Endeavour Mining (TSX: EDV, ASX: EVR) [Shares: 412M issued, 477M fully diluted at Mar-2013]
Date / Location of update	Comments
27th January 2014, Weekly Update (Stock price: C$0.68)	Endeavour Mining (EDV.TO): The EDV C$2.50 warrants expire on 4th February and will be delisted from the TSX on that date. With the stock price a long way below the warrant exercise price, the warrants will expire worthless. The EDV warrant position in the TSI List was one of many failed trading ideas during the 2011-2013 bear market. On the plus side, we've learned some valuable lessons.
22nd January 2014, Interim Update (Stock price: C$0.63)	The breakout isn't yet definitive, but Endeavour Mining (EDV.TO) has moved above the top of its short-term channel. The stock has significant resistance at C$0.90-C$1.00, after which it is 'clear sailing' until C$1.80.
2nd December 2013, Weekly Update (Stock price: C$0.57)	Endeavour Mining (EDV.TO, EVR.AX) announced that the commissioning of its Agbaou gold mine in Cote d'Ivoire is progressing ahead of schedule. The first gold pour has just been made and commercial production is expected during the first quarter of next year. With an expected AISC of around $800/oz, Agbaou will be a relatively low-cost mine and will reduce EDV's overall cost per ounce if it achieves its design parameters.
18th November 2013, Weekly Update (Stock price: C$0.61)	Endeavour Mining (EDV.TO, EVR.AX) published its results for the September quarter. Production during the quarter was 88K ounces (a record-high) at an AISC of $1,057/oz. This means that EDV is now producing gold at the rate of about 350K ounces/year, which is at the upper end of the company's guidance. The production rate is expected to increase to more than 400K ounces/year in Q1-2014 due to the start-up of the Agbaou mine. The financial statements showed that working capital was ample at $164M and that net debt (long-term debt plus long-term derivative liabilities minus working capital) increased from $118M at the end of June to $144M at the end of September, or by $26M. The increase in net debt was more than fully explained by the $43M that was spent on growth-related projects (primarily: the new Agbaou mine). EDV's cash-flow performance was markedly better than its earnings performance during the latest quarter. This was mainly due to the fact that there was an amount of about $22M for "depreciation and depletion" charged against earnings, but the company only spent about $5M on sustaining capital. This continues a pattern seen over the past few quarters. For example, over the first 9 months of this year the company's earnings were reduced by about $70M due to accounting entries for "depreciation and depletion", but only about $11M was spent on sustaining capital over the same 9-month period. This bears watching closely, as it could mean that EDV will have to ramp-up capital and exploration spending at its existing operations over the next couple of years. All in all, it was an OK quarterly performance by EDV. EDV has the lowest stock market valuation that we know of among the financially-strong 100K-500K oz/year gold producers.
11th November 2013, Weekly Update (Stock price: C$0.61)	Endeavour Mining (EDV.TO, EVR.AX) published the results of a PEA for its Hounde gold project (Burkina Faso) in January of this year. It then immediately commenced work on the project's FS. The results of the Hounde FS were published last week. In an unusual turn of events for the gold mining industry, the numbers in the FS are actually a little better than the numbers in the PEA. Of particular note, the estimated initial capex has fallen from $345M to $315M despite an increase in the average annual production rate from 160K ounces to 178K ounces. Moreover, whereas the PEA estimated an IRR of 34% at a gold price of $1650/oz, the FS estimates that the same IRR could be achieved at a gold price of $1500/oz. The Hounde project appears to be viable, although not robust, at the current gold price. Specifically, the FS indicates that the NPV(5%) and IRR would be $230M and 22.4% at a gold price of $1300/oz. Our view is that the Hounde project provides EDV with valuable in-house growth potential, but that it will make sense to wait for clear-cut evidence that a new cyclical advance has begun in the gold market before proceeding with mine construction. Right now we think it would make more sense for EDV to use its financial resources to acquire another company, because the stock market is currently offering some phenomenal deals on gold-mining assets.
4th November 2013, Weekly Update (Stock price: C$0.61)	Endeavour Mining (EDV.TO) advised that it has been paid $16M cash by Resolute Mining for a non-core exploration-stage gold asset in Mali. An additional $3M is due on completion of the sale.
21st October 2013, Weekly Update (Stock price: C$0.63)	Endeavour Mining (EDV.TO, EVR.AX) announced that the construction of its Agbaou gold mine in Cote d'Ivoire is 90% complete. The project remains on budget and on track for initial production during the first quarter of 2014.
26th August 2013, Weekly Update (Stock price: C$0.89)	As well as a long-term position in EDV.TO, the TSI Stocks List contains a short-term EDV position that was added two months ago in anticipation of a rebound to around C$1.00. For TSI record purposes, this short-term position will be exited if the stock trades at C$0.97. It ended last week at C$0.89.
19th August 2013, Weekly Update (Stock price: C$0.80)	Endeavour Mining (EDV.TO/EVR.AX) reported its financial results for the quarter ended 30th June 2013. There were no surprises. The all-in sustaining production cost during the quarter was $1,038/oz, which is about 20% below the industry average. EDV's management expects the cost to fall to $1,000/oz in 2014 due to cost-reduction measures and the start-up of the low-cost Agbaou mine. EDV's liquidity position remains strong, in that the company had about $100M of working capital at the end of June and recently added another $100M by drawing down a long-term credit facility. It should only need to invest another $30M-$35M to bring Agbaou into production and its other projects should be cash-flow positive as long as the gold price is above $1250/oz, meaning that the company should have more than enough cash to fund its current operations and its growth.                    ----------------------------------------------------------------------------------------------- Endeavour Mining (EDV.TO): EDV is testing minor resistance at C$0.80. A break above C$0.80 will create near-term targets of C$1.00 and C$1.20, although EDV won't encounter major chart-based resistance until it reaches C$1.80. C$1.80 should be viewed as an extreme upside target as far as the remainder of this year is concerned, but as a reasonable upside target with regard to the coming 12 months.
12th August 2013, Weekly Update (Stock price: C$0.62)	Endeavour Mining (EDV.TO) announced that its Agbaou gold mine in Cote d'Ivoire remains on track for initial production in Q1-2014. The mine construction is apparently now 81% complete.
29th July 2013, Weekly Update (Stock price: C$0.72)	Endeavour Mining (EDV.TO, EVR.AX) updated the market on its progress and plans. The company produced 75.4K ounces of gold during the June quarter and reiterated its full-year guidance of 310K-345K ounces at a cash cost of $840-$880/oz. The production run-rate is expected to increase from 300K oz/year during the first half of this year to 330K-360K oz/year during the second half of this year and to well over 400K oz/year in 2014. The increase in the second half of this year will be due to the Tabakoto mill expansion and next year's further increase will be due to the Agbaou mine coming into production. Agbaou will be EDV's fourth operating mine in West Africa. Next year's all-in cost of production is expected to be around $1000/oz, which means that EDV should be strongly cash-flow positive over the next 12 months at any gold price above $1200/oz. Also worth noting is that EDV has negotiated an increase in its revolving credit facility from $200M to $350M. This should ensure that the company will have plenty of financial breathing room even if the market environment remains difficult. At an operating level EDV continues to perform as well as or better than expected. In our opinion, at current prices EDV is the best candidate for new buying within the gold sector.
1st July 2013, Weekly Update (Stock price: C$0.56)	Endeavour Mining (EDV.TO) advised that the mill expansion at its Tabakoto mine (Mali) was completed on time and on budget, enabling this mine's annual rate of production to increase by about 30K ounces to around 150K ounces. The combination of the Tabakoto mill expansion and the new Agbaou mine in Cote d'Ivoire is expected to result in the company's total gold production rising from 325K ounces in 2013 to 450K ounces in 2014. As far as we can tell, at current prices there is no better buy than EDV.
24th June 2013, Weekly Update (Stock price: C$0.55)	The other change to the TSI Stocks List is the addition of a short-term trading position in Endeavour Mining (EDV.TO). The TSI List already contains long-term exposure to EDV, but the short-term risk/reward is now extremely attractive as a result of last week's price action. As is the case with RIO, there is a potential stock-specific short-term catalyst for an EDV price rebound. We are referring to the gold hedges that EDV still holds as a result of its takeovers of Adamus and Avion. Based on the most recent financial statements, EDV has a total of 114K ounces of gold committed via forward sales and call options. It also has 27K ounces of gold bullion, leaving a net hedging position of 87K ounces. At the current gold price the value of this hedging position would be about $26M higher than the value included in the 31st March financial statements. This opens up the possibility that EDV will report a significant boost to its balance sheet when the next set of financial statements is issued in early-August. Ideally, EDV's management will take advantage of the current weakness in the gold market to close out the remaining hedges. We have added a short-term trading position in EDV at Friday's closing price of C$0.55. The goal is to exit this position following a rebound to around C$1.00.
17th June 2013, Weekly Update (Stock price: C$0.78)	Endeavour Mining (EDV.TO) provided an update on the progress of its construction-stage Agbaou gold mine in Cote d'Ivoire. The bottom line is that the project remains on track to commence production in early-2014. The Agbaou mine has been designed and built to have annual production of 100K ounces.
20th May 2013, Weekly Update (Stock price: C$0.88)	Endeavour Mining (EDV.TO, EVR.AX) published its results for the March quarter and provided a corporate update. Production during the March quarter was 74K ounces at an "all-in" cost of $1083/oz, creating an "all-in" margin of $39M. This was a good result. Working capital fell from $177M to $150M during the quarter due to the money spent on the development of the Agbaou mine in Cote d'Ivoire. Agbaou remains on budget and on schedule to deliver its first gold production in Q1-2014. EDV is maintaining its 2013 production and cost guidance of 310K-345K ounces of gold at an all-in cost of about $1100/oz. The less-important "cash cost" is expected to be about $860/oz. These cost figures are roughly in line with those expected to be achieved by Agnico Eagle, Barrick and Newmont. EDV continues to fire on all cylinders. We live in hope that one day the stock market will notice.
6th May 2013, Weekly Update (Stock price: C$0.99)	Endeavour Mining (EDV.TO, EVR.AX) announced that it sold its stake in Namibia Rare Earths (NRE.TO), a non-core asset, for $5.3M in cash. This is a plus, but obviously not a big deal for a company of EDV's size.
29th April 2013, Weekly Update (Stock price: C$1.04)	Endeavour Mining (EDV.TO, EVR.AX) announced that construction of its 100K-oz/yr Agbaou mine in Cote d'Ivoire was on budget and on track to be complete at the end of this year, with the first gold to be poured early in 2014. Bringing Agbaou into production is expected to result in total 2014 production -- from four operating gold mines in West Africa -- of around 450K ounces.
1st April 2013, Weekly Update (Stock price: C$1.50)	Endeavour Mining (EDV.TO, EVR.AX) reported its financial results for the year ended 31st December 2012 and provided updated guidance for 2013. Comparisons with previous periods were difficult because Avion Gold was merged into EDV at the beginning of last year's fourth quarter. However, it seems that EDV finished the year on a strong note. The balance sheet was a little weaker at the end of December than at the end of September, but this was due to the inclusion of Avion's derivative liabilities (gold 'hedges'). The Avion liabilities and other derivative liabilities taken on by EDV due to its earlier acquisition of Adamus Resources have been reduced/mitigated by closing out the gold forward sales that would have lessened cash flow during 2013 and by holding 27,000 ounces of gold bullion as a current asset (instead of selling the gold and holding cash) to partially offset the 96,000 ounces of gold forward sales scheduled for 2014-2016. In line with the new trend in the gold mining industry, EDV now reports an all-in cost of production. For 2012 the all-in cost was $1,077/oz and for 2013 the all-in cost is expected to be about $1,100/oz. This is similar to the 2013 all-in cost forecasts of Agnico Eagle and Barrick Gold. 2013 production is expected to be about 325K ounces, which constitutes an increase of about 105K ounces over 2012's production. The increase is almost totally due to the acquisition of Avion Gold. (Note: If Avion Gold had been part of EDV for the entire 2012 then last year's production would have been 310K ounces.) The annual production rate is then expected to jump by about 100K ounces in Q1-2014 due to the Agbaou mine coming into operation. Assuming an all-in cost of $1100/oz and an average gold price of $1600/oz, EDV should generate about $160M of cash this year. Applying a conservative multiple of eight to this cash flow gives us a rough valuation of $1280M ($3.10/share) for EDV's in-production assets. Allowing for the Agbaou project, which is due to begin production in early-2014, and the Hounde project, which will potentially go into production in 2016, takes the overall valuation up to at least $4/share. At current prices, EDV is one of the best candidates for new buying in the gold sector.
18th March 2013, Weekly Update (Stock price: C$1.64)	Endeavour Mining (EDV.TO, EVR.AX) had two pieces of good news. First, the final results of in-fill drilling at the company's development-stage Hounde project in Burkina Faso had numerous good intercepts, including 73.9m of 5.26 g/t gold and 38.0m of 5.93 g/t gold. These drilling results probably won't significantly increase the overall project resource, but they demonstrate continuity of the mineralisation and should improve the project's economics by enabling Inferred resources to be upgraded to the M&I category. The next important milestone for the Hounde project is the completion of the FS, which is scheduled for late this year. The other piece of good news was the announcement that the construction of EDV's Agbaou Gold Mine in Cote d'Ivoire is on-budget and on-schedule. Initial production is scheduled for Q1-2014. Although you would never know it by looking at the stock price, EDV continues to operate very well. Eventually the stock market will notice.
6th March 2013, Interim Update (Stock price: C$1.65)	The TSI gold stocks that we think have the highest quality, where highest quality means the most favourable combination of balance sheet, location, mining assets and management, are (in alphabetical order) Almaden Minerals (AAU), Endeavour Mining (EDV.TO, EVR.AX), Evolution Mining (EVN.AX), Pretium Resource (PVG), and Sabina Gold and Silver (SBB.TO). Charts are presented below. Along the lines of what we've been talking about, these five stocks have recently been among the worst performers. We increased our exposure to each of these stocks during the first half of this week, with new purchases mostly funded by sales elsewhere. 1) Almaden Minerals (AAU), a prospect generator, traded as low as US$1.85 during the first two days of this week. There is strong support at $1.70-$1.80 and initial resistance at $2.40-$2.50. In a more normal market, the decline from the January peak would have ended at $2.40-$2.50. 2) Endeavour Mining (EDV.TO, EVR.AX), a profitable 330K-oz/yr producer with operations in West Africa, traded as low as A$1.34 in Australia and C$1.45 in Canada earlier this week, creating an exceptional buying opportunity. Initial resistance lies at C$1.90. 3) Evolution Mining (EVN.AX), a profitable 400K-oz/yr producer with operations in Australia, has possibly just completed a successful test of its July-2012 and February-2013 lows in the A$1.25-A$1.30 range. 4) Pretium Resource (PVG), an exploration-stage miner with a very high-grade 10M-ounce gold deposit in British Colombia, was pummeled on the stock market over the past two months despite no negative company-specific developments. Initial resistance is a long way above the current price. 5) Sabina Gold and Silver (SBB.TO), an exploration-stage miner with a high-grade gold resource and a potentially-valuable silver royalty in Canada's far north, has possibly just completed a successful test of its 2012 lows.
11th February 2013, Weekly Update (Stock price: C$2.06)	According to the article posted HERE, the "windfall" profits tax that the government of Cote d'Ivoire was planning to implement is now 'off the table'. This is good news for Endeavour Mining (EDV.TO, EVR.AX), which is building a new gold mine in Cote d'Ivoire, as the new tax would have substantially worsened the economics of mining gold in that West African country.
28th January 2013, Weekly Update (Stock price: C$2.22)	Endeavour Mining (EDV.TO, EDR.AX) reported its production results for 2012 and its guidance for 2013. Total production from its three operating gold mines (Youga in Burkina Faso, Nzema in Ghana and Tabakoto in Mali) came in at 311K ounces in 2012, which was slightly better than forecast. The company didn't advise the cost of production other than to say that it was within the guidance range. This probably means that the average cash cost was around $680/oz. 2013 guidance is for production of 310K-345K ounces of gold at a cash cost of $790-$830/oz. The annual production rate should then increase by about 100K ounces in 2014 due to a new mine (the Agbaou mine in Cote d'Ivoire) coming into operation. The 2013 and 2014 guidance from EDV is consistent with what we've been assuming when valuing the stock. Our valuation is based on a gold price of $1600/oz and remains at around C$4.00/share. EDV also reported the results of a PEA for the Hounde project in Burkina Faso. The Hounde project was part of Avion Gold, the company that EDV acquired last October. The PEA suggests the potential for Hounde to be developed into a 160K-oz/year gold mine by 2016, taking EDV's total annual production to 550K-600K. The economics look good: Post-tax NPV(5%) and IRR of $584M and 34% at a gold price of $1650/oz. The total initial start-up capital is estimated to be $345M, an amount that could be funded by EDV's cash reserve, existing credit facility and cash flow from its operating mines. Work has commenced on the Hounde project's FS. The EDV story continues to evolve in a positive way. The company is meeting its targets on the production front and taking prudent steps to grow its business over the next few years. The stock rallied last week on the back of the positive news releases and would have rallied a lot more if not for the pronounced sector-wide weakness. If the sector-wide sell-off continues then EDV could again become available in the low-C$2.00 area. If so, anyone without a full position should view it as a buying opportunity.
24th December 2012, Weekly Update (Stock price: C$2.09)	The most speculative gold mining stocks generally held up quite well last week in the face of sector-wide selling pressure, perhaps because they were already 'sold out'. However, the stocks of some highly-profitable and relatively-low-risk gold producers were hammered late last week for no apparent reason other than irrational fear. This has created better-than-expected opportunities to buy these profitable companies. The one that we are going to highlight is Evolution Mining (EVN.AX). This is a very profitable 400K-oz/yr gold producer with a solid balance sheet and multiple projects in the best country for gold mining (Australia). It was knocked down by around 10% last week on no news despite already offering good value at the beginning of the week. Although it held its ground in Canadian trading last week, Endeavour Mining (EDV.TO, EVR.AX) dropped about 5% in Australian trading last Friday and also warrants another favourable mention at this time. It is riskier than EVN due to having its projects in West Africa, but the additional country risk is offset by a lower valuation. Like EVN, Endeavour is a very profitable 300K-400K-oz/yr gold producer with a solid balance sheet.
17th December 2012, Weekly Update	Endeavour Mining (EDV.TO. EVR.AX) is affected by a tax increase just approved by the government in the West African nation of Cote d'Ivoire. EDV has commenced the construction of the 100K-oz/yr Agbaou mine in Cote d'Ivoire, but should now seriously consider putting the project on hold pending a more favourable tax regime. Putting this project on hold would not have a big effect on our valuation of EDV.
19th November 2012, Weekly Update (Stock price: C$2.20)	Endeavour Mining (EDV.TO, EVR.AX) continues to fire on all cylinders. The company reported last week that its operations in Ghana and Burkina Faso generated about $41M of cash during the September quarter and are on track to produce 200K ounces of gold this year at a cash cost of $670-$690/oz. The stock is trading at about 6-times this year's cash flow and cash flow is set to increase substantially in 2013 and again in 2014. The stock is a buy below C$2.20.
14th November 2012, Interim Update (Stock price: C$2.17)	Even though it could be argued that JAG's decline over the past few days is way overdone, there is some logic to it due to the company's weak balance sheet and the fact that its business is still cash-flow negative. However, some stocks have been hammered over the past few days for no company-specific reason. Endeavour Mining (EDV.TO) is a good example. EDV is a very profitable gold miner with a strong balance sheet, but thanks to the mini market-wide panic it has again become available below C$2.20. It is a buy at this level. Another example is Golden Star Resources (GSS). GSS is not as profitable or financially solid as EDV.TO, but its turnaround is progressing well and it should no longer be classed as high risk. And yet, at its current price in the low-US$1.60s it is being priced as if it were still high-risk.
31st October 2012, Interim Update (Stock price: C$2.30, warrant price: C$0.48)	The risk/reward of a company's stock warrants is often very different from the risk/reward of the same company's stock. This is partly due to the leverage provided by the warrants (there is generally a lot more upside potential and downside risk associated with the warrants) and partly due to the tendency for warrants to be over-valued or under-valued relative to the stock. Consequently, stock warrants must be analysed separately from the underlying stock. The warrants aren't necessarily a good buy just because the stock is a good buy, and vice versa. For the first time in quite a while we are highlighting the EDV A-series warrants as a speculative buy. They are slightly over-valued relative to the stock, but the warrants' current risk/reward is attractive due to the possibility that a sizeable gain in the stock price over the months ahead will lead to a much larger percentage gain in the warrant price. The warrants are much riskier than the stock and would therefore not be suitable for everyone. The risk can be explained by pointing out that if the stock price were to go nowhere over the next 15 months then the warrants would expire worthless, handing a 100% loss to anyone who bought now and held to expiry. The reason the warrants could be of interest to risk-tolerant speculators is that a 50% gain in the stock price within the next eight months, which looks very achievable, would probably create an opportunity to sell the warrants for a profit of around 200%. With the stock near its current level in the C$2.30s the warrants should ideally be purchased for C$0.48 or less and should not be purchased for more than C$0.50.
29th October 2012, Weekly Update (Stock price: C$2.42)	EDV has substantial valuation-related upside potential. The chart (see below) also suggests the potential for large gains. There is resistance at C$2.50 and at C$3.00, but after that there is no chart-related resistance until C$5.00.
15th October 2012, Weekly Update	Avion Gold (AVR.TO) reported that Q3 gold production at its Tabakoto Mine in Mali was 32K ounces -- a good result. Production costs haven't yet been published, but the recent production performance suggests that the company is generating plenty of cash. This is a plus for Endeavour Mining (EDV.TO, EVR.AX), a TSI stock selection, because AVR is about to become part of EDV. In separate meetings last Friday, shareholders of AVR and EDV approved the merger of the two companies. AVR should therefore become part of EDV on or around 18th October.
8th October 2012, Weekly Update (Stock price: C$2.37)	Endeavour Mining (EDV.TO, EVR.AX) announced that two independent proxy firms have recommended that Endeavour shareholders vote for the resolution approving the issuance of Endeavour shares in connection with the acquisition of Avion Gold (AVR.TO). A special meeting of EDV shareholders to consider/approve the AVR takeover has been scheduled for Friday October 12. As previously explained, we don't view the AVR takeover as a bad deal. We wouldn't vote against it, although we would prefer that it hadn't happened. We think the deal increases the stock's risk by more than it increases the potential upside. At the current stock price EDV's risk/reward is attractive, although its value isn't quite as good now as it was 5 weeks ago when it was trading below $2 and was described in these pages as one of the best buys in the gold sector.
17th September 2012, Weekly Update	There are a lot of interesting gold-mining companies operating in West Africa. This part of the world still seems to have an abundance of untapped exploration potential and in many cases the stocks of West-Africa-based gold miners appear to be very under-valued. That's why the TSI Stocks List now contains several West-Africa-focused gold mining companies. We are referring to Endeavour Mining (EDV.TO, EVR.AX), Golden Star Resources (GSS), Keegan Resources (KGN), Resolute Mining (RSG.AX) and Volta Resources (VTR.TO). There are good reasons to be bullish on each of these stocks at their current prices, but it's not good that our list of stock selections has so much exposure to a single moderately-risky region that appears to be headed in the wrong direction on the risk scale. There are two main reasons for our view that West Africa is headed in the wrong direction on the risk scale. First, this year's events in Mali (a military coup, a civil war, inroads being made by well-armed Islamic fundamentalists) suggest that democratically elected governments in that part of the world have a tenuous hold on power. After all, prior to this year Mali was generally thought to be one of the most politically stable of West Africa's nation states. Second, governments in West Africa are becoming increasingly aggressive in their efforts to take a bigger share of the profits earned by gold mining companies. For one example, in its 2012 budget the government of Ghana increased the corporate tax rate on miners from 25% to 35% and introduced a 10% windfall profits tax. The windfall tax has since been delayed and could ultimately be abandoned, but it is clear that tax policy in Ghana, which is reputedly the best country in West Africa to operate a gold mining business, is being driven by the belief that the miners are rolling in money and that "the people" deserve more of this money. If only the miners really were rolling in money. For a second example, a spokesman for the Cote d'Ivoire government said last week that a windfall profits tax on gold miners would be put in place "to ensure the country benefits from higher world prices for the precious metal". These governments don't understand that if they implement windfall profit taxes then investment in the mining industry will dry-up and overall tax revenues will end up declining. Mining is a very cyclical business. If the opportunity to earn a lot of money near the peak of the cycle is taken away then so is the incentive to invest. At this stage we plan to maintain significant exposure to West Africa via gold stocks that have attractive risk/reward ratios (taking into account the increasing political risk), but our short-term goal is to reduce the number of West-Africa-focused stocks in the TSI List from 5 to 3. We are going to start immediately by exiting Resolute Mining (RSX.AX), a long-time inclusion in the TSI List. We have made numerous suggestions to buy RSG shares and numerous suggestions to take partial profits on RSG shares over the years, but this one will go into the books as a profit of 106% based on its price when it first appeared in the TSI List (March of 2005) and last Friday's closing price of A$1.88. We have chosen to exit RSG because its flagship Syama project is in Mali, which has turned out to be one of the riskiest countries in the region. EDV.TO will also have significant exposure to Mali after it completes its takeover of Avion Gold, but with EDV's current production coming from three separate West-African countries it is less vulnerable to a major problem in any one country. In a market and political environment in which everything went well for RSG, EDV would also do very well. And in terms of valuation and growth potential, RSG and EDV look quite similar. The bottom line is that with EDV picking up significant Mali exposure via its Avion purchase, it doesn't make sense for us to have both EDV and RSG in the TSI List. RSG is the one to go because its stable of assets is less diverse and riskier.
10th September 2012, Weekly Update	Endeavour Mining (EDV.TO, EVR.AX) reported that construction work at its Agbaou mine in Cote d'Ivoire was on track (production is scheduled to commence in Q1-2014) and that the results of new exploration drilling at this project would likely allow for an extension of the mine life. The current estimate for Agbaou's gold resource comprises 1.2M ounces in the M&I category. A new estimate will be done once all assays from the current drilling program are received.
3rd September 2012, Weekly Update (Stock price: C$1.98)	Endeavour Mining (EDV.TO, EVR.AX) reported good drilling results from a project that we haven't, up until now, included in our valuation for this company. The drilling results are from the Ouare gold project in Burkina Faso, which is about 40km from EDV's 80K-oz/yr Youga gold mine. They included 8.8m of 14.2-g/t gold from infill drilling and 18m of 3.7-g/t gold from step-out drilling. The Ouare project currently has an Inferred resource of 323K ounces and is scheduled to have a completed PEA (Preliminary Economic Assessment) by year-end. That this interesting little project hasn't been included in our EDV valuation to date indicates the extent of this company's organic growth potential. At current prices EDV.TO/EVR.AX is one of the best buys in the gold sector.
27th August 2012, Weekly Update (Stock price: C$2.00)	EDV's stock price plunged a couple of weeks ago in reaction to news that the company had agreed to buy Avion Gold (AVR.TO) in an all-stock deal. We aren't keen on the deal, because at the current gold price it adds more risk than potential reward. However, it's important to put things in perspective. This is not a Tye Burt (former Kinross CEO) style asset purchase that wipes out a lot of shareholder value in one fell swoop due to an absurdly high price, it is the purchase of a relatively risky asset at a fairly low price. The continued downward pressure on EDV shares due to the AVR takeover news combined with the recent gains in other gold mining stocks has led to EDV becoming one of the gold sector's best candidates for new buying.
13th August 2012, Weekly Update	Endeavour Mining (EDV.TO, EVR.AX) reported its financial results for the June quarter. Production and costs for the quarter had been reported in mid July, so last week's report didn't contain much in the way of significant new information. That being said, the company generated a lot more cash during the quarter than we were expecting, which is obviously a plus. Also, included with the financial results was a note that the company has been granted the permit it needs to start the construction of its 100K-oz/yr Agbaou mine in Cote d'Ivoire. We suspect that these results would have boosted EDV's stock price by 5%-10% if not for the AVR acquisition announced at the same time. The AVR acquisition news temporarily trumped all other considerations and caused the stock price to plunge 17% during the ensuing trading day.
8th August 2012, Interim Update (Stock price: C$1.99, Warrant price: C$0.44)	EDV is buying Avion Gold (AVR.TO) in an all-stock transaction: 0.365 EDV shares for each AVR share. Based on EDV's closing price on 7th August (the price when the deal was announced), the bid values AVR at C$0.88/share. This is a 56% premium to the 7th August closing price of AVR and amounts to about $390M for the entire company.  AVR is currently producing gold at the rate of about 100K ounces per year at its operations in Mali (West Africa), and the annual production rate is expected to increase to about 150K ounces over the months ahead due to a mill expansion. So, for its money EDV will be getting an extra 100K ounces/year of current production and an extra 50K ounces/year of baked-in future production growth. EDV will also be getting a 50% boost to its in-ground M&I gold resource. At the agreed share exchange ratio the acquired assets are being valued similarly to EDV's existing assets. This leaves our assessment of EDV's upside potential unchanged. Specifically, the $3.93/share valuation and $4.50/share upside target explained in the 23rd July 2012 Weekly Update remain applicable. However, the risk is now much higher because at least one-third of EDV's expected future production of 450K ounces/year will come from Mali (a relatively high-risk country thanks to this year's political instability (military coup) and the on-going violent conflict in the north).  Due to the greater risk associated with EDV as a result of this deal we will be quicker to exit this stock in the future than would otherwise have been the case. To be a little more specific, rather than waiting for our upside price target to be reached we will possibly view a future rise to C$3.00-$3.50 as a good selling opportunity. As things currently stand, however, EDV is clearly a buy due to the stock market's extreme over-reaction to the takeover news. Note that the AVR deal doesn't alter the risk/reward equation for the EDV C$2.50 warrants (TSX: EDV.WT.A). The downside risk associated with these out-of-the-money warrants was 100% prior to the AVR deal and is still 100%. The upside potential is still at least 300%. EDV's management is clearly trying to grow the company rapidly via acquisitions in West Africa. We won't be surprised if its next takeover target -- after it beds down the AVR purchase -- is either Keegan Resources (KGN) or Volta Resources (VTR.TO), both of which have advanced exploration-stage projects in West Africa.
23rd July 2012, Weekly Update (Stock price: C$2.18, Warrant price: C$0.45)	EDV is expected to produce a combined total of about 200K ounces of gold this year and next from its Youga and Nzema mines in Burkina Faso and Ghana. The annual production rate is then expected to increase to about 300K ounces due to completion of the Agbaou mine in Cote d'Ivoire, but for valuation purposes we will assume a steady state production of 200K ounces/year. We will also assume a gold price of $1500/oz and a cash operating cost of $700/oz (versus the $680/oz cost achieved during the first half of this year). 200K ounces/year with a per-ounce margin of $800/oz ($1500 - $700) yields an annual cash margin of $160M. In the first quarter of this year EDV's reported cash flow was 84% of its cash margin, but to be conservative we will assume that 70% of its cash margin becomes operating cash flow. This gives us an estimate of $112M for annual operating cash flow. Applying an eight multiple to this annual cash flow leads to an estimated value of $896M for EDV's operating mines. To value the construction-stage Agbaou project we will rely on a technical report completed last month by Senet, a third party engineering firm. Using figures included in the Senet report we calculate that Agbaou has an after-tax NPV(5%) of around $330M at $1500/oz. Applying a 50% discount to reflect the fact that the project is about 18 months away from production gives us an estimated current value of $165M. Adding $165M for Agbaou to the $896M figure mentioned above for EDV's operating mines results in a total estimated value of $1061M for EDV's portfolio of gold mining assets.  Turning to EDV's balance sheet, there is $165M of working capital that is almost totally offset by long-term debt and a derivative liability. The derivative liability stems from the hedge book that was inherited when EDV purchased the Nzema gold mine. As at 31st March 2012 it encompassed 113K ounces of gold forward sales at the low price of $1061/oz, to be delivered as per the following schedule: - 7K over the remainder of 2012 - 10K in 2013 - 32K in each of 2014, 2015 and 2016 This hedge book reduces EDV's leverage to gold, but not by much because it amounts to only 5% of expected production in 2012-2013 and 10% of expected production in 2014-2016.  With liabilities approximately offsetting liquid assets on the balance sheet, we'll use $1061M for our valuation of the company. This equates to $3.93/share (assuming a share count of 270M), which in our opinion is conservative because it is based on a gold price that's $100 lower than the current gold price and a few hundred dollars lower than where we expect the gold price to be 12 months from now. Our price target of $4.50/share allows for some gold price appreciation. EDV is a buy in the C$2.20s or lower, and for more aggressive speculators the EDV C$2.50 Feb-2014 warrants (TSX: EDV.WT.A) are a buy near their current price of C$0.45.
9th May 2012, Interim Update (Stock price: C$2.02, Warrant price: C$0.53)	EDV has been comparatively resilient over the past few weeks, meaning that it has been hammered more gently than most other junior gold mining stocks. This is probably because it is generating lots of cash.  As per the results announced this week, EDV had per-share cash flow and earnings of $0.14 and $0.07 during the first quarter of this year. When these figures are annualised they imply that EDV is presently trading at 3.6-times cash flow and 7-times earnings.
19th March 2012, Weekly Update (Stock price: C$2.38, Warrant price: C$0.70)	Fast-growing West-Africa-based gold miner with producing mines in Burkina Faso and Ghana and development-stage projects in Cote d'Ivoire and Mali. It is under-valued considering only its current production, meaning that the market is currently allowing nothing for the company's planned growth.
15th February 2012, Interim Update (Stock price: C$2.29, Warrant price: C$0.69)	Most TSI readers will be familiar with EDV, because we have written about this company many times over the years. The TSI Stocks List currently has some exposure to EDV via the EDV Feb-2014 C$2.50 warrants (TSX: EDV.WT.A), but the stock hasn't been part of the List since we took profits at C$2.70 back in September of 2010. At least, it hasn't been part of the List until today. When we removed EDV from the List in 2010 it was producing gold from its Youga mine at the rate of about 80K ounces/year, but more than half of its net asset value was a huge cash reserve. This cash reserve meant that the risk was low, but it also meant that the stock didn't offer significant leverage to the gold price. The lack of leverage was the main reason for our decision to exit. As a result of developments over the intervening period, EDV now offers much greater leverage to the gold price and has a more clearly defined growth path. It is currently producing gold at the rate of around 180K ounces per year from two mines -- the Youga mine in Burkina Faso and the Nzema mine in Ghana. Also, it plans to develop the Agbaou project in Cote d'Ivoire into a mine that produces gold at the rate of 70K-100K ounces/year by the end of 2013, and has additional growth potential due to its 40% stake in the exploration-stage Mali-based Finkolo project managed by Resolute Mining. Moreover, the stock is now trading about 15% lower than our earlier exit price despite the gold price being 30% higher. The company expects to generate about US$150M of cash in 2012. This cash flow, along with its current cash hoard and credit facility, should be more than enough to take Agbaou through to production without needing to arrange additional financing. We have returned EDV to the List at Wednesday's closing price of C$2.29, a price that is just above an area of good support (refer to the following chart for details). We have a 12-month target of C$4.50 in mind. The target was determined by applying an 8 multiple to this year's expected cash flow and allows nothing for the growth potential provided by Agbaou and Finkolo. By the way, in addition to trading in Canada under the symbol EDV, Endeavour Mining also trades in Australia under the symbol EVR. With today's addition of EDV there is now too much exposure to West Africa in the TSI Stocks List (GSS, KGN and RSG.AX also have their main assets in West Africa). We hope to be able to address this imbalance by exiting RSG.AX within the next few months at around A$2.50.
9th November 2011, Interim Update (Stock price: C$2.35, Warrant price: C$0.64)	EDV moved quickly up to chart resistance on Monday of this week. The sudden emergence of strength was possibly due to anticipation of the good quarterly financial results that were announced on Tuesday. There was more news on Wednesday, with the company announcing that it had agreed to sell its Advisory Business for staged payments totaling $20M. The sale of the Advisory Business is neutral at best from a financial perspective, but it does mean that the company is now almost 100% focused on its gold mining operations in West Africa. These operations will have current production of 185K ounces/year once the merger with Adamus Resources (ASX: ADU) is complete, and are expected to have production of 250K ounces/year by the end of 2013 due to development of an existing Feasibility-Stage project. Due to its relatively low post-merger cash cost of around $600/oz, EDV should generate a lot of cash over the next 12 months if the gold price averages at least $1500/oz (which it almost certainly will). The stock's relatively low valuation suggests that this cash flow generation is not factored into the current stock price, and, therefore, that the stock has a lot of upside potential. At the same time, downside risk is mitigated by the company's strong balance sheet. In the TSI Stocks List there is exposure to EDV via the February-2014 C$2.50 warrants (TSX: EDV.WT.A). We think that the stock and the warrants are good candidates for new buying near their current prices in the low-C$2.30s and the low-C$0.60s, respectively. The warrants are a lot riskier than the stock, but have a lot more upside potential.
24th August 2011, Interim Update (Stock price: C$2.40, Warrant price: C$0.71)	In the TSI Stocks List we have exposure to Endeavour Mining (TSX: EDV) via the C$2.50 warrants expiring in 2014 (TSX: EDV.WT.A). EDV has finally found a way to put its large cash hoard to work. It will be merging with Adamus Resources (ASX: ADU) in an all-stock deal (0.285 shares of EDV for each share of ADU) and will be using its cash to a) pay off ADU's $60M of project debt and b) reduce ADU's hedge liability. We previously looked at ADU as a potential speculation and TSI stock selection, but decided against it due primarily to the company's debt and hedge liabilities (ADU forward-sold 290K ounces of gold at $1,075/oz last year, 270K ounces of which remain and are scheduled to be delivered over the next 5 years). Accounting for the hedge liability, ADU appears to be fully valued at its current market cap of around A$320M (454M shares at A$0.70/share). Despite ADU's so-so valuation, we like this deal because it solves a problem for both of the companies involved. From ADU's perspective, it removes the financial constraints imposed by a weak balance sheet and an ill-conceived gold forward-sales book. From EDV's perspective, it greatly increases the leverage to gold and gives the company a good asset in a low-risk jurisdiction. Specifically, EDV gets the Nzema project in Ghana, which is currently producing gold at the rate of 100K ounces/year at a cash cost of around US$575/oz. The combined company should produce around 180K ounces of gold over the next 12 months. Based on an expected total post-merger share count of 254M, the production is currently being valued by the market at around US$3,400/oz. This is cheap considering today's gold price and the expected cash operating cost of around US$600/oz, but is not cheap relative to several other 100K-400K-oz producers that we track. EDV is a candidate for new buying near its current price of C$2.40, but we aren't going to add it to the TSI List at this time. We'll stick with the warrants.
23rd May 2011, Weekly Update (Stock price: C$2.19, Warrant price: C$0.64)	There is exposure to EDV in the TSI List via the February-2014 C$2.50 warrants (TSX: EDV.WT.A). EDV is sitting on a large pile of cash, which limits the stock's downside risk but also limits its upside potential by reducing its leverage to gold. The company currently owns the 80K-oz/yr Youga gold mine in Burkina Faso and plans to use its cash hoard to purchase another in-production gold mine, but it is taking an inordinately long time to do a deal. The stock has fallen back to an area of long-term support (see chart below), where it is a reasonable candidate for new buying. However, it will be difficult for us (or anyone) to become enthusiastic about EDV until after the company has announced its next gold-mining acquisition.
30th March 2011, Interim Update (Stock Price: C$2.63, Warrant Price: C$0.90)	We removed EDV from the TSI Stocks List some time ago, but retained some exposure to this company via the warrants (TSX: EDV.WT.A). Whether or not EDV makes its way back into the TSI Stocks List in the future will depend on what the company does with its $200M cash hoard. It is currently under-valued and offers exposure to gold via its 80K-oz/yr Youga mine in Burkina Faso, but because cash constitutes about half of its net asset value it doesn't offer as much leverage to gold as we'd like. As we've mentioned in the past, we think it would make sense for EDV to use its cash to make a stock-plus-cash bid for Resolute Mining (ASX: RSG). RSG is under-valued and would make a good fit with EDV's West African assets. Following a successful bid, RSG's non-African assets could be sold off or spun off to make the expanded EDV an Africa-focused mid-tier producer with a strong balance sheet. This would likely lead to a substantial upward re-rating in the stock market that would benefit all shareholders. Although we aren't going to return EDV to the List at this time, we wanted to point out that it is a relatively low-risk buy near the current price. This is not only due to the low valuation and strong balance sheet, but also due to the stock chart. The chart (see below) shows that EDV has trended upward over the past two years via a "two steps forward followed by one-and-one-half steps backward" process. The rallies have generated trough-to-peak gains of 83%, 78% and 52%, while the intervening downward corrections have taken the stock price to just below its 200-day moving average. There's a good chance that the stock's most recent correction ended in the C$2.30s earlier this month. Consecutive daily closes above the 50-day moving average (currently C$2.72) would suggest that the next "two steps forward" rally had begun. If the next rally results in a trough-to-peak gain of 52%-83% then it will end at C$3.50-C$4.30.
6th December 2010, Weekly Update (Stock Price: C$2.89, Warrant Price: C$1.13)	There has been a lot of strength in the gold sector over the past few months, with many gold stocks making large gains. Exploration-stage stocks with positive news in the form of good drilling results or resource upgrades have done particularly well, although there are plenty of junior gold miners that stand to gain immediate benefit from a higher gold price -- by virtue of having current production -- that have been left out of the rally. EDV is one such stock. Despite having current gold production of 80K ounces/year from a mine in West Africa, EDV's stock price has not responded to the 10% rise in the gold price over the past 2.5 months. Moreover, this stodgy performance can't be explained by valuation, because EDV looks under-valued at its current price even if we allow nothing for its profitable merchant banking business. It is possible that the market has the same concerns that prompted us to remove EDV from the TSI Stocks List in mid September (we removed the stock, but kept the Feb-2014 $2.50 warrants). Specifically: insufficient leverage combined with uncertainty about how the company's large cash reserve would be used. EDV will likely use its cash to acquire all, or part of, a junior gold mining company with current production in Africa, but the uncertainty -- and the lack of leverage -- will remain until a deal is done. EDV is a relatively low risk buy below C$2.90/share and would be a reasonable choice for someone who is just beginning to build a junior gold-stock portfolio, but it probably won't return to the TSI Stocks List until after its next significant gold-related acquisition has been announced. In the mean time, we'll retain some exposure to the EDV story via the warrants (TSX: EDV.WT.A).
14th September 2010, Stock Selection Update #60 (Stock Price: C$2.70, Warrant Price: C$0.96)	Endeavour Financial (TSX: EDV) announced prior to the start of trading on Monday that it had agreed to sell its 43% stake in Crew Gold (TSX: CRU) to Severstal for US$215M. This equates to about C$4.90 per CRU share. We were expecting this deal, but were hoping that it would occur at a much higher price for CRU.   Severstal will probably offer to acquire the 7% of CRU that it doesn't already own at C$4.90/share. This means that there isn't much downside risk in CRU at Monday's closing price of C$4.47, but also that the upside potential from here is capped at about 10%. The remaining upside potential is nowhere near enough to justify the stock's continuing inclusion in the TSI List, so we will make a quick exit for a small profit of around 5% (based on last week's entry at C$4.24).   There was an opportunity to sell EDV in the C$2.90s immediately after the stock opened for trading on Monday, but unfortunately the early news-related gain quickly evaporated. At Monday's closing price of C$2.70 the stock is very under-valued with relatively low risk, but we have decided to remove it from the TSI List and record a profit of 61.7% based on our September-2009 entry at C$1.67.   The reason we are exiting EDV, despite is relatively low risk and under-valuation, is that due to the exit from CRU it no longer offers sufficient leverage to gold. At least, it won't offer sufficient leverage until it puts its now-large cash reserve to work via another gold-related acquisition. We will re-evaluate the stock after the timing and details of the next acquisition become known.   As previously mentioned, the sale of its CRU stake could pave the way for EDV to make a bid for Australia-listed Resolute Mining (ASX: RSG). We have no information to indicate that EDV is planning a tilt at RSG, but such a move would make sense considering a) RSG's low valuation, b) the West Africa location of RSG's major gold-producing asset, c) the fact that RSG and EDV are already JV partners on an exploration-stage project, and d) the likelihood that many RSG shareholders are unhappy with current management.   Note that although we are removing the EDV shares from the TSI List, we are going to maintain exposure to this company via the warrants (TSX: EDV.WT.A). These warrants, which have an exercise price of C$2.50 and about 3.5 years to expiry, do offer plenty of leverage. They are also much riskier than the stock.
30th August 2010, Weekly Update (Stock price: C$2.15)	Endeavour Financial (TSX: EDV) is a member of the TSI Stocks List and EDV owns 43% of CRU, which means that the TSI Stocks List has indirect exposure to CRU. Severstal, a Russian company, owns 50% of CRU, so the trading float is relatively small. Due to its recent stock-price decline, CRU is now an interesting speculation in its own right (rather than indirectly via EDV). It is a profitable gold producer with current annual production of around 210K ounces and a plan to increase production to around 270K ounces/year. It also has about 5M ounces of in-ground gold, mostly in the M&I category. At Friday's closing price of C$4.23 its current production and resources were being valued by the stock market at US$2,386 and US$102 per ounce, respectively, which is low for a company of this size. CRU's gold production comes from the Lefa project in Guinea (West Africa). This means that country risk must be taken into account (Guinea is not a model of political stability), although by their actions it is clear that EDV and Severstal do not consider the country risk to be substantial. CRU is a takeover candidate with Severstal being the likely buyer. In our opinion, if the offer price were right it would make sense for EDV to sell its CRU stake to Severstal and then use the cash to make a bid for Resolute Mining (ASX: RSG), especially considering that Etruscan Resources (recently acquired by EDV) and Resolute have a project in common. Whether or not you already have exposure to CRU via EDV, it could make sense to buy some CRU shares. We view CRU as a buy below C$4.30 and a strong buy below C$3.70.
29th June 2010, Interim Update (Stock Price: C$2.22, Warrant Price: C$0.78)	EDV has made an offer to acquire the 45% of Etruscan Resources (TSX: EET) that it doesn't already own. The offer is a combination of cash and stock, and has been approved by EET's board. The $43M cash portion of the acquisition will be funded using a $100M credit facility recently arranged by EDV. Assuming that EDV ends up with 100% of EET, its gold business (100% of EET plus 43% of Crew Gold (TSX: CRU)) will have the following equity-accounted production and resources:   - 189K-oz/yr production   - 3.7M ounces of M&I resources plus 1.0M ounces of inferred resources (4.2M ounces total, assuming an inferred ounce is worth 50% of a M&I ounce) This means that at its recent price of C$2.22/share, EDV is being valued by the stock market at around US$1622 per ounce of production and US$73 per resource ounce. These figures are very low, and they don't allow anything for EDV's non-gold investments and its merchant banking business. We expect that EDV's gold business will eventually be spun off as a separate company, perhaps following one more acquisition. Putting the gold assets into a separate company would be an efficient way to boost shareholder value. EDV and the EDV warrants (TSX: EDV.WT.A) are suitable for new buying near their current prices of C$2.22 and C$0.78, respectively.
13th May 2010 Update (Stock price: C$2.65)	...Endeavour Financial (TSX: EDV) released its Q1-2010 financial results after the close of trading on Tuesday. These results revealed that the company had a net asset value (NAV) of C$5.54/share at 31st March. Right now the NAV is probably about C$5.00/share, which is almost double the current market price. Who said that the stock market was efficient?
11th May 2010 Update (Stock price: C$2.44)	Endeavour Financial (TSX: EDV) is one stock suitable for new buying near its current price (C$2.44).
3rd March 2010, Interim Update (Stock Price: C$2.35)	EDV has recently broken upward from its lengthy basing pattern (see chart below), but we wanted to point out that the increase in the stock price has not closed the gap between the company's market value and its net asset value. The reason is that the net asset value per EDV share has risen by as much as the EDV stock price. To put it another way, it could be argued that EDV is as under-valued today at C$2.35 as it was two weeks ago at C$1.80. Our long-term target for EDV's stock price is its net asset value. In other words, we are anticipating an eventual elimination of the discount at which the stock currently trades. The current net asset value is about C$4.50/share. The top of EDV's basing pattern (C$2.20) should now provide solid support, and the area around this support level is now the optimum realistic place for new buying.
1st March 2010, Weekly Update (Stock Price: C$2.28)	In the 22nd February Weekly Update we said that the lengthy basing patterns of ADM.V and EDV.TO had been frustrating, but that patient holders of these stocks would be rewarded. EDV broke upward from its basing pattern late last week so it looks like the patience of EDV shareholders will be rewarded in the short-term. At the same time, however, ADM plunged to near the bottom of its 12-month range, meaning that a lot more patience will be required with this one.
22nd February 2010, Weekly Update (Stock Price: C$1.82)	Andina Minerals (TSXV: ADM) and Endeavour Financial (TSX: EDV) have been two of our most frustrating stocks over the past 12 months. Both of these stocks are very under-valued and under-appreciated by the stock market, despite being extremely well positioned to profit from a rising gold price. We think that patient holders of ADM and EDV will be rewarded. As evidenced by the following charts, both stocks have been basing over the past year and have resistance at C$2.00-$2.20.
15th February 2010, Weekly Update (Stock Price: C$1.83)	In late January EDV purchased an 810M-share (38%) stake in Crew Gold (TSX: CRU), a company with annual gold production of around 220K ounces from a mine in West Africa. EDV's cost per share was C$0.125. CRU ended Friday's session at C$0.215, up C$0.07 (48%) on the day. At Friday's closing price for CRU, EDV had an unrealised gain of about C$73M on its recent investment. Furthermore, at Friday's closing market prices EDV's net asset value was in excess of C$4/share (well over double its current stock price). The reason for Friday's surge in CRU's stock price was news that an affiliate of Severstal Resources, one of Russia's largest mining companies, had purchased 336M CRU shares (15.7% of the company) the day before at C$0.16/share. Severstal began building a gold-mining division in 2007 and appears to be interested in adding CRU to its stable of assets. Severstal's interest in CRU could create the opportunity for EDV to realise a large and very quick gain on its CRU stake, but even if Severstal doesn't make a bid for all of CRU its willingness to pay C$0.16/share for a 16% stake highlights the wisdom of EDV's earlier purchase at C$0.125/share. EDV is a buy near its current price.
1st February 2010, Weekly Update (Stock Price: C$1.76, Warrant Price: C$0.67)	EDV's strategy over the past several months has been to purchase substantial stakes in financially-challenged junior gold miners at opportunistic times, such as when excessive debt has forced the companies in question to restructure. In September of 2009 this strategy led to the purchase of a 54% stake in Etruscan Resources (TSX: EET), a company with annual gold production of 88K ounces from a mine in Burkina Faso (West Africa). And last week it led to the purchase of a 38% stake in Crew Gold (TSX: CRU), a company with annual gold production of around 220K ounces from a mine in Guinea (also in West Africa). EDV is paying US$92M for 38% of CRU. Accounting for CRU's $108M of debt and $25M of cash, EDV is effectively paying $123M for 38% of a 220K-oz/yr mine, or about US$1500 per ounce of production. This is low and creates the potential for a substantial return on investment. EDV is very under-valued (the company's net asset value is well north of C$3.00 per share) and at some point this fact will be recognised by the stock market. It is an excellent candidate for new buying near its current price. Note: 1. EDV has a valuable investment-banking business and significant investments in non-gold resource companies, but with this latest deal its asset base is now strongly biased towards gold. We have therefore shifted it from the "Other Stocks" section of the TSI List to the "Gold and Silver Stocks" section. 2. We like the EDV warrants (TSX: EDV.WT.A), which have an expiry date of Feb-2014 and an exercise price of C$2.50. However, at current prices the stock offers better value than the warrants (the warrants are moderately expensive relative to the stock).
25th November 2009, Interim Update (Stock price: C$1.86)	EDV's stock price plunged on high volume on Tuesday for no readily-apparent explanation. Our guess is that an institution with a sizeable position wanted to make an exit for reasons that have nothing to do with the investment merits of EDV shares. The stock traded as high as C$2.02 on Monday, then dropped as low as C$1.67 on Tuesday before rebounding to end Wednesday's session at C$1.86. This sort of volatility is quite common within the ranks of junior resource-oriented stocks, even stocks such as EDV that are nowhere near as speculative as the average exploration-stage miner (EDV is an investment-banking company that regularly takes equity positions in the companies it helps to finance). Smart speculators use this volatility to their advantage by placing under-the-market buy orders to catch the downward spikes and above-the-market sell orders to catch the upward spikes. The following chart shows that EDV remains mired within a lengthy basing pattern. By the way, chart patterns such as this are still easy to find at the junior end of the gold sector, which is more evidence that gold and gold stocks are nowhere near 'bubble territory'. EDV is also trading at a huge discount to its net asset value. Needless to say, its risk/reward is excellent near the current price.
11th November 2009, Interim Update (Stock Price: C$2.10)	EDV announced its latest quarterly financial results on Tuesday 10th November. A substantial profit was achieved during the quarter ended 30th September, but note that the reported quarterly earnings number is not a good indicator of EDV's performance because it tends to fluctuate wildly from one quarter to the next in response to changes in the market values of the company's investments in junior resource stocks. Of particular interest to us was the reported net asset value (NAV) of C$3.17/share. Furthermore, the gain in the market value of EDV's stake in Etruscan Resources subsequent to the quarter's end will have boosted the NAV to around C$3.50/share. In other words, EDV ended Wednesday's session at a discount of around 40% to its NAV. The following chart shows that EDV is still attempting to complete its basing pattern. There is resistance in the low-C$2.20s and support at around C$1.80. It is presently not 'overbought', and is, in our opinion, a buy near its current price of C$2.10 based on its large discount to NAV and the likelihood that another gold-related deal -- similar to the recent Etruscan deal -- is in the works. It would be a very strong buy at C$1.80 or thereabouts.
26th October 2009, Weekly Update (Stock Price: C$2.01, Warrant Price: C$0.85)	EDV gained 13% on Friday on high volume and is in the process of breaking out from the base that has formed over the past 12 months. As far as we can tell, Friday's surge was driven by news that the previously-announced deal to acquire 54% of Etruscan Resources had been completed. Near Friday's closing price of C$2.01, EDV is still a good candidate for new buying because it remains very under-valued and is not technically 'overbought' on even a short-term basis. We estimate that the company's net asset value now exceeds C$3.00/share, so the stock is trading at a large discount to the underlying assets. Moreover, EDV will still have almost $100M in cash after paying for its Etruscan stake and is planning to use this cash to do similar value-enhancing deals over the months ahead.
30th September 2009, Interim Update (Stock Price: C$1.67, Warrant Price: C$0.70)	In last week's Interim Update we discussed the recent deal that involves EDV taking control of junior gold producer Etruscan Resources. In our opinion, the Etruscan deal proves that EDV has exactly the right strategy. The quarterly financial results reported by EDV earlier this week revealed a net asset value (NAV) at 30th June 2009 of C$2.78/share, of which C$2.16/share comprises cash and investments (the remainder is the book value of the merchant banking business). The NAV would have risen a little since then. This means that at Wednesday's closing price of C$1.67, EDV was trading at a hefty 40% discount to its NAV. To put it another way, EDV's stock would have to gain 66% to bring it into line with its NAV. Although the TSI Stocks List already has EDV exposure via the company's A-series warrants (EDV.WT.A), we are now adding the stock to the List. Doing so will hopefully enable us to record a profit at some future time -- by exiting either the warrant position or the stock position -- while retaining long-term exposure to the company. This is an opportunistic time to buy EDV, because after testing resistance at C$1.85 over the past week the stock price has since pulled back to within about 4% of support at C$1.60.
23rd September 2009, Interim Update (Warrant Price: C$0.62)	EDV, an investment banker focusing on the junior resource sector, made an interesting announcement on Wednesday. The company announced that it is buying 54% of Etruscan Resources (TSX: EET) at a total cost of around US$51M, US$43M of which will go directly to EET to facilitate the restructuring of its financial position (including the closing-out of half its gold hedge book). EET owns 90% of the Youga gold mine in Burkina Faso and 40% of the Tabakoroni gold project in Mali. Youga is in production at the rate of 88K ounces/year, meaning that EET's stake is 80K ounces/year. Tabakoroni is an exploration-stage project with a current gold resource of around 800K ounces. Following the financial restructuring facilitated by EDV's investment in the company, we understand that EET will have debt and hedge liabilities of around $50M. Accounting for the debt and hedge liabilities, EDV is effectively paying about US$1900/ounce for existing gold production and getting exploration-related upside for free. We think this is a reasonable deal for EDV because it has added some leverage to the gold price without contributing much downside risk. Also, we like the fact that the company is actively looking for opportunities to take substantial positions in under-valued junior gold miners. It has the ability to do more deals like this, because after paying for its EET stake it will still have about $100M of cash and cash-equivalents. The following chart shows that EDV has been forming a base over the past 10 months and is now testing resistance. It could pull back from here, but it is not overbought and it remains significantly under-valued (by our calculations, the company's net asset value is at least C$2.60/share). We suspect that if it does pull back over the next couple of weeks it will find support at around C$1.60. Our exposure to EDV is via the A-series warrants, which ended Wednesday's session at C$0.62. At the current stock price, fair value for the warrants is around C$0.60. Both the stock and the warrants are good candidates for new buying at or below current prices. The warrants have more upside potential and more downside risk than the stock.
13th May 2009, Interim Update (Warrant Price: C$0.52)	EDV, an investment bank that operates within the junior resource sector, currently has no debt and around C$2/share of cash and investments. The book value of its investment banking business is around US$55M, which means that the company's net asset value (net-cash plus investments plus investment banking book value) is around C$2.65/share. Cash makes up more than 40% of EDV's net asset value, so an investment in EDV shares is largely a bet that the company's management will be able to earn a good return on its cash over the years ahead. This is a good bet right now, particularly since the current large discount to NAV means that investors are effectively being compensated to make the bet. The following chart shows that EDV broke out of a lengthy consolidation at the beginning of this month, but has not yet moved far from its lows. The stock appears to be slowly gathering strength. We are playing EDV's long-term upside potential via the C$2.50 warrants that expire in February of 2014. At EDV's current price of C$1.65 the warrants are fairly valued in the low-C$0.50s. If the stock price were to move up to around C$2.50 over the next few months then the fair value of the warrants would rise to around C$1.00.
23rd February 2009, Weekly Update (Warrant price: C$0.49)	We recently added the Endeavour Financial Feb-2014 C$2.50 warrants (TSX: EDV.WT.A) to the TSI Stocks List. This is just a quick note that these warrants have dropped back to an area where new buying would make sense for long-term speculators (they ended last week at C$0.48-$0.50).
11th February 2009, Stock Selection Update #56 (Warrant price: C$0.49)	Over the past two months we have mentioned that investors could obtain exposure to a portfolio of junior resource stocks by purchasing Sprott Resource Corp. (TSX: SCP) or Endeavour Financial (TSX: EDV). We added SCP to the TSI Stocks List in mid December and continue to like it as an under-valued, well-managed long-term play on the junior resource sector. Today's email, however, is about EDV.   EDV recently completed a very large equity financing that re-capitalised the company. This financing raised C$115M at C$1.77 per share, in the process tripling the company's share count and putting downward pressure on its share price. Also, the large increases in cash and shares outstanding reduced EDV's short-term leverage to the junior resource sector, as well as its risk.   Despite the 200% increase in share count EDV is still trading at a sizeable discount to its net asset value. Specifically, based on the market value of the company's investments as at 31st December 2008 (the current value should be about the same as it was then) and incorporating the effects of the recent financing, we calculate that EDV presently has cash and investments with a combined value of US$163M. This equates to about C$2.00 per EDV share, which compares favourably with Tuesday's closing share price of C$1.58. However, EDV also operates an investment banking business with a book value of US$55M. Adding the book value of the investment banking business to the market value of the cash and investments results in a net asset value of C$2.77 per share.   Assuming that EDV's management invests its cash prudently in junior gold and other resource companies over the year ahead, the company's net asset value should increase markedly. One reason is that there is a huge amount of value to be found in this area of the stock market. Another reason is that EDV, due to its connections and status, gets presented with a lot of good investment opportunities that are not available to the average person. In the short-term, however, the stock may not be a stellar performer due to the effects of the recent financing (higher share supply and watered-down leverage).   For risk-tolerant speculators, the reduced-leverage issue can be overcome by purchasing the new EDV warrants rather than EDV shares. The warrants, which trade on the TSX under the symbol EDV.WT.A (the Yahoo Finance symbol is EDV-WTA.TO), have an exercise price of C$2.50 and an expiry date of February-2014, so as long as there's a bull market in junior resource shares at some point over the next 5 years there should be an opportunity to realise large gains on these warrants. Furthermore, there seems to be reasonable liquidity in the market for these warrants at around C$0.50 (950K warrants traded between C$0.49 and C$0.52 on Tuesday).   We are going to add the above-mentioned EDV warrants to the TSI Stocks List at Tuesday's closing price of C$0.49. With the stock at around C$1.60 we calculate fair value for the warrants to be C$0.48-C$0.52.