Credit Suisse has initiated coverage on the UK side of Endeavour Mining, the established gold miner with a sizeable suite of producing and development assets focussed largely in Francophone West Africa.
Credit Suisse rates Endeavour as “outperform” based on the strong operational track record the company’s built up over the past couple of years, as well as on the prospectivity of the land it holds under licence.
The broker concedes that the jurisdictions in which Endeavour operates can be considered “higher risk”, but also points out the considerable experience Endeavour has built up in operating in these locations.
“Endeavour Mining is a West Africa-focused gold producer with strong growth and longer-term potential, underpinned by strong cashflows,” wrote the Credit Suisse analysts.
“Its assets are attractively positioned on the global cost curve and the expansion of flagship asset Sabodala-Massawa stands to incrementally lower group all-in sustaining costs. Greenfield optionality could also lift group production by 5% by 2025.
Credit Suisse also compared Endeavour to Fresnillo, which it rates as “underperform” on the potential for production downgrades.
Credit Suisse sets its medium-term gold price forecasts at US$1,650 per ounce and forecasts revenues for Endeavour in 2023 of US$1.9bn and in 2024 of US$2bn. This, it should be noted, is somewhat below the consensus, so there may be further upside on offer that Credit Suisse is not at this stage factoring in.
One possibility of course, is that the gold price could ride out the pressures currently being exerted on it by the strong dollar.
Either way, the Credit Suisse view of Endeavour remains distinctly favourable.
Endeavour, says Credit Suisse is a “West African gold producer with enviable cost positioning and growth optionality.”
The Credit Suisse analysis notes further that 76% of production is at or below US$870 per ounce, with costs likely to come down even more with the expansion of Sabodala-Massawa.
What’s more, Endeavour has set a minimum dividend payment of US$150mln for 2022 and US$175mln the following year.
“Combined with buybacks already conducted we forecast a yield of just over 3% for 2022 and 2023,” said Credit Suisse.
“However, given a net cash balance sheet there is capacity for further upside to shareholder distributions.”