Good to see some useful information and reasoned arguments coming out on both sides. Too bad about the unpleasant words being exchanged, let's try to ignore those.
Most of the discussion seems to be about whether the company can afford a dividend, and/or whether it would affect the growth pipeline. Let me try to put some figures on the concepts, starting with a couple of key quotes from the recent news release:
"Assuming a gold price of $1,600 per ounce, Endeavour’s three mines are forecast to generate $230 million of cash margin during 2013 (using mid-guidance production volume and cash costs, and deducting royalties), which when combined with the cash position of $151 million, will more than fund the 2013 planned capital and exploration spending of $227 million."
"We anticipate that, at current market prices, we can fund our planned capital expenditure program over the next 3 to 4 years, including Houndé, from current financial resources. ... We believe that this [financial flexibility] can and should be achieved by expanding our bank credit facilities rather than accessing the equity markets."
Let me start with the loan issue. With the availabile cash, the company had no need to draw down the remainder of the $200 million credit line. They chose to do so mainly for window-dressing purposes, ie to buy out the 2013 gold hedges (which is taking money from one pocket and putting it in another) and to accumulate $45 million worth of actual gold. (I believe the latter move was intended to boost the perception of the company as a gold company, but apparently it didn't work.) The $200 million is a relatively modest debt in relation to the company's mining assets, liquid assets and strong cash flow. I believe management is confident they can access addition bank credit if needed, and I totally agree this is preferable to accessing unfavourable equity markets. So the company is not maxed out on credit, and can get more when needed for a good reason. (Or they could pay down some of the debt with the available cash if they chose to do so.)
Coming back to how the growth will be funded, management has clearly stated that 2013 cash flow should entirely cover the 2013 capital budget of $227 million, which includes mine building, sustaining capital, exploration and studies - it's all in there. If any little hitches come up, the cash reserves and/or additional credit facilities can easily cover them. Management has not given numbers for capital spending in 2014 and beyond, except to say they will have no trouble funding the capital plans.
Let's look at a specific scenario, like a 10 cent dividend starting in 2013. With 411 million shares outstanding, this would cost $41 million, a small fraction of the cash and gold reserves that are not earmarked for anything in particular.
If the $2.50 warrants are exercised in 2014, this will bring in $81 million, enough to pay the dividend for almost two more years, even allowing for the modest increase in the number of shares outstanding.
A dividend of 10 cents on today's share price of $2.18 comes to over 4.5%, which is not to be sneezed at in a yield-hungry market.
Looking at it another way, the cost of a 10 cent dividend will be only 18% of the company's projected 2013 cash flow. This percentage would decrease as production increases. Any company with a 4.5% dividend and a payout ratio of only 18% should be considered.. a gold mine.
So what exactly would be the point of the dividend? It's not because we want the pocket money. It would be a major step to achieving a multi-bagger outcome, which is what most of us here are hoping for. And it would not limit the growth opportunities at all. The company will have slightly less cash on hand, but increased ability to secure non-dilutive financing. And those of us who are so inclined can use our dividends to buy more shares.
The alternative scenario is that the share prices languishes indefinitely, in spite of strong growth. I believe there is a perception in the market that the company is run by wheeler-dealers who will always think of something tricky to do with the profits. Personally I am impressed by the real growth that has been achieved, but clearly the market is not. I think we need a payout for the market to believe that the growth and the profits are real.
Some people have argued that normally, only big, steady-state companies pay dividends, while growth companies need every penny of cash flow to finance their growth. This is not true of EDV, whose cash flow is already in excess of what is needed to finance the growth plans. In normal times, the cash flow would translate into share price appreciation, or buyout offers at high multiples, so shareholders would get their due that way. In these abnormal times, we need a different strategy.
In my opinion we actually can have our cake and eat it too. We will just nibble one corner of the cake, but the company's strong cash flow and growth will soon replace the little bit that was nibbled.