re: Ann: Endeavour's Agbaou Gold Project ...
New report from Raymond James . . .
Raymond James Ltd. Canadian Equity Research - Jun-11-12
Endeavour Mining Corp. EDV-TSX EVR.D-ASX Construction Decision at Agbaou Brad Humphrey [email protected] 416.777.4917
RATING Outperform 2 Target Price (6-12 mths) C$4.30 Closing Price C$2.33 Total Return to Target 85% ___________________________________
Event Endeavour Mining released an updated study on its 85% owned Agbaou project in Côte d'Ivoire and, based on this study, a positive construction decision has been announced.
Recommendation We are maintaining our Outperform rating but increasing our target price to $4.30 (from $4.10). We recommend investors buy EDV shares on what we view as significant near-term production growth, a solid balance sheet, and the potential for a re-rating in the market - giving investors access to a growing gold producer with an increasing presence in West Africa. It is also important to note that we anticipate the company will be able to fund the Agbaou project internally.
Analysis Across the board, the updated study for Agbaou came in ahead of our expectations demonstrating above average returns at $1,250/oz gold. With production, costs, and capex all beating our expectations, the project is well positioned to enter the next phase of development (fully funded). Importantly however, the much anticipated mining permit is yet to be received. Details: * Average gold output of 103,000oz/yr over an 8 year mine life vs. our previous estimated ~80,000oz/yr over 12 years. We now assume ~100,000oz/yr over a 10 year mine life. * Operating costs are estimated at $635/oz LOM vs. our previous estimate of $730/oz. We are now assuming $665/oz LOM. * Initial capex totals $159 mln vs. our original estimate of $200 mln. We have maintained this assumption. According to management, first gold pour remains on track for 1Q14 (we estimate 2Q14). * Notably, EDV advised that it has given the green light to the project ahead of receipt of its mining permit, but after receiving written notice from the Ministry of Mines encouraging it to proceed. * A conference call is planned for June 14 at 11am ET, dial in 1-877-407-0832.
Valuation Our $4.30 target price is based on a 1.2x NAV multiple, reflecting our view of Endeavour's growth, execution risk, geopolitical risk profile, and balance sheet. Endeavour Mining currently trades at 0.6x NAV vs. our group producer average of 0.8x NAV (assuming spot gold prices EDV is trading at ~0.5x NAV).
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EVR Price at posting:
$2.20 Sentiment: Buy Disclosure: Held
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