ENDEAVOUR TO LAUNCH EXPANSION OF SABODALA-MASSAWA; DFS CONFIRMS ITS POTENTIAL TO BECOME TOP TIER GOLD MINE.

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Algemeen advies 05/04/2022 08:58
HIGHLIGHTS:
Robust DFS economics support the expansion of Sabodala-Massawa by supplementing the current 4.2Mtpa CIL plant with a 1.2Mtpa BIOX® plant to process the high-grade refractory ore from the Massawa deposits
Expansion is expected to yield incremental production of 1.35Moz at a low AISC of $576/oz over the life of the BIOX®Expansion Project
Lifts Sabodala-Massawa to top tier status with an expected average annual production of 373koz per year over the next 5 years at an average AISC of $745/oz
Low-capex intensive brownfield expansion given upfront capital requirement of $290m, expected to be self funded by the existing Sabodala-Massawa operation
Robust after-tax IRR of 72% and NPV5% of $861m with a quick 1.4-year payback period, as the expansion generates $200m of incremental annual free cash flow during its first 5 years, at $1,700/oz gold
Construction will commence in Q2-2022 with first gold pour from the BIOX® plant expected in early 2024
Significant upside potential as the DFS does not include the conversion of the previously announced discovery of 709koz of M&I resources
Endeavour remains on track to discover its target of 2.3Moz to 2.7Moz of Indicated resources at Sabodala-Massawa over the 2021-2025 period
London, 4 April, 2022Endeavour Mining plc (LSE:EDV, TSX:EDV, OTCQX:EDVMF) ("Endeavour" or the "Group" or the "Company") is pleased to announce that it will soon launch the construction of its Sabodala-Massawa expansion in Senegal, supported by the recently completed Definitive-Feasibility Study (“DFS”).

The DFS recommends the expansion of the Sabodala-Massawa complex by supplementing the current 4.2Mtpa Carbon-in-leach (“CIL”) plant with a 1.2Mtpa BIOX® plant to process the high-grade refractory ores from the Massawa Central Zone and Massawa North Zone deposits (“Expansion Project”), with first gold production expected in early 2024.

Sébastien de Montessus, President and CEO of Endeavour Mining, said: “We are extremely pleased with both the current performance of Sabodala-Massawa and the Definitive Feasibility Study results announced today, as they demonstrate the asset’s potential to be a top tier mine capable of producing in excess of 400,000 ounces per year at an industry-leading AISC.

Given the robust project economics, which significantly exceed our investment criteria, and the strong exploration upside potential, we are excited to launch this low-capex intensive brownfield expansion project as it will continue to improve the quality of our operating portfolio and contribute to driving the Group’s return on capital employed above our 20% target. In line with our capital allocation framework, we are very pleased to be able to pursue this organic growth opportunity while maintaining a healthy balance sheet and the financial flexibility to continue to deliver strong capital returns to shareholders.

We believe we are well positioned to unlock the full value of the Sabodala-Massawa complex as we have significantly de-risked the project by integrating key changes into the DFS, based on experience gained from operating the asset and the results of further technical analysis, and we have highly experienced operating and construction teams already in place.”

As shown in Tables 1 and 2 below, the Expansion Project is expected to yield an incremental production of 1.35Moz of gold at a low AISC of $576/oz over the life of mine and boasts robust economics with an after-tax IRR of 72%, NPV5% of $861 million and a quick 1.4-year payback period at a gold price of $1,700/oz.

Table 1: Sabodala-Massawa Expansion Project Highlights (excludes current CIL operation)

FIRST FIVE YEARS
(2024-2028) LIFE OF MINE (2024-2033)
OPERATING SUMMARY
Tonnes processed, Mt 5.7 10.8
Strip ratio, W:O 7.7 8.5
Grade processed, Au g/t 6.07 4.43
Gold contained processed, koz 1,110 1,538
Average recovery rate, % 86 88
Gold production, koz 971 1,350

ANNUAL OPERATING METRICS
Average annual production, koz/a 194 135
Average Total Cash Costs, $/oz 504 553
Average AISC, $/oz 531 576


MINE FREE CASH FLOW
Based on $1,500/oz gold price
Total mine free cash flow, $m 743 1,018
Annual mine free cash flow, $m 149 102
Based on $1,700/oz gold price
Total mine free cash flow, $m 999 1,439
Annual mine free cash flow, $m 200 144
Table 2: Sabodala-Massawa Expansion Project Economics (excludes current CIL operation)

GOLD PRICE $1,300/oz $1,500/oz $1,700/oz $1,900/oz
PRE-TAX ECONOMICS
NPV0%, $m 385 957 1,530 2,102
NPV5%, $m 260 696 1,132 1,568
IRR, % 28 57 83 108
Payback years1 2.6 1.7 1.3 1.1
AFTER-TAX ECONOMICS
NPV0%, $m 316 742 1,164 1,585
NPV5%, $m 211 538 861 1,184
IRR, % 26 51 72 94
Payback years1 2.6 1.7 1.4 1.1
Payback period calculated starting from start of commercial production
As shown in Figure 1 below, the Expansion Project is expected to add an incremental average production of 194koz per year, over its first five years of operations (2024 – 2028) at an average AISC of $531/oz. As such, the Expansion Project is expected to lift the Sabodala-Massawa complex to top tier status with an expected average annual production of 373koz per year over the next 5 years at an average AISC of $745/oz for the combined CIL and BIOX® operation, as shown in Table 3 below.

Strong upside potential exists as the DFS does not include the conversion of the previously announced discovery of 709koz of M&I resources, which is expected to notably boost 2023 production.

Figure 1: Production Profile (next 10 years) for Sabodala-Massawa Combined CIL and BIOX® Operation

Table 3: Sabodala-Massawa Combined CIL and BIOX® Operation Summary

NEXT 5 YEARS
(2022-2026) NEXT 10 YEARS
(2022-2031) LIFE OF MINE
(2022-2036)
PRODUCTION SUMMARY
Tonnes processed, Mt 24.3 51.0 66.4
Strip ratio, W:O 7.5 7.4 6.7
Grade processed, Au g/t 2.71 2.39 2.08
Gold contained processed, koz 2,117 3,913 4,440
Average recovery rate, % 88 89 89
Total gold production, koz 1,865 3,475 3,945
Average annual production, koz/a 373 347 282

COST SUMMARY
Average Total Cash Costs, $/oz 630 693 747
Average All-In-Sustaining Costs, $/oz 745 775 825

FINANCIAL SUMMARY
Mine free cash flow at $1,500/oz, $m 698 1,473 1,489
Mine free cash flow at $1,700/oz, $m 966 1,956 2,029
As shown in Table 4 below, the mine is capable of self-funding the Expansion Project given the robust cumulative cash flow expected to be generated from the existing CIL operation in 2022 and 2023.

Table 4: Sabodala-Massawa Combined CIL and BIOX® Operation – Next 5 years profile

2022 2023 2024 2025 2026 TOTAL
(2022-2026) AVERAGE
(2022-2026)
OPERATING SUMMARY
Tonnes processed, Mt 4.2 4.5 5.0 5.3 5.3 24.3 4.9
Strip ratio, W:O 8.2 9.5 4.9 9.3 4.9 7.5 7.5
Grade processed, Au g/t 3.00 2.37 2.90 2.69 2.61 2.71 2.71
Gold contained processed, koz 409 343 463 454 448 2,117 423
Average recovery rate, % 88 87 87 89 89 88 88
Gold production, koz 360 299 403 402 401 1,865 373
Total Cash Costs, $/oz 605 651 601 618 680 630 630
AISC, $/oz 725 777 776 690 766 745 745

FREE CASH FLOW
(including expansion capex)
Based on $1,500/oz gold price 30 (42) 221 238 251 698 140
Based on $1,700/oz gold price 89 (4) 281 294 306 966 193


Leveraging Endeavour’s construction and operating experience, several key changes have been incorporated in the DFS, compared to Teranga’s 2020 PFS, to significantly de-risk the project, as summarized in Table 5 below.

Table 5: Key Changes in DFS vs. PFS

AREA DESCRIPTION OF CHANGE EXPECTED RESULT
Geometallurgical Additional geometallurgical work has reclassified fresh and transitional ore from the Massawa Central Zone and Massawa North Zone as more amenable to processing through the refractory plant adding an additional 3.8Mt at 2.02g/t gold for 248koz into the refractory ore reserves Removes risk associated with blending transitional and fresh ore with oxide ore into the CIL circuit.
Improves mining efficiency due to lower need for selective mining.

Improves overall recoveries and provides supplemental ore feed into the BIOX® plant.

Processing
Addition of a standalone ROM pad and crusher Reduces the risk of cross-contamination and improves blending optionality
Addition of a surge bin Improves capacity when processing softer ore and provides a supplemental feed to cover crusher outages
Addition of a gravity circuit within the milling circuit Improves recoveries from the high-grade ores containing free-milling gold
Addition of a flotation cleaner circuit Controls the sulphur and carbonate grades in the concentrate and manages acid consumption in the BIOX® circuit
Reduced the number of BIOX® reactors from nine to seven following further metallurgical tests which showed lower sulphur content for the Massawa Central Zone and North Zone deposits Reduced BIOX® reactors and reduced associated blower air and cooling requirements reduced the upfront cost of the BIOX® circuit component
Tailings Addition of a separate high-density polyethylene (“HDPE”) fully lined tailings storage facility (“TSF 1B”) into the initial scope which will host the neutralised product and the BIOX® CIL tailings while the existing tailings storage facility (“TSF 1”) will host the flotation tailings Allows the clean supernatant water from TSF 1 to be recirculated into either processing plant without treatment
Infrastructure


18MW expansion of the existing HFO power plant, adding three 6MW HFO generators and two back up diesel generators, with the option to add-in solar to the infrastructure in the future De-risks power supply by increasing the capacity of the existing power plant by 50% to ensure sufficient power supply and back-up supply to maintain stable conditions for the BIOX® reactors
Additional infrastructure including roads, water and administrative buildings Improves access and infrastructure at the Massawa Central Zone and Massawa North Zone pits
Construction management Endeavour managed EPCM compared to contracted 3rd-party Allows for flexibility in defining scope, contractor selection and procurement ensuring that the projects’ team leverages off the existing operation
DEFINITIVE-FEASIBILITY STUDY DETAILS

Background
Endeavour acquired the Sabodala-Massawa mine from Teranga Gold on 10 February 2021, prior to which Teranga Gold acquired the Massawa project from Barrick Gold on 4 March 2020, combining the Sabodala mill and deposits with the nearby Massawa deposits. As such, the Sabodala-Massawa mine consists of two mining licenses, the Sabodala exploitation permit (“Sabodala licence”) and the Massawa exploitation permit (“Massawa licence”) and two further exploration permits. The Sabodala licence is held by Sabodala Gold Operations SA (“SGO”) while the Massawa license is held by Massawa SA (“Massawa”). Endeavour holds indirectly through its subsidiaries a 90 percent stake in each of SGO and Massawa with the Government of Senegal holding the remaining interest.

In August 2020, Teranga Gold filed a Preliminary Feasibility Study (“PFS”) for the phased expansion of Sabodala-Massawa. In 2021, Endeavour expedited the completion of the initial upgrades at the existing Sabodala-Massawa CIL plant and simultaneously advanced the DFS for the addition of a refractory ore processing plant to confirm the economic viability of processing the high-grade refractory ores from the Massawa Central Zone and Massawa North Zone deposits.

Lycopodium Minerals Pty Ltd (“Lycopodium”) was responsible for the compilation of the report and delivery of the DFS to Endeavour. Orelogy completed the mine design for the DFS. Minescope Services are consulting on the Process Plant, while Metso-Outotec, who own the BIOX® technology, are providing the BIOX® and milling technology. Land and Marine Geological Services Pty Ltd (“L&MGSPL”) will be designing and executing the Tailings Storage Facility (“TSF”) design. QGE Pty Ltd (“QGE”) will be providing the power station expansion engineering services and managing the delivery of the power station expansion by an Original Equipment Manufacturer on a lump sum turn key basis.

Endeavour expects to file a Technical Report pursuant to National Instrument 43-101 – Standards of Disclosure for Mineral Projects in respect of the Sabodala-Massawa DFS within the following 45-day period.

Geology
At the Sabodala-Massawa Complex, all of the defined mineral resources are within the Sabodala and Massawa exploitation permit areas. The permit areas are transected by two prominent, first order shear zones, the Main Transcurrent Shear Zone (“MTZ”) and the Sabodala-Sofia Zone (“SSZ”) both trending north-northeast. Existing deposits and exploration targets are closely associated with these first order structures.
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https://www.endeavourmining.com/media/news/endeavour-launch-expansion-sabodala-massawa-dfs-confirms-its-potential-become-top-tier



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