Goldman Sachs starts "well positioned" Endeavour Mining with "Buy" rating

Thu 10:50 am by Joyanta Acharjee

'In a nutshell, EDV generates strong operating cash flow from its three operating mines which is sufficient to deliver two growth projects to double production,' Goldman Sachs analysts said in a note. "In a nutshell, EDV generates strong operating cash flow from its three operating mines which is sufficient to deliver two growth projects to double production," Goldman Sachs analysts said in a note.

 

Goldman Sachs (NYSE:GS) has initiated coverage on "well positioned" mid-tier gold producer Endeavour Mining (TSE:EDV) with a "Buy" rating and $3.15 target price.

"In a nutshell, EDV generates strong operating cash flow from its three operating mines which is sufficient to deliver two growth projects to double production," Goldman Sachs analysts said in a note.

Endeavour owns three producing gold mines in Ghana, Mali and Burkina Faso and has a fourth mine under construction in Côte d'Ivoire. Endeavour also holds a 40 per cent interest in the Finkolo Gold joint venture in Mali and a 38.5 per cent interest in NREI, which has the Lofdal Rare Earth project. The company expects to produce 187,000 to 200,000 ounces of gold at a cash cost of $670-$690 in 2012.

The investment bank believes that Endeavour’s shares are undervalued by the market as the following factors are under-appreciated: the company is well positioned to deliver strong growth over the next three years from an already established production base; the recent acquisition of Avion Gold has added the high-grade Tabakoto asset to the; all growth projects are fully funded and Endeavour’s management has proven in the past to be adept at managing mining projects which de-risked the current growth projects.

In terms of catalysts for the stock, the Goldman Sachs analysts highlighted: delivery of the pre-feasibility for Ouaré and Nzema Sulphide in Q4 2012; a successful ramp-up of the expanded mill operations at the Tabakoto mine; construction updates on Agbaou confirming gold production remains on course for Q1 2014 and confirmation by the government of Burkina Faso regarding a new mining tax code.