Endeavour Mining plc (EDV) Earnings Call Transcript & Summary

Today, I'm delighted to be joined by Sébastien de Montessus, the President and CEO of Endeavour Mining to talk about the COVID-19 response from the company. Sébastien, good morning.

Good morning, [ Scott ]. Thank you for taking me.

Sébastien, we're seeing unprecedented times with COVID-19 and its impact around the world, touching every aspect of our lives. Now with regards to Endeavour, what are you doing to manage COVID-19?

Thanks, [ Scott ]. As you said, I mean this is completely unprecedented. Although in the case of West Africa, we've been in the past through similar crisis type, in particular with Ebola. I think it's fair to say today that health and safety of our employees is paramount. We've set up a crisis management team at Endeavour at the outbreak of COVID-19, which is about 3 weeks ago. We've also got a very well-regarded epidemiologist acting as special adviser to us. And we've deployed last weekend and we have a personal medical team from a leading U.S. NGO who will be deployed as and when the need arises in order to have the right support in terms of medical assistance to all the sites and our staff across West Africa. So health and safety is really the primary focus of this response team. The second part, obviously, is having a business continuity program in place in order to continue to manage operations during an outbreak like that. For this, we've identified about 3 level of response. That depends on how the virus spread where we operate. I would say, if I may describe quickly those levels, I would say that we are currently at level 1 of this crisis, which is where we can still operate at relatively normal levels, but with some extra precautions and those measures are working well so far. It's obviously health screening, temperature for all staff, strictly monitoring access to sites, mandatory 14-day quarantine for all travelers, which are arriving in West Africa, working from home for all our office staff and, of course, regular communication updates. This level 1 is basically a phase where the virus doesn't spread yet in the countries where we operate, but it's mainly trying to protect our operations from getting infected by someone bringing the virus to site. There is after what we call the level 2 response is where the virus starts to be significantly more prevalent in our operating countries and where we, therefore, apply much more restricted -- much more restrictions to our operation, but we can still mostly keep seeing working as normal. In preparation, as an example, for a possible level 2 in Côte d'Ivoire and in Burkina Faso where the virus will start spreading across the country, we've been trying to anticipate possible restrictions on travel and ensure that we had all the key people who were on break back in-country before the border is closed. Both Burkina Faso and Côte d'Ivoire did close last weekend all commercial flights and borders. So fortunately, we've been able to manage and anticipate that, so that they all are back to country, but in a 14-day quarantine before being able to be released to go to sites. In this environment, we anticipate that we might have to lock down the mine and isolate the mine from the communities, villages and so on in order to protect the operation themselves from a prevalent virus spreading across the country. But during this level 2, we would also be into production, and we would expect limited impact on our operations. The level 3, which will be obviously the more serious, is where we might expect to see severe restrictions on our operations, and we might need to consider suspending or curtailing the operations. To be clear, we are currently at level 1. But obviously, we are monitoring things very closely as we might enter into the level 2 in the next few days or weeks.

So it sounds as if you're very well prepared with regards to different levels there and, obviously, important with regards to the health and safety of your employees being paramount. But with regards to your supply chain, what impact are you seeing there? And how are you mitigating the risks?

Sure, [ Scott ]. I think that the supply chain is obviously one of the critical aspect of ensuring business continuity. I think that over the past year, Endeavour has focused on sourcing more and more its key supplies from either in-country or broader regional West African countries, which has proved to be the right strategy. Since the outbreak, we've done a full analysis on the supply chain to ensure that we have all the necessary stocks, spare parts, reagents, et cetera, including what's in-country, what is not yet. In fact, we've done an analysis on what's on stock on the site, what's in-country and what's not yet in-country to ensure that we have sufficient supplies to enable us to operate until end of July. So what we've asked the team is work under the assumption that this crisis may impact our operations and our standard way to operate until the end of July. And obviously, if it goes beyond, then we'll adapt and adjust our plans. So we've been working directly with our suppliers in order to secure sufficient stock until the end of July. And all our key contractors on site, whether drilling explosives or transport, cyanide, have confirmed stockholding for essential spares for at least 3 to 4 months. The other aspect, which sometimes we forget is the end of the chain, which is basically the gold shipments. As commercial flights have been suspended, and so far, we've been shipping all our golds through commercial flights, we have to put in place an alternative plan and have worked with other gold miners, either in Côte d'Ivoire or in Burkina Faso and Brink's who's in charge of our security for gold shipments to get special authorizations to use private charter planes to ensure the safe shipments of our golds to refineries.

So Sébastien, moving on to the government response in West Africa. What are you able to tell us about that?

Well, I think that what's so far -- when you look from seeing from Western countries, you would -- and that's the fear that we all have is if this type of virus spreads into Africa generally and West Africa, the biggest issue is the ability for the health system to contain and to respond to such virus spreading in the country. So what has been very positive is the fact that the governments of Côte d'Ivoire and Burkina Faso where we have our main operations, are managing so far this crisis pretty well. I think they have learned from both their experience with Ebola. So they know the importance of being quick to contain the spread and have closed very early on the borders to all the essential supplies. They've done this very fast, much faster than some Western countries, if I take the example of France, the U.K. and others. So I hope that this will be better to contain the disease. As an example, they've been already shutting the border last weekend, they have also shut down the schools. In Côte d'Ivoire, last Tuesday, a state of emergency has been declared to limit the movement of people, although key industries like gold minings are still allowed. We've obviously been working very closely with the Ministry of Mines in both countries. We are very keen to ensure gold mining operations continue as long as the right measures are in place. So from that perspective, it is obviously important to the economies of these countries that we continue our operations. But we will do it, of course, at any cost prevailing that the safety of our people is well protected as well the safety of villages and communities where we operate. We don't want to put any of those at risk. But so far, I must say that I've been impressed by the quality of the response that has been put in place by both governments in Côte d'Ivoire and Burkina Faso to try as early as possible to contain the spread of the virus.

So it sounds as if you have got very good plans that are in place and looking after your employees, which is obviously critical. One question that investors may be looking for is how financially robust is Endeavour if you get to that level 3 stage and can't ship the gold that you produce?

Sure. Well, I think that, currently, Endeavour benefits from a pretty strong balance sheet. We have total liquidity available at the end of 2019 of over $300 million, which means that if we're not able to ship the gold but continue to produce, I would say, that we have a monthly burn cash of about $70 million, continuing to produce without selling any gold, which means that we can do that for the next 4 to 5 months without any issues. And obviously, if we were to put the operations into care and maintenance, our burn monthly cash would be probably in the range of $25 million to $30 million in order to continue to pay salaries for all our staff and in that case would be over than -- over 10 months in this environment without any issues. So I would say that we have currently a strong financial situation and a strong balance sheet to go through this crisis.

Sébastien, thank you for your time today. We are in an unprecedented times, and thank you for being so open with us today.

Thank you very much, [ Scott ], for your time.