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Is Endeavour Mining Randgold 2.0?

Mark Bristow says the newly London-listed miner "supersedes the Randgold brand," but investors should be warier
June 16, 2021

Endeavour Mining (EDV) is the latest company to position itself as a successor to Randgold Resources, which merged with Barrick Gold (Can:ABX) just before the gold bull market began. 

IC TIP: Hold at 1,660p

This title is not an easy one to take. 

Randgold handed investors hundreds of millions of dollars in dividends over its life, increasing payouts even with gold languishing below $1,300 an ounce (£921) during the sector’s downturn. 

Resolute Mining (RSG) tried to offer another West Africa-focused gold option but has struggled with the mining part of the offering and has not offered a dividend in the past two years, although analysts forecast a payout this year. 

Endeavour looks closer to the Randgold model given its size, geographic focus and plans for shareholder returns. Its dividend yield is 3 per cent currently, which is behind London’s other big gold producers Polymetal (POLY) and Polyus (PLZL) on 6 per cent and 4 per cent, respectively. 

Barring a gold price collapse, Endeavour plans to ramp up its distributions, however, and has set an absolute dividend target of $500m over the next three years. 

Bristow, who now runs the world’s second-largest gold miner Barrick, even backed this apparent successor at Endeavour’s capital markets day in the first week of June. “And now we have a real West African-focused gold mining company, which really supersedes the Randgold brand,” he said. 

The making of Endeavour

Just 18 months ago, the Canadian-listed company would not have come close to being compared with Randgold. It was weighed down by debt and was looking for new assets, even after building the Ity and Houndé mines successfully. 

It launched an all-share takeover bid for Centamin (CEY), which quickly failed despite the Egypt-focused company being in a vulnerable position after struggling with production. But just a few months later the miner got its new mines. It combined with fellow Canadian company Semafo, which also had assets in West Africa. 

This was an opportunistic deal. Semafo was on its knees after a terrorist group killed 39 of its workers in Burkina Faso in November 2019, following another deadly attack in 2018. 

Endeavour handed Semafo investors 0.1422 of its own shares for each share they owned, equivalent to C$1bn (£580m), gaining around 250,000 ounces (oz) a year of gold production. 

At the capital markets day, De Montessus said Endeavour felt comfortable operating in Burkina Faso again after a sizeable investment in security. This includes the construction of an airstrip at Boungou to keep workers off the dangerous roads. 

Following the Semafo purchase, Endeavour surprised investors with another big deal, buying Teranga Gold in another all-share deal, making the new company two-thirds Endeavour and one-third Teranga, also bringing in Barrick as 4 per cent shareholder. 

Following this run of deals, which has taken the company’s production to an estimated 1.4-1.5moz in 2021, the company has said it would sit still and focus on the assets it has. 

By being aggressive, Endeavour has come through this bull market with triple the production and a whole new suite of exploration opportunities.

The risks are higher than before – needing to fly to a mine is not a good sign – but the rewards could be sizeable as well. Given the low volumes in London so far, a buy or sell rating is largely unnecessary, but we would stay on the sidelines while the acquisitions are bedded in. Randgold 2.0? Not just yet. Hold.