul '13 33 of 37

In reply to marben100, post #15

Endeavour Mining says they expect to have gold revenue of $524 million assuming a $1,600 gold price in the midpoint of our guidance range for gold production (their Q4 2012 earnings call)

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marben100 2nd Jul '13 34 of 37

In reply to Eric Rutanski, post #33

Thanks Eric,

Since then, however, we've had Q1 2013 results and revised forecasts based on $1,400 gold (see p4 of the linked presentation).

These show f/c revenue of $475m and an all in  sustaining margin of $127m (vs $166m @ $1,600/oz).

Note also that the recent confirmation that the new Tabakoto mill is running at capacity should help put downward pressure on costs/oz in H2 of this year, due to economies of scale.

Despite recent falls, I suspect $1,400 is a realistic assumption over the course of the year - if the recent low of $1,180/oz does turn out to be the bottom. Don't know whether you've seen my post here with my thoughts on the gold price?



PS an all-in sustaining margin of over $100m makes Endeavour's current market cap. of $230m look a little silly. ;0)

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marben100 10th Jul '13 35 of 37

Useful article on Endeavour here: http://www.bus-ex.com/article/endeavour-mining

Generally v bullish, but I'm a little concerned about this:

Neil Woodyer’s long and extensive involvement in the market means that financial risk is minimised. Endeavour’s experienced mine operators and mine builders ensure that operational risk is well-managed. As former CEO of Lloyds International Trading before running his own merchant bank he is uniquely qualified to steer a gold production company at a time when gold futures are anyone’s guess. “We have a $200 million credit facility that we have to start paying back in about 18 months. I am in the process of trying to increase that facility and extend it to give us more flexibility,” he explains. “We may want to spend some capital on our existing operations and fine tune them to get better economic value out of them. I am making sure we have the financial flexibility to optimise the return without having to dilute the shareholding.”

Now, the company has previously flagged that it wished to extend/increase its faciltiies, which seems a prudent move to me, if it is able to do so, considering the uncertain climate. However, I'm not so keen on "spending  some capital" to "fine tune" operations... would have thought that would be covered by operating cashflows, otherwise could be used dress up OPEX as CAPEX. I will have to ask exactly what "fine tuning" he has in mind at the next opportunity.



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marben100 19th Aug '13 36 of 37

Endeavour published its quarterly results last week, a 97 page tome.

Headline numbers of all-in sustaining costs of $1,038/oz for Q2 and a realised average price of $1,385/oz don't look too bad, but the actual IFRS figures are less pretty: an adjusted loss of $11.6m and negative operating cashflow of $7.2m for the quarter (before CAPEX).

There was also a writedown of $225.4m relating mainly to past acquired operations (so I don't view that as too concerning).

The conference call relating to the results was held today, with an associated presentation, giving me an opportunity to ask a few questions. I have tweeted some new points I picked up on the webcast.

My chief question was to ask for an explanation of the discrepancy between the apparent "profit" on gold sold with cashflow and reported profit. Christian Milau CFO, put the cashflow difference down to a $17m increase in working capital and one-off payment of a tax bill relating to the Youga mine. The company is seeking to reduce its working capital and there may also be some VAT recovery to help. There were significant cash outflows relating to the Tabakoto mill expansion. The company does expect its working capital level to stabilise and reduce in time. Outside consultants are being employed to seek further ways of optimising cashflow.

Though not mentioned in the company's response, a big factor in the discrepancy between (adjusted) profits and the reported cash margin on gold sold is depletion & depreciation, which was a hefty $24.8m in Q2.

I note from p42 of the quarterly report that the company will move to the WGC definition of "all-in sustaining costs" from January 2014. At present it is still capitalising underground development costs (which is a bit of a fiddle IMO). Choosing that date should be rather convenient, as the Segala development should be largely complete by then. However, as Segala is not yet in production I think capitalisation of costs there is a reasonable treatment at this stage.

It is encouraging that, per slide 4 of today's presentation, the company anticipates that all-in costs, including u/g development will be under $1,000/oz in 2014. That compares favourably with most major gold miners.


I noted that corporate G&A was running at over $20m p.a. CM expected this to reduce to $15-$16m p.a. I said that this still seemed rather high (without saying explicity that a lot of it was due to massive management pay), and it was indicated that the co. will continue to look for further savings in the G&A figure. CM also said that that level of costs was comparable with similar sized miners.


Finally I asked about a comment on p9 of the quarterly report, regaring Nzema operations:

As expected and discussed in Endeavour’s first quarter report, production was lower in the first half of 2013 due to slower than planned access to and development of the Adamus pits because of protracted negotiations in the resettlement process as well as lower than expected grade in the upper portions of the deposit.

How many people were involved in this resettlement? I was somewhat shocked to learn that 1,000 households were affected. Attie Roux, COO advised that a new village (township?) was to be built by early 2014 to house the inhabitants. Meantime work was proceeding at starter pits. I have found this article showing some political opposition to the move, in May. I hope that the company is going about this in the right way and is properly compensating those that are moved and providing them with a good standard of accommodation.


I must admit that it is now very tricky to value this company, as a valuation rests on the anticipated lower costs feeding through to the bottom line and cashflow. To me, the latter is more significant (after taking into account CAPEX that genuinely lifts production and is not merely sustaining). There are a large number of factors that distort reported profits, such as hedges, impairments/write-backs - depletion may be immaterial too, if not offset by sustaining capital. Cashflow, as always, is a clearer indication of genuine profitability. Obviously valuation is also hugely subject to future gold prices. I remain (relatively) bullish on those, because without price around $1,500/oz or higher, much new investment in mines will dry up, leading to a fall in production. I believe that mined supplies will be required in the medium term to meet demand (especially from BRICS and other emerging markets). I also observe that gold has been in a clear uptrend since the end of June. If the price does reach $1,500 per ounce, Endeavour should produce some excellent cashflows and will appear remarkbly cheap at its current valuation.

Bottom line: there is certainly execution and gold price risk in the current share price, but upside is potentially very large.



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marben100 21st Aug '13 37 of 37

A full transcript of the CC, including my questions & answers is now available here: http://www.earningsimpact.com/Transcript/83089/EDV/Endeavour-Mining-Corp---Q2-2013-Earnings-Call#sthash.RavPYfY5.WCXVnQ0T.dpbs

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