Greetings, and welcome to the Endeavour Mining Third Quarter 2020 Results Webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded today. It is now my pleasure to hand over to the management. Please go ahead.
Thank you, operator, and hello, everyone. It's a pleasure to be here on our Q3 presentation results webcast. I'm sure that this will be a very exciting presentation as we have a lot to discuss today. You would have seen that we also published our new life of mines for Ity and Houndé. On the call, I am joined by Sébastien, who, as some of you might have seen via our very insightful social media feed, is currently in Côte d'Ivoire. Also on the call are Mark, Henri, and Patrick. Today's call will be followed by the usual format. Sébastien will start with an overview, followed by Henri to discuss the financials. Mark will then take us through the performance of each mine, including the updated mine plans at Ity and Houndé, and then Patrick will move towards providing an exploration update.
We will try to be as quick as possible to leave questions at the very end. Before we start, please note our usual disclaimer. Now I'll hand it over to Sébastien to take us through the first section on page six.
Thank you, Martino. Before we start, I'm sure you've all seen the announcement on Tuesday, which confirmed that we are in discussions with Teranga regarding a potential merger of equal style combination. These discussions are ongoing and may or may not result in an agreement in respect of a potential transaction. Any transaction would only be pursued by management and the board of Endeavour if they believe that it represented a compelling value creation opportunity for our shareholders. I want you all to, however, rest assured, we remain committed to our promises of generating strong cash flow, deleveraging, and paying dividends. I do not intend to comment any further at this stage, either in this presentation or during Q&A, which I hope you'll understand. It's okay, as you'll see that there is lots of other exciting stuff to talk about.
For those who haven't yet had time to digest all the materials published this morning, this slide is a very good summary. In short, we are on track to meet guidance for the year. We generated a record cash flow per share, and I'm mentioning per share because it was a record in absolute as well. Given the completion of the SEMAFO transaction, it is more fair and accurate to look at the per share. We also significantly reduced our net debt with a 71% reduction over the last twelve months. In Q3, we reduced it by nearly $300 million and expect to be net cash by year-end if gold remains around 1,900.
We also published new mine plan for our two flagship mines, Houndé and Ity, which demonstrate strong, real ability to generate cash flow over a long period and gives visibility to our cash flow generation. Last but not least, given that we have now a strong balance sheet and that we expect to generate significant cash flow, as seen with our new life of mine plan on our two flagships, our board has declared our first dividend at an attractive yield. It's exciting for me and the team to break this milestone given the work done over the last four years in building the right portfolio and put us in this position today. We will go over all these items in depth and in the upcoming slides. Turning now to slide seven, I'd like to update on our COVID-19 response.
We continue to operate at level one of our business continuity plan, which is near-normal operations with enhanced preventive measures in place, such as temperature checks, increased hygiene standards, social distancing, and regular testing of our workforce. Thankfully, West Africa has avoided the brunt of the impact of COVID-19 so far. While we have seen some impact from the pandemic on our business earlier on in the year, it was mainly around people movement and borders closing. Thanks to the precautionary decisions made and the significant efforts of our entire team, we've been able to maintain our guidance and remain on track to achieve our targets for the year. We continue to remain vigilant with the appropriate measures in place. Moving to slide eight, we can see how we're tracking against our guidance for the year.
We continue to focus on our lost time injury frequency rate as a key measure of employee safety, and we are pleased that this rate continues to track well below our peers. As anticipated, we had a strong Q3, and we are well on track to achieve our guidance in terms of both production and all-in sustaining cost. This is driven by an expected strong Q4 as we benefit from higher grades at Houndé and the restart of the Boungou mine. We will also see lower weighting from the relatively higher H1 2020 cost structure of SEMAFO once we look at the pro forma full year. This is in spite of a $45 per ounce increase in royalties, which is driven by the higher gold price. Moving on to slide nine, we will look at these metrics in a little more detail, starting with safety first.
This is of the utmost importance to us and our first priority. As I mentioned, we continue to be well below the industry average. Three lost time injuries over the past 12 months is a reminder we can never become complacent. I would like to take this opportunity to congratulate Houndé, which achieved 20 million lost time free man hours, and Agbaou, who reached 10 million lost time free man hours. This is a great collective effort by the team on site. On slide 10, you can see the trend in production and all-in sustaining costs on a consolidated basis for the past five quarters. This is the first quarter where we are reporting the results of our consolidated portfolio, following the swift integration of the SEMAFO assets in the summer.
In terms of production, we have had a strong quarter, adding 95,000 ounces since Q2, which represents a 64% increase quarter on quarter. This increase is due to the addition of Mana and Boungou, and a stronger performance in our existing portfolio. Looking ahead, we expect Q4 to be a record quarter as we benefit from higher grades from the Kari Pump deposit at Houndé, as well as the restart of mining operations at Boungou. Moving to slide 11, you can see the trend of our all-in margin over the past five quarters. Our margin has increased by 119% since Q2 this year to $245 million, demonstrating a strong performance following the acquisition.
We've also been able to take advantage of the higher gold price environment following the expiry of our gold collar program at the end of June, which saw nearly half of our production capped at the time at $1,500 per ounce. Turning to slide 12 and our operating cash flow before working capital. As you can see, this was a record quarter for us for cash flow, both in nominal terms with an increase of $138 million during Q3 when compared with Q2, as well as on a per share basis due in part to the SEMAFO acquisition, which was accretive to operating cash flow per share by more than 30%. Increased production across the group and a higher gold price were also significant contributors.
Turning to slide 13, you can see the trend of our leverage profile, where we have steadily driven down net debt since completing the investment phase at Ity and Houndé. As you can see from the graph here, we are in the back end of our debt reduction phase, having brought the net debt down by $300 million in this third quarter alone. This is a great achievement for the business and for our shareholders, as we are now quickly approaching net cash position. The best one, slide 14. As mentioned earlier, we are pleased to announce that based on our expected robust free cash flow generation, our board of directors has declared a first dividend of $60 million for the 2020 fiscal year, payable in early 2021. The initial dividend equates to approximately CAD 40.48 per share and represent a 1.6% yield based on yesterday's closing price.
As you can see on this chart, the yield of 1.6% already ranks competitively against our peers. The first dividend sets the path to a sustainable dividend policy based on our capital allocation framework and a strategy of maximizing long-term shareholder value. Following the payment of this first dividend, we expect to declare future dividends on a semi-annual basis, with the goal of maintaining a similar annualized dividend yield until we have reached a target net cash position of $250 million. I believe it is important to build this strong balance sheet buffer to be able to continue to pay a dividend during cycles. Once this target cash position is reached, we would be well positioned to reassess our capital allocation priorities, which may include augmenting our shareholder return program through either increased dividends and/or share buyback program.
Moving to slide 15, this shows you why we are confident to be able to pay a sustainable dividend going forward. Thanks to the updated mine plans and outlooks for both Ity and Houndé, we have visibility on long-term cash flow generation. As you will have seen this morning, we've just announced updated mine plans for Ity and Houndé to our flagship assets, driven by 2 million ounces of reserve additions, principally from recent discoveries at Le Plaque at Ity and Kari Pump and Kari West at Houndé, as well as expanded mill throughput. These additional reserves have allowed us to optimize the mine plans to focus on both Ity and Houndé, contributing 250,000 ounces each per year sustainably, with each mine confirmed with more than 10 years of mine life remaining.
We believe that the opportunity remains to continue to extend production at each operation through continued exploration success and fill the gap to maintain this 250,000 mark on an annual production for each operation. The combined annual production of both mines is therefore expected to average approximately half a million ounces for 2021-2025 and 465,000 ounces for 2021 through 2030. The chart here shows the details of the current and previous mine plans. In one you can see the original plans, while the blue bars represent the added production from the mine plans announced today. In aggregate, these plans add an average of 106,000 ounces or 25.7% per year through 2025, and 170,000 ounces or 58% per year from 2021 through 2030. Of course, these are just two mines out of our portfolio of six.
On slide 16, we can spend a moment looking at the five-year outlook for the Ity and Houndé mines in more detail. Both mines are expected to produce, as I said, 250,000 ounce a year each, and these figures don't include further upside potential from near mine exploration. The average all-in sustaining cost for those two assets is $823 an ounce, which places them at the bottom of the industry cost curve. With total M&I resources of 8.6 million ounces, we are very optimistic we'll be able to continue adding to reserves as a result of our exploration campaigns, and as demonstrated over the last few years. We've already identified a number of targets which we are busy assessing.
Looking at the column on the far right, we are confident we can continue extending the mine life to beyond 10 years in each case, as a result of further near mine exploration programs. When looking at mine performance and assessing the impact of our operation, we look beyond just production and cost metrics and consider our environmental footprint, including CO2 emissions. We believe that predicting our potential impact is an important step in finding ways to further minimize this impact. At these two operations, we have calculated that the intensity of our greenhouse gas emissions will be well below the industry average of 0.6 tons of CO2 equivalent, which is encouraging. As miners continue to tackle climate change, we believe this will become an increasingly important metric and a differentiating factor. Turning to slide 17.
As I mentioned at the start of the call, significant progress continues to be made at Fetekro, our greenfield project in Côte d'Ivoire. During the quarter, we announced 108% increase in indicated resources to 2.5 million ounces at an average grade of 2.4 grams per ton of gold. We also released the result of an initial PEA, which was based on the original 1.2 million ounce indicated resource and a 1.5 million ton per annum plant. As you can see on the right-hand side, the economics are already quite compelling. Based on the robust project economics and the fact that we have determined that we don't need to do any further drilling for reserve conversion, we've decided to fast-track Fetekro to PFS stage, which we are targeting for completion now in Q1 2021. This will include a doubling of the processing plant size to 3 million tons per annum.
With additional nearby targets still to be drilled, we believe Fetekro has the potential to become a key asset in our portfolio, which is very exciting indeed. Finally, before I hand over to Henri, let's take a look at the exploration side of the business on slide 18. You can see on the right-hand side a breakdown of our exploration expenditure for the year to date. The largest spends were at Ity and Houndé, as we continue to drill attractive exploration targets at each mine. We also continued to invest in Fetekro, as well as in some other promising greenfield targets. We move into 2021, we expect to ramp up exploration efforts on both Boungou and Mana. I'll keep this slide brief, as Patrick will comment later.
Turning to slide 19, you can see here that we remain well on track to meet our five-year exploration target set back in 2016 to discover 10 million to 15 million ounces of additional resources by 2021. Since then, we've added 8.4 million ounces. This was done for less than $15 per ounce discovered, which is of course very competitive. We are finalizing exploration plans for Mana and Boungou and see these as strong opportunities for additional success. Boungou, in particular, has seen limited drilling since it was built. We have identified several promising near mine targets. We look forward to updating you on this during the course of next year. Slide 20 brings us to the end of the highlights section. To summarize, I believe we have created an attractive portfolio with diversified exposure and optionality across the asset life cycle.
Following the acquisition of SEMAFO earlier this year, we now have six producing mines, which are generating good cash flow and allowing us to pay dividends. In addition, we have near-term growth potential from our four projects and long-term upside from our extensive greenfield exploration portfolio. I will now hand over to Henri to take us through the financial results in greater detail.
Thank you, Sébastien, and hello to everyone. I will start on slide 22 with a snapshot. The key takeaway here is that we are in a much stronger position year-on-year, mainly due to higher production across the group, a full year of Ity, and obviously the integration of the SEMAFO asset during the quarter, and gold price. This has contributed to strong increases, as you can see here. If we turn to slide 23, Martino, we can see the breakdown of the all-in margin, which as a reminder, includes the non-sustaining capital. If we look at the bottom line of the slide, you can see that on a year-to-date basis, we are up more than double compared to the same period in 2019, while on a quarterly basis, we nearly tripled all-in margin.
If we move to the next slide, net free cash flow, you can see that the continuous progress of our net free cash flow from this year. Our year-to-date net free cash flow before repayment of proceeds from long-term debt improved by nearly $363 million. If we highlight some notable items here, we have taxes paid, which has increased mainly due to increased corporate income tax payment at Agbaou. As you can see, in point six, Q3 also includes acquisition and restructuring costs. If we move to point nine of this slide, you can see that we have repaid a portion of the RCF, which we drew down in Q2 as a precaution during the COVID-19 crisis. Moving to slide 25, net debt and liquidity analysis. We will take a closer look at our net debt and liquidity.
We have prepared an analysis of our cash position, starting with our cash position at the end of Q4 2019, and ending with how we currently stand at the end of Q3 2020. As you can see, with significant operating cash flow and with investing in financing cash flow, we ended up the quarter with $523 million in cash. This means that we ended Q3 at a net debt of $175 million, which, as previously noted, is down significantly from last year. This, combined with a strong EBITDA performance, has resulted in a reduction in the net debt to adjusted EBITDA ratio to just 0.29x . Next slide, it provides a breakdown of our adjusted net earnings. For ease, we have noted the adjusting line items with the letter A on the right-hand table.
If we look at the table, we'll see that the largest item relates to the losses on financial instruments. This is mainly due to the derivative portion of the convertible senior bond, which has increased due to the significant increase in our share price in 2020. Earnings were also impacted by higher depreciation results from the gross up of the SEMAFO asset. Nonetheless, our adjusted net earnings increased on a per share basis compared to the same period last year, as you can see at the bottom of the table. In particular, our adjusted net earnings per share has increased significantly to 1.24 at quarter end, nearly a factor of four. Slide 27, Martino, I'd like to set up the financial review by looking at our adjusted earnings per share and how it's trended over time.
As you can see from the graph, it has continued to grow steadily over the year, and it's now sitting at 44% for the quarter, up 47% from the same period last year. Sébastien, back to you.
Thank you, Henri. I realize that this is your last webcast as Joanna has recently arrived and will be taking over as CFO beginning of next year. I thought I'd leave you with a nice stat. You now hold the record within Endeavour as CFO that has generated the most cash flow. Good timing. While you were interim CFO, we decreased our net debt by $298 million from $473 million to $175 million. Given the production is higher weighted to Q4, and due to the continued strong gold price environment, Joanna, I'm sure will quickly try to surpass you. On that note, Mark, over to you for the operational review.
Thank you, Sébastien, and hello to everyone. I trust that you're keeping safe and well wherever you're located. Starting on slide 29, our production bridge illustrates the performance year to date for both the pre-acquisition assets as well as the pro forma business. Ity CIL, Houndé, and Karma all showed increases, which more than offset the expected decline at Agbaou, and resulted in a pre-acquisition production level of 475,000 ounces year to date. A great achievement given the challenges presented by COVID-19 and a modest increase from the same period in 2019, which is typically a more challenging quarter given the rainy season. Once we add in the year-to-date impact of Mana and Boungou, we're now looking at pro forma production of 722,000 ounces. As you know, we have recently restarted mining operations at Boungou, so the production shown here is mainly from processing stockpiles.
Moving to slide 30, I will start the operational review with Houndé. As you can see on the chart, production increased in Q3 due to higher process grade, which more than offset slightly lower throughput. All-in sustaining costs decreased quarter-on-quarter, mainly due to a decrease in sustaining capital, lower processing unit costs, and slightly higher sales volume, which more than offset higher royalty and higher mining and G&A unit costs. On the bottom right-hand side, you can see the detailed KPI. Total tonnes mined declined by 14% due to the normal rainy season impact, while total tonnes of ore mined increased by 15% due to the commencement of mining at Kari South, with an initial low strip ratio. Ores sourced primarily from Vindaloo Main and Kari Center and Kari South, complemented by Goura and Vindaloo North.
Tonnes mined was flat, as outside ore from Kari South offset an increased amount of fresh ore from Vindaloo, while process grade increased as we accessed higher-grade ore from Vindaloo Main and Central, complemented by Kari South. Looking ahead to Q4, we are expecting a further increase in production versus Q3 as process grades are expected to improve substantially while processed tonnes and recoveries are expected to be relatively unchanged. Turning to the updated life of mine on Slide 31, the key drivers behind the update have been near mine exploration success and mill throughput, which has consistently outperformed the optimization phase. We have added approximately 2.5 million ounces of measured and indicated resources at a discovery cost of less than $15 per ounce, which has allowed us to add 1.4 million ounces to reserves.
It is worth noting that reserves at Kari Center, Gap, and Pump Northeast have not yet been included, and we're expecting to have these completed by year-end. On this slide, you can see how the detailed production for Houndé has been enhanced compared to the original study. Similar to the earlier production chart, the white bars show the original mine plan, while the blue bars show the incremental production. There are a few more points that I'd like to take you through on this chart. The first is that we've added more than 211,000 ounces of gold production from 2021 to 2025, which represents a 21% increase over the previous plan. The second is that the Houndé mine life has been extended by at least three years with continued opportunity for expansion from resource conversion and new mine exploration, which Patrick will expand on shortly.
Moving to Slide 32, let's take a closer look at the long production statistics for Houndé. The Houndé operation will be able to sustain 250,000 ounces per annum over the next five years, and over 200,000 ounces from 2025 for the following five years, without taking into account our expectations for conversion from additional exploration upside. All-in sustaining costs are very competitive at under $875 per ounce through to 2025, and currently at just above $900 per ounce over the life of mine. Our goal is, of course, to continuously adjust our life-of-mine plans with each exploration update to augment the production profile for the following five-year period. On Slide 33, we've included a map which illustrates the extended term at Houndé to incorporate the Kari Area.
You can see the two new high-grade deposits, Kari Pump and Kari West, that are now part of the updated mine plan, as well as additional resources that we will incorporate in the near future. Turning to Slide 34, you can see the mining schedule by pit at Houndé. The Vindaloo pits will be sustained as the same source of feed over the life of the operation, while the addition of the higher-grade Kari Pump and Kari West deposits has allowed us to displace lower-grade sources to the end of the mine life. The Kari Center, Kari Gap, and Kari Pump Northeast deposits are lower grade than Kari Pump and Kari West, though will contribute positively to extend mine life when they are added to reserves at the end of the year.
The benefit that the new long plan brings is sufficient time horizon to consider further improvement initiatives focusing on mining productivity, plant throughput, recovery, and cost. It is worth noting, with the volume of ore at Kari Pump, we will be considering alternative options to CIL circuit. Another good potential project for Houndé is the use of solar to supplement the grid, which is more expensive in Burkina Faso. Work is already underway in this regard. I will now hand over to Patrick to take us through our exploration program at Houndé.
Thanks, Mark. Hello to everyone. Turning to Slide 35 now. When we take a higher-level look at the exploration work done at Houndé, if we include the cumulative production, Houndé is now host to a total reserve endowment of more than 3.4 million ounces, with 2.8 million ounces still in reserves. This is an increase of more than 64% compared to the 2016 optimization study, which essentially means we have more reserves today than we did when mining began. We are indeed confident that we have several additional opportunities to add even more. Our main focus has been the Kari Area at Houndé, which now accounts for 57% of the total Houndé M&I resource, with 2.5 million ounces of indicated resources discovered over the past three years.
The area hosts high-grade deposits with approximately 84% of indicated resource grading more than two grams per ton of gold, amounting to 2.1 million high-grade ounces at a very low discovery cost of less than $15 per ounce, per indicated ounces. Importantly, all of these deposits are within trucking distance of the plant. Earlier this year, we also announced an updated resource estimate in early Q3, incorporating some 554,000 additional indicated ounces for the entire Kari Area. This included the extension for the Kari West and Kari Center deposit, plus new maiden resource for the nearby Kari Gap, Kari South, and Kari Pump Northeast deposit. We will soon start a new drilling campaign of at least 20,000 meters in the Q4, which is focused on targeting extension in fill and exploratory work.
We will continue to focus on the Kari Area until we have finished converting all the resource into reserves, and we expect to announce maiden reserve for Kari Center, Kari Gap South, and Pump Northeast in our year-end reserve update during Q1 2021. We will then prioritizing the next targets that are within 15 kilometers of the mill for exploratory drilling in early 2021, and we look forward to seeing the result of that program, with excitement. Lots to achieve, but lots still to play for at Houndé. Back to you, Mark.
Thanks, Patrick. Turning now to Ity on Slide 36. You can see that production has decreased slightly since the last quarter, as higher throughput and gold recovery largely offset the lower processed grade. all-in sustaining costs decreased due to a lower strip ratio, an increase in gold sold, higher recovery rates, and lower unit processing costs, which were partially offset by higher unit mining and G&A costs and higher royalty expenses related to the gold price. Mining continued to prioritize pit cutbacks during the quarter at the higher-grade Ity and Bakatouo deposits. Taking a step back to look at mining activities over the past two years since the CIL plant began operations, mining in 2019 was primarily focused on ore extraction. During 2020, we accelerated the Ity pit cutback in quarter two and have been focused on this, plus a cutback at Bakatouo to expose additional ore.
This will enable us to source ore from several deposits to optimize plant feed based on metallurgical characteristics. We are confident these short-term compromises will position Ity for a stronger performance in quarter four and into 2021. Production in quarter four is expected to improve over quarter three due to higher processed grades. Plant feed during the quarter is expected to be sourced primarily from higher-grade sulfide ore at Daapleu, along with historical leach dumps and stockpiles. Throughput and recovery rates are expected to decline due to the expected metallurgical characteristics of the higher proportion of fresh Daapleu ore. Moving to slide 37 and looking at the updated Ity mine plan, similar to Houndé , we've been able to develop a mine plan that confirms this operation as one of the cornerstones of our business, producing at a rate of 250,000 ounces per year.
Reserves have increased steadily through ongoing exploration success, which has allowed us to progressively increase mill throughput through various small capital improvement projects. On this slide, the blue bars show the incremental production compared to the previous plan, which are in white. While there have been some modest variations on an annual basis, we have maintained the ability to bring forward additional high-grade discoveries to either increase production in the shorter-term window or to sustain the 250,000 ounce production for longer, subject to continued discoveries like Le Plaque, for example. It is worth noting that the published life of mine plan is based on current reserves and installed plant capacity and does not take into account further processing upgrades that are under planning and/or detailed engineering, which will bring a range of benefits, including increased throughput, increased recovery, and reduced reagent consumption.
On slide 38, you can see some additional key metrics, both for the five-year period starting in 2021 and what we anticipate the following five-year period will look like, as well as the total life of mine as it currently stands. Headline numbers are annual production of approximately 250,000 ounces through to 2025, and an average of 230,000 ounces over an 11-year mine life. All-in sustaining costs are very competitive at $780 per ounce for both the next five years as well as over the life of mine. Moving to slide 39. We've recently received the mining permit for the entire Floleu license area, highlighted in purple, which is held within a new subsidiary, the Société des Mines de Floleu and 90% owned by Endeavour.
This license covers the existing Le Plaque deposit, as well as several additional targets in close proximity, and will give us flexibility to bring additional discoveries into the mine plan in the future. The bridge that was constructed for access to the Daapleu pit enables access to both sides of the Cavaly River, the Floleu license as well. On the next slide, we have detailed the mining schedule across the mine deposits at Ity. Access to the Le Plaque deposit is underway. We expect to finish all land compensation and haul road construction in the next five to six months, so that we can start grade control drilling and infrastructure establishment ahead of the wet season in early 2021. This will enable us to commence mining in late 2021.
Patrick will talk about exploration plans shortly, though we will always advance higher-grade options ahead of the lower-grade pits such as Dia and Djibiti. It is great to have that range of options and flexibility at Ity. I'll now hand over to Patrick.
Thanks, Mark. Turning to slide 41, as you can see on the map, the Ity mine remains highly prospective with quite a significant number of exploration targets, which are all within trucking distance of the plant. As Mark already mentioned, so far since 2016, we have discovered more than 2.3 million ounces of indicated resource. I am confident, due to the quality of the exploration portfolio, that we will continue to find more. Since Markh 2018, our primary focus has been the Le Plaque area. You can see we have been very busy. During the year to date, the majority of exploration has continued to focus on the Le Plaque area, with $13 million spent year to date, comprising over 85,000 meters of drilling. During H1 2020, we also carried out more drilling on the northern part of the Floleu license area.
This reconnaissance drilling outlined that Le Plaque represents only around 30% of the large northern Floleu anomalies area. Drilling on this additional target is ongoing, with results pending on several holes. Our goal is to delineate new resource at some of these targets in 2021, and I look forward to updating you as we progress on that. We are also drilling near-mill targets, including Verse Ouest, the historic leach pad of Ity, and the Daapleu South West.
Now back to you, Mark.
Thanks, Patrick. On Slide 42, I'll take you through our Agbaou mine, where production remains flat from last quarter. An increased proportion of mill feed was comprised of higher-grade fresh ore, which compensated for the expected reduction in plant throughput. This ore was sourced from the deeper elevations of the north and south pits, which resulted in higher waste stripping and a corresponding decrease in ore mining. Looking to the last quarter of the year, we expect production to increase as we process higher grades and increase tonnage. Mining is expected to continue, principally in the north and south pits. Throughput is expected to increase following the end of the rainy season, while recoveries are expected to slightly decrease due to greater volumes of the harder fresh ore processed. Moving to Slide 43.
Production at Karma increased slightly from last quarter due to the recovery of some of the gold locked up in the heap during previous quarters. This offset the lower grade recovery rate and tonnage stacked, driven by the rainy season and higher strip ratios associated with the Kao North and GG1 pits. We expect production to increase slightly during quarter four, thanks to increased tonnage stacked during the dry season. Mining is expected to continue at Kao North and GG1 through the remainder of the year, with stack rates expected to be consistent with those in quarter three, as low-grade stockpiles supplement ore stacks. Turning to slide 44. This is our first look at how the Mana mine is performing as an Endeavour operation. I've been to site four times now over the past four months, and we'll be heading there again next week as part of our budget process.
This has enabled me to understand the operation quite well and meet many of the team. With the completion of the Siou open pit, all focus is on waste stripping at Wona and maintaining strong production performance in the underground. We have undertaken a review of exploration targets and will commence drilling for both open pit and underground extensions in quarter four. We've also employed an experienced general manager for Mana who has good open pit and underground experience. This quarter, production increased significantly. One of the biggest improvements was a substantial increase in total tonnes mined due to an increase in equipment availability. This allowed us to increase ore mining by 19%, in spite of a higher strip ratio. Ore extraction focused on Siou and Wona pits, while pre-stripping was conducted at Wona.
In the underground, ore mining increased 43% versus quarter two, which was impacted by a two-week shut related to implementation of preventative COVID-19 measures. Ore processing increased as a result of higher available feed for the mill. Looking ahead, following a stronger quarter three, we expect production to decline modestly in quarter four due to the completion of the Siou open pit, while increased ore from Wona will lead to lower throughput and recoveries. Operations will focus on non-sustaining underground development and pre-stripping of Wona, which is expected to increase both sustaining and non-sustaining capital expenditure. We will also initiate a 35,000-meter drilling program for quarter four, with 27,000 meters of RC and 8,000 meters of core drilling planned. The program is targeted at northeast continuations of oxide mineralization at Wona and Siou open pits.
A further 15,000 meters will be targeted at evaluating continuations of underground ore shoots at the northeast and southwest extension of Siou. Moving to Boungou on Slide 45. Similar to Mana, I have had four trips to Boungou with another planned for next week. Our general manager from Ity is now on-site, and good progress has been made with the mobilization of SFTP, who have purchased a large amount of the previous mining contracted fleet, in addition to the fleet that they are mobilizing to site. We have conducted an exploration review with Patrick's team, drilling will also recommence in quarter four. As announced last month, mining activity successfully restarted at Boungou, which will enable us to have a strong fourth quarter.
I'd like to thank the government of Burkina Faso for their partnership in improving regional security and also to say well done to everyone involved in getting this restart off the ground quickly and safely. It marks a real milestone for us and is a key factor to realizing the full benefits of the SEMAFO acquisition. Production in quarter three remained flat compared to the previous quarter, as increased plant throughput offset the lower-grade mill feed. We were able to extract some previously blasted ore, which helped to offset the decline in stockpile grade in the lead up to the recommencement of mining. That concludes my operational review. I'll now hand back to Sébastien.
Thanks, Mark. Before we hand over to Q&A, I'd like to reiterate the strategic importance of the Houndé and Ity mines to our overall ambitions of being a strong dividend-paying gold producer. This chart is a neat summary of how we have turned around this business in just four years, following a period of significant investment and hard work. You can see that our portfolio is now better balanced, with an attractive cost profile, and gives us significant visibility into the future. With the investment period now over and debt falling rapidly this quarter, supported by a strong gold price, we've been able to achieve our goal of becoming a sustainable dividend payer. I'm proud of the combined efforts of our exploration, mine development, and operations team, who have worked together to make these mines a resounding success. Looking ahead, we have several interesting near-term catalysts coming up.
With higher production expected at both Houndé and Boungou in Q4, we're expected to have a record quarter. We also expect to announce maiden reserves for Kari Center and Kari Gap in our year-end reserve statement. Turning to our growth portfolio, we plan to announce the accelerated PFS for our greenfield Fetekro project during Q1. With our first dividend announcement today, our next goal is to seek a secondary listing to broaden our appeal to investors and drive incremental investor demand through increased index inclusion. We've worked hard and invested heavily in recent years to build the platform that we have today. I really believe this work is now paying off, and we are looking good for the end of the year and into the future. Thank you.
Thank you, Sébastien, Henri, Mark, and Patrick. That's a stellar job as always. It's lots of details, but I'm sure that our audience appreciates it. This concludes the formal portion of our session. Operator, we will now take applause, comments, and of course, questions.
Thank you. Once again, as a reminder, if you do have a comment or a question on today's call, please press star one on your telephone and wait for your name to be taken by the operator. That's star one if you have a comment or a question on today's call. If you wish to cancel this request, please press the hash key. Our first question comes from the line of Raj Ray from BMO Capital Markets. Your line is open. Please ask your question.
Good afternoon, Sébastien and team. My first question is on your dividend, and congrats on instituting your first dividend. If I'm not wrong, you're maintaining 1.6% dividend yield, and it's not a percentage of your earnings or free cash flow. Is that correct?
Yeah, that's correct. The intent is until we reach $250 million of net cash on the balance sheet, we'll maintain the same level of yield. Once we've reached the $250 million net cash, which based on different gold expectations throughout 2021 can come as early as, say Q2, Q3, then we'll be able to increase the dividend yield by distributing further to our shareholders.
Okay. Thanks, Sébastien. My second question, if I'm not wrong, you did mention about the potential share repurchase that you could look at. Can you give us some color on what valuation benchmarks would you be looking at with respect to whether you would be buying back your shares or not?
Sure. Well, I think that the objective for us is to come up, and that will be probably as part of our year-end result with a strategy on capital allocation that includes the buyback instrument. By February, Markh, when we'll publish our year-end results, we'll be able to describe, again, given the strong balance sheet where we are, that as part of our capital allocation strategy, buyback may become an attractive tools of returning value to shareholders if and only if the share price continues to be significantly underperforming.
Okay. Thank you. Then, if I may, just a couple more questions. First up on your convertible bonds. If I'm not wrong, there's a 20 of 30 soft call provision that kicks in February 2021. This depends on where your share price is at that point and if it's above the trigger price. Do you have any thoughts on whether you'd be looking to call that or you let it ride to maturity?
Well, I think you're right, Raj. In Feb or March, we have the ability with this call option. Doesn't mean that we're going to exercise it. We always said that our intent was that once we reach a strong balance sheet, and we do believe that thanks in particular to our two key assets, we should, in this current gold price environment, continue to generate significant cash flow. Means that once we are able to reach this $250 million net cash and we are able to continue to pile up cash, down the road, we'll make the assessment on whether from a capital allocation standpoint it makes sense to call back this bond or not.
Okay. Thank you. One last question, maybe this is for Patrick. Just wanted to get a sense of the strip ratio for Le Plaque. If I remember correctly, Ity had a low strip of two, but the strip ratio has increased with the inclusion of Le Plaque. How is the profile for the strip ratio? Is it higher at the beginning or as you go deeper into the Le Plaque deposit, the strip ratio increases? Any thoughts there?
Hi.
Hi, Patrick.
Yeah. As far as I remember, yes, it's significantly higher than Ity because the mineralization are much more, I would say, vertical. For the exact number of the strip ratio, I don't remember. Maybe Mark could answer more in detail because I know this has been included in our latest mining plan. Mark?
Yeah. Patrick, if I were to step in here, it's over four to one, whereas Ity is less than two to one, It is more-
Okay
It is high grade. Raj, to your question on timing of the different deposits. In the press release, figure seven of the life of mine press release, you have a table there with the pit sequencing. Le Plaque shows that it's coming into production in late next year and runs throughout the life of mine until 2028. The idea is to blend the higher grade, with some of the lower grade deposits to maintain this 250,000-ounce flat profile.
Okay. Thank you very much. That's it from me.
Thanks, Raj.
Thank you.
Thank you. Our next question comes from the line of Lawson Winder from BofA Securities. Your line is open. Please ask your question.
Oh, hi, everybody. A really exciting dividend policy. Well played. I just wanted to ask another question on that policy to sort of reinforce my understanding of it. It is based on the yield and just hypothetically, if your share price were to double from here, your dividend payout then would double to $120 million?
Well I think that, if our share price doubles, I think it just will be reflecting the strong balance sheet and the further cash flow that we'll be generating. We should be able to continue to maintain this level of yield. That's one. Second, as mentioned, I think that we believe that returning value to shareholders, in particular the ones that have been supporting us over the last four or five years through the intensive CapEx phase of building Houndé and Ity. Once we've reached this $250 million milestone, then instead of keeping a discretionary view on this policy, we'll get more into a percentage of cash flow generated by the company once we've reached this $250 million. Where we are excited is we've reached as we expected in 2020, this nearly net debt zero. Now it's all about maximizing cash flow.
We said that we wouldn't start any new projects in terms of construction before 2022, which means that 2021 is solely focused on maximizing cash flow and getting as fast as possible to this $250 million net cash position so that we can continue to increase the return to shareholders. In parallel, as we have the balance sheet and the cash flow, we'll be able also to revisit what is the best capital allocation for our shareholders, including potential buybacks depending on share price performance.
Yeah, thanks so much for that, Sébastien. Just on another thing you touched on there on the no CapEx in 2021, you do plan to have a pre-feasibility study out on Fetekro, and I'm just curious, assuming that pre-feasibility study is positive, are there any permitting type restrictions that would prevent you from proceeding with at least some CapEx spending at that asset in 2021?
As soon as we have a sensible feasibility study, we'll have to move to permitting, which is a process which we're extremely familiar with in Côte d'Ivoire, as you saw with the recent Le Plaque permit. Our objective would be to be in a position to have a completed feasibility study and mining permit ready by the end of the year, so that we can decide in terms of capital allocation, whether between Kalana and Fetekro is the first one to go into construction starting in 2022.
Great. That's a fantastic color. On the listing, last quarter you said you're looking at a secondary listing in either London or New York. Maybe one, could you just update us on that process? Two, from this point forward, could you see Endeavour possibly having two additional listings, a secondary and a third? Some of your peers have done that.
Sure. I think that our view is that given our increased size, we believe it makes sense to have a second listing. We're currently evaluating the right venue. Most of the work, to be frank, has been done. I would say that we nearly have the answer. The issue we're facing is in terms of timing. It takes time to prepare, whether for New York or London, this listing. I think there is no point in announcing something that's going to occur in 6 months' time, announcing already the venue. I would just say that we are doing the work so that by end of Q2, we are in a position to make the listing happening, which probably means that we'll be announcing it as part of our year-end results. Yes, we're progressing very well on all that, full steam.
We have a dedicated project team working on that, and we believe that that's an important catalyst also for our share price in 2021.
Okay, then just any thought to two listings?
New York or London, I would say that still evaluating the merits between the two.
Okay, fair enough. All right, just one final question from me. I'd like to ask sort of a conceptual question. If I look historically at your sort of deposit strategy, you guys have tended to go after deposits, of course, in West Africa that tend to be higher grade, large proportions of oxide material. I'm just curious how you would think about adding a potential refractory deposit to the portfolio, and how you might manage the risk associated with that and the technical challenge that would come along with that. Thanks.
Sure. Well, I think that given the quality of the portfolio that we have, and I think Patrick and the team have been really excited about focusing on identifying short-term, nearby high-grade oxide deposits. So far, we continue to deliver on that front. We know that at some point we might have, in particular on the nearby, to focus on a bit lower grade. We all know that in West Africa there are a lot also of refractory ore. I don't think it's on the agenda today, but I'm sure that technically there's been a lot of progress done on treating refractory ore, and a lot of our peers are progressing on that. I think that down the road, I'm sure that that's something that the group will be evaluating and might enter into. We don't need to for today, which is good.
This is why we're so happy with our life of mine plans that we published on Houndé and Ity, given the strong visibility that I think we're giving to investors in the market on those life of mine plans with easy ore to treat, I would say.
Great. As always, thanks so much, Sébastien, and thank you everybody else for your comments today.
No, thanks. Thank you, Lawson.
Thank you. Our next question comes from the line of Fahad Tariq from Credit Suisse. Your line is open. Please ask your question.
Hi. Good morning. Thanks for taking my question. On Ity, on the 10-year outlook, I noticed in the outer years or near the end of that 10-year period, there's a gap, and at Houndé, from your comments, it sounds like Kari Center and Kari Gap would fill that gap. For Ity, where do you see the exploration upside that would fill that gap in the later years to get you to the 250,000 ounces per year? Thanks.
Sure. Well, I think Patrick could confirm, but Le Plaque, for example, it's still open and we haven't finished on the Le Plaque wider area. The team continues to be extremely excited by the multiple targets that we continue to identify on Ity. It's clear that we're not short of ideas on target where to find more answers. It's just a question of putting priorities. As you tend to go more to the back end of the life of mine plan, 9-1 0 years down the road, obviously, it shifts in terms of priority and timing versus other more short-term priorities on other mine sites and so on. Patrick, I don't know if you want to give a bit more color on all those different targets and potential.
Yes, sure. Yes. As Sébastien said, there is still some upside in the Le Plaque deposit itself. Something to remember is, in Ity, we have been very fast and concentrating, as somebody said before, on a quite shallow, open, pittable oxide type of mineralization. That being said, we know that we have some deeper potential, whether for example, in Le Plaque, in the Daapleu in Bakatouo too, where initial exploration stopped at quite a shallow depth. We know we have upside there. On top of that, as was mentioned before during the presentation, there is potential in Verse Ouest, in several areas actually around Ity, where limited exploration was done, maybe not for 1 million ounce deposit, but we do believe that there is very good chance to find additional 200,000-300,000 ounces deposit around Ity, at least within the 5-KM radius around Ity.
For us, it's just a matter of time just to fill that gap.
Okay. That's clear. Thank you. My only other question was on royalties. I know they're higher, is that a function of just the gold price, or are you seeing any pressure from certain governments to try to revise the royalty regime because of COVID budget deficits or just higher gold prices? I'm just trying to get a sense of, so far it sounds like it's basically the gold price.
Yes
Do you see a-
It is solely Yeah, I confirm it is solely gold price. As you know, in most of the countries where we operate, the mining code is basically a scaling royalty based on gold price. It's simply mechanically the effect of gold price increase.
Just have you seen any pressure from any of the governments to try to revise any of the mining agreements? Thanks.
No. I think that what I've been advocating regarding West Africa countries, in particular French West Africa, where we operate, is that because those mining codes do take into account higher gold price with this mechanism, they are already incentivized, and therefore they have no reason into revisiting all this.
Okay, great. That's it for me. Thank you.
Thank you.
We have no further questions in the queue. Please continue.
Well, thank you everyone for your questions and attendance. As there is no more questions, we'll now finish the call. I, of course, remain available to address any questions offline. For those of you that have also seen on our website, we published the virtual tours for Ity and Houndé, along with those mine plans, so we invite you to visit those. Thank you everyone, and have a good day.
Thank you. Bye.
That does conclude today's conference. Thank you to everyone who has participated in today's call. You may now all disconnect. Speakers, please stand by.