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Gold Miner Posts Q2/21 Financial, Operational Beat, 2021 Numbers Look Good
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A report by CIBC contains its full-year 2021 estimates for top pick, Endeavour Mining.

In an Aug. 4 research note, CIBC analyst Anita Soni reported that Endeavour Mining Corp. (EDV:TSX; EVR:ASX) achieved "a solid Q2/21 operational and financial beat" and confirmed that the outlook for the company's full-year 2021 looks good.

Soni outlined the changes CIBC made to its model on Endeavour to reflect the miner's successful Q2/21. The financial services firm increased its overall 2021 production estimate to 149,300 ounces (1.493 Koz), which falls within the higher end of Endeavour's guidance of 1,365–1,495 Koz.

On the other hand, CIBC lowered its 2021 production forecasts for Boungou and Mana. This is because, according to Endeavour, recovery rates at Boungou and mill throughput and grades at Mana will likely decrease in H2/21.

In another change to the Endeavour model, CIBC raised its all-in sustaining cost (AISC) projection for 2021 by 3% to $900 per ounce, the maximum AISC to which the miner guided. Expected increases in three sets of costs in H2/21 drove this change. They are AISC at Boungou due to higher fuel prices and security costs; AISC at Karma resulting from decreased grades, throughput and recoveries; and general and administrative costs. CIBC also bumped up its total 2021 capex estimate to $478 million ($478M) from $471M.

With respect to inflation driving up costs for the mining company, Soni noted that Endeavour expects little of that, given it recently renegotiated most of its contracts. However, the company does expect that capex for its next two projects, Fetekro and phase two of Sabodala-Massawa, will be higher than originally anticipated, due to inflation.

Soni indicated that in terms of 2021 free cash flow, CIBC continues to forecast it to be strong, around $793M. Endeavour, in fact, had $833M in cash at the end of Q2/21. Net debt was $97M.

Expected free cash flow "should more than support Endeavour's capital return to shareholders via its minimum dividend policy and share buyback," Soni affirmed.

CIBC has an Outperformer rating and a CA$41 per share target price on Endeavor Mining, one of its top picks. The miner's current share price is about CA$31.39.

"We continue to recommend Endeavour as a cornerstone name in an investor's portfolio as we expect it to continue to rerate as it earns back investor confidence after two acquisitions last year and the outflows from the Toronto Stock Exchange index exclusion," Soni explained.

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Disclosures from CIBC, Endeavour Mining, Aug. 9, 2021

Analyst Certification: Each CIBC World Markets Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

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Important Disclosure Footnotes for Endeavour Mining Corporation (EDV.TO): CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from these companies in the next 3 months: Endeavour Mining Corporation For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click here: CIBC Disclaimers & Disclosures Companies mentioned in the report but not listed are not covered by fundamental research at CIBC.

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