Neil Woodyer - CEO Attie Roux - COO Ota Hally - CFO

Andrew Breichmanas - BMO Capital Markets Tara Hasan - Haywood Securities Michael Stoner - Peel Hunt

Good day. Greetings, and welcome to the Endeavour Mining First Quarter 2016 Webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Neil Woodyer, CEO of Endeavour Mining Corporation. Thank you, Mr. Woodyer. You may begin.

Thank you, operator. And welcome everybody to our Q1 2016 webcast conference call for the results. So turning if I may take you through to page 3 and I will take you through the overview; Ota will take you through the financial detail and Attie who is on the call as well will take you through on the mine-by-mine basis. Sebastien is also available as is Vincent. So we'll start on page 3 with the performance for the quarter. Our production in the first quarter was 132,000 ounces that were pretty much on track guidance for the year of 535 to 560. We were down a bit in Nzema and Attie will address that later on and we had good performance from Agbaou and Ity. Our all-in sustaining cost is very much in lined with the guidance. We achieved a figure of 900 for the quarter including Youga. If we take Youga out and just look at it the three of our continuing mines our all-in sustaining cost was actually 889.

04:49.7: If we turn to the next slide and look at the achievements for the year-to-date. And as you know we've achieved a number of important milestones since the beginning of the year. The sale of Youga was complete for 20 million. It was completed in February. The Houndé project is now in construction and is expected to be our flagship mine by the end of next year. The True Gold acquisition closed on April 26 and integration to our operating structure and procedure is well under way. The recorded quarter's first gold last month. And Attie's team is now waking with the Karma management team to ramp it up into commercial production with a plan of achieving out by the end of June. That will then put us in the position to see how the full year will turn out. So we intent to update on crude production and guidance statistics. At the same time as we report on our Q2 results at the end of July. We are however planning to continue exploration at Karma to convert inferred resources into reserves and be able to show an extended mine life. And as you know as part of the True Gold transaction and Naguib Sawiris as La Mancha maintained its position and investing the $65 million to further improve our liquidity. On another subject the definitive feasibility of the Ity CIL project is now fully under way under Jeremy and with a target for completion in Q3. And very importantly as soon as we completed the La Mancha transaction last year the second play say strategic review of our some hat considerable exploration assets. With the recent traditions of Ity and Karma we have very significant land packages now in the Ivory Coast and Burkina in addition to coast down [indiscernible]. In past we haven't been able to capitalize on this because of our capital constraints. But we are now in a position to see how best to realize their potential value. Then we're carrying out a review now which we expect to be completed in the third quarter and we'll provide you an update of it then. So far this year quite a lot of positive progress report and if I can just take you to the next page, page 5. We now have $84 million shares outstanding and the market cap is approximately CND$1.3 billion. So on very significant re-positioning and re-rating from a year ago. And of course it's due to the La Mancha transaction which we did in November, giving us a much stronger balance sheet and also the introduction of our long-term strategic shareholder. And this let us to True Gold and [indiscernible] Construction. And we are able to do this because of our operation and construction expertise and most definitely with the help of the market and our leverage. So today our market cap is about $1 billion and we are in a very different space, offering better in the liquidity and improved liquidity on starting a re-rating in the process. If we turn to slide 6, looking at our production in the quarter and less than too much on time on this because Attie is going to go through it by mine-by-mine. As I said Nzema was down and we had good performance from Ity and Agbaou. We had two months included of Youga. This was our full quarter first full quarter of Ity. So I'll leave that for Attie to go through in more detail later on. Going on to slide 7, looking at our all-in sustaining cost, in lined with guidance it decreased on a total basis to 900 in the month down from 946 in the same period last year. Notably due to cost reductions at Agbaou, Tabakoto and the benefits of Ity. Agbaou did achieve a record all-in sustaining cost low for the quarter. Mainly due to the renegotiation of our mining contract rates and following the optimization of a mine plan. As I said if we didn't have you - we just look to continuing operations overall all-in sustaining cost would have 889. If I take you now to page 8 and hand over to Ota to take you through.

Thank you, Neil. As we can see on this slide our cash flow generation with the strong cost performance as well the gold price is translated into fully solid cash flow profile. Our all-in sustaining margin increased 64% over the previous quarter to $37 million lifted by lower all-in sustaining cost per ounce and higher gold prices. So free cash flow before working capital impact and financing cost increased significantly at 133% over the previous quarter to $28 million. On the non-sustaining exploration, we continue with our 2016 program and the non-sustaining capital we are working on the secondary pressured Agbaou which is going well. As well the Nzema pushback which is also progressing nicely. We turn to the next slide, slide 9, we look at the working capital where we get a lot of questions about that and primarily phasing quarter in and quarter out we see changes in our payable, inventories and some of the other working capital accounts and of course we expect that to reverse. As we see in this slide, we have quite a positive in-flow in that category and working capital in Q4 and so we expect that to fluctuate this quarter. For the interest, we pay our interest semi-annually, so in the first quarter there was actually no cash interest paid. We could now go to slide number 10, turning to our net debt position, we continue to significantly improve our balance sheet as Neil mentioned with net debt down to $136 million at the end of the quarter that the change from $259 million at the end of March 31, 2016. Our net debt to operating EBITDA ratio also significantly improved year-on-year decreasing from 1.8 to 0.4 times on a pro forma basis after the True Gold's transaction. Following the La Mancha, $65 million anti-dilution cash injections that Neil also pointed to that closed at the end of April. Our pro forma net debt further decreased to $71 million. With that following quarter end, we made a further $40 million long-term repayment at the revolving credit facility resulting a net drawn amount of $200 million. On slide 11 as we look to our Houndé project, as you can see we have a strong financing and liquidity sources for two of our projects especially the Houndé mine, the world-class low cost asset. This includes our $182 million cash position at the end of March. We anticipated Houndé mine equipment financing and the undrawn portion of the revolving credit facility in addition with strong cash flow generation we expect over the construction period, putting in excess of the Houndé's total CapEx at $328 million. All-in-all we are in a good position to comfortably secure financing for the total $328 million as expected in September [ph]. And with that, I'd like to pass it over to Attie who will take us through the mine-by-mine details.

Okay. Thanks, Ota. If we can turn to page 13. We talk firstly about the Agbaou mine. As we can see Agbaou continued it's excellent performance in the first quarter. Although with lower than the fourth quarter and if you all remember the fourth quarter was all time record total for Agbaou as well. So we are back into the net 40,000 as far as ounce production is concerned. The mining operations are performing very well and interact with the life of mine planning. The all-in sustaining cost for the first quarter was again a new record at 525. And that's mainly due to revision of the mining contract right. We managed with our new life of mine to residual the mining sequencing and that resulted in a revision of the rights downwards. And also the cost decreased significantly, mainly due to the continued low reagent consumptions of cyanide especially because of the ore friendliness of the material. And this month also we have record 98% gold recovery in the processing facility. As mentioned previously, the secondary crusher installation is going on plan, it's on budget as well and is expected to be completed by the third quarter of this year. And that should give us the increased flexibility as we start seeing some of the higher grade but also the higher hardness materials in some of the pinnacles coming through from the surface of the mining areas. Turn to slide 14. At Tabakoto in Mali. Tabakoto at stable production around 40,000 ounce per month - per quarter mark, it’s slightly down compared to some of the previous quarters, but in lined, it’s mainly due to lower grade experience from the Tabakoto especially on the ground, due to stopping unavailability that’s largely being sorted out now and if we look at the month-to-date results in April now Segala is on track, as far as, tonnes and tonnes are our greatest concern and obviously ounces. Tabakoto is still slightly behind with the tonnage, greatest improving close to the expected grades and with all the preparatory work was done under ground in the quarter one, quarter two and three set up very nicely. The significance at our quarter is the marked production in the cash and the oil sustaining cost and that’s mainly due to improvements in terms of optimization in the processing area cyanide and also in steel ore consumption and also the business improvement programming that also the issues like labor and the rest of the mining cost structure as well. If we turn to slide 15, our new kit from the blocked Ity mine, it is the integration has progressed very well in the first quarter and we are very, very close to calling it complete, it will be very closing in the second quarter. We’ve had very production in terms of all aspect and although the grade was lower than previous, the recovery was still very very good at just about 90%. The All-in Sustaining increased a little bit due to the lower grade and, but the total cost of the mine were actually started to improve as the new management rolled out some initiatives on cost management. Neil mentioned the continued exploration that we - that is in '13 with all the mines and especially at Ity looking towards the development and finalization of the DFS project, though the Ity CIL project. We needed to extend the heap leach mine life to fully debt in the interim and it’s been very successful in terms of short-term exploration on the mine. If we turn to slide 16, Neil mentioned that Nzema had fairly troublesome quarter. We’ve had production impacted by lower volumes and grades from purchased oil suppliers. That resulted from permitting issues in December, where the regulators and the authorities imposed new requirements on the small scale mining people that supply the material to us. That's taken quite a bit of time to renegotiate the new permitting conditions from them with the authorities. But for now early start in the second quarter has gone really well as in terms of volume, the grades are still a little bit on the left side and we’re working within to improve that. During that period, we had to treat lower grade stock pulse during the quarter to maintain throughput through the processing plant. And as we all know that the CapEx of the [Indiscernible] and specifically as started in the beginning of the year and it’s scheduled to be completed by in and during this period the reliance on the purchased or is quite significant. The mine grade aspect to improve in the last quarter, as we start to seeing some of the higher grade as we complete the CapEx and the reliance on the ore obviously will be very good for the mine towards the end of the year. Neil, I think at this point, I can hand back to you for conclusions.

Okay. Thanks Attie. So briefly in conclusion on slide 17, before we go to the Q&A session. The first quarter of 2016, has been a pretty start for us, a start of busy and quite exciting year. The second quarter is particularly important for us to get the integration of True gold Karma's mine correct and is ramp out commercial production in June and significant for the start of the construction of the Houndé. So with the addition of Houndé and Karma to our portfolio, where our clear path to delivering our objectives as a group to improve the quality of our assets. We should be increase the group's production to 900,000 ounces a year and at the same time lowering our average All-in Sustaining cost to below 800 by the end of 2018. So we are delivering on our strategy to achieve a profitable growth by optimizing our mine portfolio but at the same time now starting to unlock the exploration value that we have in our projects and exploration and being opportunistic on M&A. So very much on track, a good start for the year but a lot of work has to be done and will be done to bring home value for our shareholders. So with that I will open up the floor to questions now. Please operator.

Thank you. [Operator Instructions]. We will take our first question today from Andrew Breichmanas of BMO Capital Markets. Please go ahead.

Thanks and good morning or good afternoon. I have two questions, the first is on Tabakoto, I'm just trying to understand sort of the great profile there. Do you have any sort of further resolution on the grade from the underground versus the open-pit and how you expect the trend through the rest of the year?

Okay. Thanks, Andrew. I'll take that question, it's Attie. Yes, if we look at the - let's start with the easy one the open pit [indiscernible] is giving us very good tonnage, very good grade in the net 4 range. So that's a good supplement to be to underground mines. Now as it was last time the two underground mines are supposed to give us 1500 tonnes each at the grade between the 3.5 and 4.5 grams per tonne. We battled during the first quarter with Tabakoto specifically, and that followed on to the issues we had late last year with the flooding of the underground section especially the higher grade sections. And also because of that the other sequence mining in the lower grade areas, that's largely been sorted out during this first quarter, and we still had lag from having the mine some of the lower grade materials. The grade at the moment is picked up nicely to in the range that we expect from the life of mine plan. The volumes are still on the low side as we have developed during the first quarter a lot of the phases to be open so we can mine that now. And Segala has gone if you remember we spoke about it at previous sessions. The top section of Segala had to be split into two blocks because of the width of the ore body. And we have to mine the hanging ore site first and then fruitable that had most of the grade. We're in that now. And you can see from this months the tonnes and grade from Segala has spot on target. So I think we are very well setup now to deliver on the forecast for the rest of the year in terms of tonnes and grade. I think the grade maybe in the net increase to 4 as planned with the total mix of materials we're giving.

Okay thanks. And I guess second question is on Karma. You mentioned you are expecting commercial production in June. Just wondering if you could give an update on performance in the first gold part sort of the current state of operations there and how much you anticipate spending in Q2 to get to commercial production?

Okay. As just you see from the takeover we've in the place for about one week. I've got the team there right now to assist the state of construction as this goes some issues and some of the sections under construction. They are also assessing the state of commissioning of the sections that has been completed and then also the state of after commissioning the operational readiness of the various sections. So we will only have those ounces in the next short period so that we can understand where we are in terms of are there any surprises or not at the moment. These sections that can make gold has been technically commissioned as we've produced about 2600 ounces since the first gulf war. So it's slower upper end, and we will have to see where we are in terms of the ramp up towards commercial production. As Neil says I think it will be late in this quarter in terms of where we are. In terms of spending it's going to be very difficult. We have to see what we still needs to be think in terms of completion and commissioning. And the easy budget for the current construction and commissioning we have to compare the two what we find versus what was planned in terms of the DFS.

Okay thank you.

Thank you. We will take our next question from Tara Hasan of Haywood Securities. Please go ahead.

Thank you, operator. Just question on Agbaou, the cost where substantially better than we had modeled on a per tonne basis and on a sustaining cost basis. You had mentioned sort of some efficiencies on the consumables and also on the mining contract. Are we able to model similar per tonne cost in lined with the Q1 figures going forward?

So Tara, you just broke up there on me, just can you quickly repeat that?

Sorry. I was just asking if we could model per tonne mining and processing cost in lined with the Q1 numbers at Agbaou given that there were some efficiencies on consumables and the mining contracts as you mentioned.

Okay. Thanks, Tara. Now I have to put, I think in terms of the mining contract rights, it would be fair to assume these rights will carry forward. In terms of the operational efficiencies in terms of cost on reagents, it's going to be difficult until we have a bit more information going into the second quarter. We've seen significant improvement in the reagents, but it's because of the materials we processing. And when we look at our life of mine that was just published the new life of mine residual. We can see some harder material coming through towards the end of the year and we're going to try and see how we blend it out by the continued exploration excess that we're getting. But at this point it maybe it bit premature to do that. But certainly on the mining cost right but done override the BCM I think it's fair to use that.

Okay, that's great. And at Nzema how much is locked in the stockpile and or the average grades of the stockpile remaining?

The stockpile is actually decreased quite a bit as I mentioned we have to use a lot of the stockpile to supplement the shortfall in total materials. Also I can't tell you I'll have to come back to you on volume. The stockpile grades are typically in the range of 1.2 to 1.4 the current remaining stockpiles. Of course we are processing the better grades through the process [indiscernible].

Okay. And so do you think that there is a resolution to the accessibility of purchased or that what's in Q2 that will help to offset drawing from the stockpiles for the next few quarters until that first stock is complete?

Yeah, very definitely. It's been a long battle the last quarter up to now. Certainly April month has seen a significant improvement in volumes delivered from our gold suppliers. The grade is still under lower side and again it's then getting access to the materials that they have to forefoot during the stoppage period when they have to get all the new payment requirements. But we are hopeful and we've had lots of discussions with them during the last two months to assist them wherever we can to get to the volumes and to the grades. So we are happy, I think we are confident that we will get the volume. We'll have to see what grades we get, but the promises are that we will get the grade.

That's great. Thanks so much.

Thanks, Tara.

Thank you. [Operator Instructions] We will now take a question from Michael Stoner of Peel Hunt. Please go ahead.

Good afternoon, gentlemen. One probably for Attie, just looking at the stock availability issue at Tabakoto. You said you kind of work through much of the worst of that base, is there any then kind of ongoing lag on development that you’re going to have to be running at higher rate going forward for the next quarter or two? And then a second question on the secondary crusher Agbaou. At what point does or could that get slightly disrupted to the kind of the main processing closely when you’re integrating and how long do you see that period lasting as well?

Okay. Michael, thanks for the questions. Okay, Tabakoto the imbalance between the ramp development and the lateral development to get into the stopes, that was largely sorted out. As you remember last year, we had the flat underground so we could not do the ramp development. We sorted all of that out, so we’ve got multiple stopes now available and the sequencing of lateral development of having stope that’s in development having stope that’s lasted then stope that’s, being like [indiscernible] drilled. I think the balance is getting to appointment how we feel a lot more comfortable and also with in the improved availability of the machinery that's certainly sorted itself out. So we are quite confident that next quarters will be significantly better than quarter one. Coming to the secondary crusher at Agbaou. Yeah. The plan changed over as about four days, we will schedule it and it's already been planned that we will have a big stockpile inside the plant of crusher Agbaou, and we could also truck in if we have oxide material that we will see the site for that period, to make sure that we don’t have interruption during [indiscernible] of the plant.

Okay. So minimal impact?

Minimal? We don’t plan any loss of production as a result of that.

Okay. Perfect. Thanks for that.

It appears, we have no further questions at this time. I would like to turn the call back over to Mr. Neil, would you have additional or closing remarks?

Well, thank you very much ladies and gentlemen for attending in particular Andrew, Tara, Michael for your questions. I think it’s important that we tell you that the team is working well together and working well on the integration with the team that was at Karma and are working well there. And I think, it’s been working well with Sebastian on the strategy and West African expertise. So, we look forward to continuation and the success we've had recently. And thank very much indeed ladies and gentlemen, thank you.

Thank you. Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may disconnect your lines at this time.