Good day, and thank you for standing by. Welcome to the Endeavour Mining Q3 2022 Results Conference Call. At this time, all participants are in listen-only mode. After management's presentation, there will be a question -and- answer session. We note that due to time constraints, we'll be prioritizing questions from covering analysts. Today's conference call is being recorded, and a transcript of the call will be available on Endeavour's website tomorrow. I would now like to turn the call over to the management. Please go ahead.
Hello, everyone. I am Martino, Vice President of Strategy and Industrial Relations, and I'd like to welcome you to our Q3 2022 Results webcast. On the call, I am joined by Sébastien, Mark, Joanna, and Patrick. Today's call will follow our usual format. We will first go through the operating and financial highlights, and then walk you through the performance mine by mine. We'll try to be as quick as possible to leave questions at the end. Before we start, please note our usual disclaimer. I will now hand it over to Sébastien to walk you through the highlights. Sébastien?
Thank you, Martino, and hello, everyone. We are pleased to report that we have continued our strong momentum from the first half of the year into Q3, putting us in a solid position to achieve another strong year for the group as we are delivering against our key objectives. We've continued to see six recurring themes throughout our business, as displayed on slide 6, which shows where we are focusing our efforts. In summary, our strong operating performance this year has resulted in robust cash flow generation and the ability to continue to execute our capital allocation strategy, which is focused on maximize returns, strengthening our financial position, and investing in our growth. To that end, we continued our attractive shareholder returns program during the quarter as we paid out $100 million in dividend and completed $37 million of share buybacks.
Regarding the strengthening of our financial position, we are looking forward to reimbursing our convertible bond due in Q1 2023 in cash, which will both reduce our growth debt while limiting shareholder dilution. Given our strong operational performance and financial position, we are very pleased to be pushing ahead with our growth plans as both the expansion of Sabodala-Massawa and the construction of Lafigué will add lower cost product, provide further geographic diversification. On the exploration front, we are extremely excited with the potential within our portfolio and have had huge success this year, which we look forward to publishing in the coming weeks. As such, we are on track to achieve our previously disclosed group target of discovering 15 million-20 million ounces of indicated resources over the 2021 timeframe.
Lastly, on the ESG front, we are pleased to see that all of our hard work is being increasingly recognized by rating agencies as we were awarded top industry ranking scores with both Sustainalytics and MSCI. Turning to the next slide before moving further into the presentation, I'd like to touch upon safety. While our lost time injury frequency rate has continued to improve over recent quarters, we were saddened to report a fatal accident at our Ity mine on October twenty-seventh, when one of our contractors as a result of injuries sustained during blasting activity. This is a reminder that it doesn't matter how good your LTI rate is compared to peers. One LTI is already one too many.
It's something I say a lot internally, but for all the staff listening into this call, I will say it again, there is no job so important that it cannot be done safely. It is important that we remain cautious and focused on safety as we increase man-hours at our expansion and development projects. Turning now to slide 8, you see our quarterly production and cost. We are happy to report that we have managed the wet season well with a Q3 performance, which was nearly the same as that of Q2. It's very important for us to demonstrate consistent performance quarter after quarter, as it is the hallmark of a resilient, predictable business. The rainy season comes every year, and given the maturity of the business and our portfolio diversification, we are now much better positioned to achieve consistency.
Moving to slide 9, you see that this strong achievement places us on track to achieve the top end of our full year production guidance, and most importantly, within our all-in sustaining cost guidance range as well. This is very important to us, as it will be the 10th consecutive year of meeting or beating our guidance, a stat that we are collectively very proud of. I like this slide also as it shows that at a group level, we have fully de-risked our guidance, and now it's just a question of if we will be at the top end or maybe even beat it. What this slide also shows is the benefit of having a diversified portfolio of assets, where the strong outperformance on some mines is able to offset lower performance at others. I will let Mark detail the asset by asset performance later in the presentation.
Moving to the next slide, we've plotted the all-in sustaining cost guidance and year-to-date realized cost for our sector using the relevant companies that have published so far. As you can see, we are currently the lowest cost producer. We firmly believe that this low cost positioning is now a strong competitive advantage, and we are pleased that the hard work to reposition our portfolio over recent years is now paying off. We have, of course, not been totally immune to industry-wide inflationary pressures, but we've benefited from continuous operational improvements from the pricing mechanisms resulting from our long-term supply contracts, from favorable exchange rates variations, and production and cost optimization initiatives throughout the portfolio. On slide 11, you see how our production has increased in recent years, while our all-in sustaining costs have remained near the $900 per oz level over the last three years.
We're looking forward to both the Sabodala-Massawa expansion and the Lafigué project coming on stream in 2024, which will continue to add low cost production to the portfolio. On slide 12, we note how our revenue protection program is providing the much needed benefit of increasing our cash flow visibility through our growth phase, which allows us to continue to offer strong shareholder returns despite the gold price coming up a bit. During the quarter, we made a gain of approximately $20 million, which equates to around $60 per oz sold. On the next slide 13, you see that on a year-to-date basis, our continuing operations have generated slightly higher operating cash flow before working cap this year compared to last year. As mentioned earlier, this strong cash flow generation is one of our capital allocation priorities.
I will now hand it over to Joanna to walk you through the detail before the quarterly cash flow and net cash variations. Joanna?
Thanks, Sébastien. Turning to slide 14, you see that the operating cash flow before working capital for Q3 would have been quite similar to that of Q2, had it not been for the expected withholding tax payments made during the quarter. As Sébastien mentioned earlier, we intend to redeem our convertible notes in cash in Q1 next year. As such, during the quarter, we upstreamed cash from the operating entities to provide us with financial flexibility, which resulted in the withholding tax payment of $48 million in addition to minority dividend payments. Turning to slide 15, you see the operating cash flow bridge between Q2 and Q3. The largest impact has been the lower gold price, followed by the higher working capital outflow and higher taxes paid, which were offset by lower operating expenses.
Of note, the working capital outflow is due to an increase in receivables and prepaids and the timing of certain supplier and other payments. Operating expenses decreased due to favorable exchange rate movements related to a depreciating euro, as well as our continued focus on controlling our cost structures in this current volatile cost environment. Lastly, the income taxes paid increased, taxes paid on dividends declared by mine sites, which was offset by the historically higher taxes paid in the second quarter of the year as we finalized our tax filings for our operating entities. Moving to the net cash position on slide 16, we see the bridge from Q2 to Q3. In Q3, we generated $110 million from operations, net of reimbursing $50 million on the RCF.
We spent $30 million on growth capital, and as Sébastien mentioned at the start of the presentation, we paid $137 million in the form of dividends and buybacks. As mentioned on the previous slide, we also had $48 million payment of withholding taxes and a $57 million payment linked to minority dividends. Again, all with the aim of upstreaming cash from our operating entities to ensure that we have the ability to redeem our convertible notes in cash to limit dilution to our shareholders. Lastly, the change in our net cash also includes the $52 million impact of the remeasurement of our cash held in foreign currencies at the end of the quarter into the US dollar due to the strength of the dollar.
On slide 17, we have provided the year-to-date evolution of our net cash position in similar slide. What is nice to see is that the strong cash flow generation we have achieved during the first 9 months of the year by our operations, which represented with the first gray bar on the chart, and which supports our growth and shareholder return strategy. Turning to slide 18, you can see our plans for our upcoming debt reduction and the significant liquidity sources at our disposal. With $833 million in cash at the end of the quarter, and a further $500 million available from our revolving credit facility, we have access to more than $1.3 billion if needed and no further significant debt for repayments projected until 2026. Turning to slide 19.
As we continue improving our growth debt position, it is important to note that we are already one of the lowest levered major gold producers, given our net cash position. While we believe that our business could and should at times support net debt to optimize our capital structure, our goal is to maintain a long-term net debt to EBITDA ratio well below 0.5 x and quickly deleverage ourselves when we are not in a build phase. Turning to slide 20, we summarize our net earnings for the quarter. Earnings from continuing operations amounted to $91 million, a decrease compared to the previous quarter due to slightly lower gold sales due to timing and a lower realized gold price, as well as slightly higher depletion expense, which is a non-cash charge.
On this slide, we have inserted specific comments for points 1 through 4, which explain the net earnings variance. Given our time constraints, I'd be happy to go through further details during the Q&A session. I will now hand it back to Sébastien.
Thank you, Joanna. On slide 21, you can see more detail on how we're tracking against our shareholder returns commitment. As you may recall, last year we outlined a three-year dividend policy to pay a progressive fixed minimum dividend, which increases each year with the aim of distributing a cumulative minimum of just over $500 million by the end of full year 2023. The reason we did this is so that we can provide a strong outlook on shareholder returns while pursuing our growth plans. We are tracking well ahead of our target, as we will see on the next slide. For 2021, we exceeded our minimum dividend of $125 million by paying $140 million.
This year, we continued along the same trend by increasing our full year dividend commitment from $150 million to $200 million, of which $100 million was paid during the quarter for the H1 dividend. At the same time, we are continuing to supplement our shareholder returns with share buybacks, returning $75 million year-to-date. As you can see on slide 22, on a cumulative basis, our shareholder returns program has paid out over half a billion dollars since the start of 2021 and is expected to return a minimum of $780 million by the end of 2023. To put it into context, we already paid out significantly more than the capital required to build one new mine.
As mentioned earlier, in addition to delivering solid shareholder returns, given our balance sheet strength and our ongoing strong cash flow generation, we are also well-positioned to fund our growth. Slide 23 highlights our attractive pipeline of growth projects. Our priorities are the construction of the Sabodala-Massawa expansion and the Lafigué development project, but we are also focused on continuing to optimize our existing portfolio to ensure we can maintain our low cost profile. In addition, our long-term growth continues to be underpinned by our successful exploration program, which is focused on both near mine opportunities and greenfield opportunities. Turning to slide 24, you see here that both the Sabodala-Massawa expansion and Lafigué project construction are underway. Construction at our Sabodala-Massawa expansion is progressing well, with approximately 50% of the initial capital now committed.
At Lafigué, we launched construction earlier this quarter, and we are seeing activities ramp up fairly quickly. In fact, we were very pleased to welcome the board to the site earlier this week to see the good progress being made. Turning to slide 25, you can see the continued focus on exploration. Given the long mine life visibility on our flagship assets, we are now able to also dedicate significant efforts towards greenfield exploration opportunities and our recent discovery at Tanda-Iguela in Côte d'Ivoire, as you will see in a few weeks, is an example of our efforts paying dividends. Later this year, we also expect to publish an exciting resource update for our Ity mine in Côte d'Ivoire.
Given this success, we are pleased to reiterate that we are on track to achieve our five-year discovery target of 15-20 million ounces of indicated resources at less than $25 per oz. Touching upon ESG, I'm really pleased that our sustainability efforts are being increasingly recognized by the rating agencies, with both Sustainalytics and MSCI recently awarding us sector-leading ESG ratings, shown here on slide 26. Turning to slide 27, here are a few highlights of recent initiatives we have supported and which are aligned with our sustainability strategy. As you may be aware, the gold industry recently took a significant step forward on aligning the whole mine-to-market value chain with a set of responsible and sustainable business practices known as the Gold Industry Declaration of Responsibility and Sustainability Principles.
This was led by the World Gold Council and the LBMA, and we are pleased to be signatories through the council. On the skills development front, we are working with the Ivoirian government to support the training of 150 youths in the communities surrounding our Lafigué project, so they can learn a trade and become employable as the mine construction progresses. Another example is our Towards Zero Plastic initiative, and it was great to see the launch of our partnership with Plastic Odyssey. This is a strong initiative which uses plastic to fuel technology. Will train around 300 entrepreneurs in the recycling and recovery of plastics to clean up the path into reusable products. Finally, another great initiative that complements our mine site city efforts is the Great Green Wall.
As many of you know, this is an ambitious plan that involves the planting of a green wall across Africa from Dakar to Djibouti to fight desertification, which brings environmental and socioeconomic challenges to affected countries' populations. Once complete, the Great Green Wall will be the largest living structure on the planet, three times the size of the Great Barrier Reef. This quarter, we planted the first trees as part of our annual reforestation promise of 130 hectares in Senegal. Moving to slide 28, to touch upon our UK listing, we're happy to see that our liquidity in the U.K. continues to increase significantly, with more than 40% of our shares traded in the U.K., and over 34% of our shares held in the U.K.
This has been helped by our inclusion into the FTSE 100 as we continue to attract U.K. and European investors, given we are the largest pure gold producer on the premium segment of the LSE and our attractive investment proposition. I will now hand over to Mark to talk you through our performance by mine. Mark?
Thanks, Sébastien. Today, we are speaking to you from Abidjan in Ivory Coast, where we have just completed visits to our flagship assets. We are also very happy to welcome our board members on site at Ity. I am pleased to report that our operations continue to perform well, and both of our growth projects remain on track. On slide 30, we have provided a breakdown of the year-to-date performance by each asset, including how we are tracking towards our full year guidance. As you can see, our strong group production is driven by outperformances at our Houndé, Ity, and Mana mines. Looking at production over the first nine months, you can see that we are once again in a strong position to achieve close to the top end of our full year guidance.
The same can be seen with our all-in sustaining costs, which are sitting well within the full year guidance range. This is a great achievement given the industry-wide inflationary pressures, which we have been working hard to offset through various site initiatives. I will now walk through the performance of each asset, starting with Sabodala and Massawa on slide 31. At Sabodala and Massawa, we are ramping up the mining volumes and delivery of higher grade non-refractory ore from the Massawa North Zone and Central Zone pits. This resulted in improved head grades quarter-over-quarter, driving higher production. As we move into the fourth quarter, mining at both the Massawa Central Zone and North Zone pits will continue, with supplemental ore expected to be sourced from the Sofia North and Sabodala pits, as well as the new Bambaraya pit.
We expect the mined and processed grades to continue to increase due to higher grades from the Massawa North Zone pit. In addition, the end of the rainy season will bring higher mill throughputs as well. Going into a bit more detail on Bambaraya on slide 32, we have been working hard to add high-grade, non-refractory ore in the short-term mine plan following reclassification of some of the transitional Massawa ore to refractory within our updated DFS. As a result, we brought forward the mining and processing of the Bambaraya deposit, which was discovered only last year. This is an excellent example of our exploration team delivering a deposit in record time, which will add real value to the mine.
We are currently working on other recent discoveries, such as the Delya South deposit and the area between the Delya and Samina open pit resources, where advanced grade control is underway. These are great examples of the exploration team working hand in hand with the operations team to deliver us mineable answers very quickly. Regarding the Sabodala-Massawa expansion project, we are pleased to report that construction is on track and on budget, with approximately 50% of the initial capital now committed and pricing in line with expectations. As you can see from the photos on slide 33, we have completed most of the bulk earthworks for the BIOX processing plant and commenced laying the ring beam foundations for the BIOX reactors.
The stainless steel plates for these tanks have started to arrive on site, which helps to de-risk this critical activity, which is on the critical path for the construction schedule. We expect construction activities in the milling circuit and the power plant expansion to ramp up in the coming months. Our operating team have been involved throughout the studies and detailed design to ensure all minor operational details are factored into the final designs ahead of the construction, while helping to identify areas where we can save costs. Moving to slide 34, at Houndé, production has been very strong year to date, and we are on track to exceed the top end of our full year production guidance, as well as to come in below our all-in sustaining cost guidance.
I'd like to congratulate the team for achieving a processing record this quarter, with over 1.2 million tons processed despite the rainy season, which is largely due to ongoing optimization initiatives. Due to this great performance, we accelerated stage three of the Kari Pump pit, with pre-stripping commencing during the quarter. As a result of this activity, and the lower proportion of high-grade ore from Kari Pump Stage Two, and the usual seasonal impacts associated with the wet season, production was slightly lower quarter-on-quarter. For the remainder of the year, we will continue pre-stripping at Kari Pump Stage Three, and source ore predominantly from Houndé Main and Kari West, which would position us well going into 2023. Turning now to Ity on slide 35.
Ity has exceeded expectations this year as production continued to increase quarter on quarter, despite the typical challenges associated with the wet season, while all-in sustaining costs decreased due to less waste stripping activity during the quarter. The increase in production was driven by higher proportions of higher grade, fresh and transitional ores in the mill feed to offset the seasonal issues of high moisture content oxide ores. Given that we are mining from several different pits at any time, we have a high degree of flexibility to manage the ore blend according to the wet season conditions, which is a great strength for the asset. For the remainder of the year, the main source of mill feed will come from the Le Plaque, Ity and Walter pits, supplemented by historical stockpiles and heap leach material, which will result in a lower grade processed.
The mill throughput, however, is forecast to increase following the end of the wet season, and recovery rates are expected to be stable quarter on quarter. Moving on to slide 36. As outlined earlier this year, we are working on several optimization initiatives across the group, and the re-cyanidation project at Ity is a good example. This circuit aims to improve costs by reducing leaching and detox reagent consumption, improving the quality of the discharge water, and increasing recovery rates. I was on-site yesterday and it was pleasing to see the progress made. The circuit is on track to be commissioned before the end of next year. Turning to slide 37. At Boungou, production increased during the quarter, predominantly due to increased access to higher grade ore in phase III of the West pit. We expect this trend to continue in mine grades.
However, supply chain delays have limited on-grade activities during the fourth quarter. This has been caused by delays in obtaining security escorts for convoys departing from Fada. The government has been proactive with improving the situation by providing increased support and improved availability for our convoys. As such, we have had two convoys dispatched over recent weeks with a faster turnaround time. It is important for us to continue to work in partnership with our host countries, and we are very pleased to see the level of support given to us by the government, who are also highly supportive of our activities, given the economic and social benefits we provide. Moving to slide 38. At Wahgnion, we are starting to realize the benefit of the Samavogo pit, where we started mining towards the end of quarter three.
At Samavogo, the reserve grade is higher than that of Nogbele and Fourkoura, where mining was focused earlier in the year. As such, during quarter three, head grade increased by 15%. In quarter four, we expect this trend to continue as we've had a full quarter of mining from Samavogo and continued higher grade feed from Nogbele North. On the cost side, Wahgnion continued to trend above our guided range, and we are working on several levers to improve costs in quarter four and into next year, which will be supported by the higher ounces produced, as well as improved efficiencies following the wet season. Turning to slide 39. At Mana, production is on track to achieve near the top end of full year guidance and at costs within the guided range.
This is a significant achievement, considering Mana is going through a transition from mining the Maoula open pit to establishing the Maoula underground and the commencement of mining at the new Maoula open pit. We are progressing very well with the development of the Maoula underground. We completed 1,552 meters of advance during the quarter. In addition, 45 meters was vertical development for ventilation raises and escape ways. We are on track to commence mining. As you can see on slide 40. Each of the operations are undergoing key optimizations to improve cost, which will serve the operations well into the future. For example, we are looking at the option of implementing solar power at our Sabodala-Massawa and Houndé mines, where we seek to reduce our dependency on fossil fuel generated power sources while also lowering our operating costs significantly.
Similarly, we are looking at establishing in-pit tailings deposition at several of our mines, including Sabodala-Massawa and Wahgnion, and in-pit waste dumping at Boungou. These actions will not only defer or eliminate the requirements to acquire more land, resettle people, and construct new facilities, but can also improve our closure planning for our depleted pits. We look forward to sharing more details on these initiatives during our upcoming investor and analyst visit later this year. As you have seen, performance across our operations has continued to be strong this quarter, which positions us well against our guidance for this year. As you have heard, there are activities going on at sites now that will set us up well for next year. That completes my brief overview of our operations, and I'll be happy to go into more detail during the Q&A session. Sébastien, back to you.
Thank you, Mark. As you have seen, the resilience of our business is clear from the continued strong performance against our key objectives and underpinned by our disciplined capital allocation. Overall, we are pleased and very pleased with our results this quarter and with the momentum we will carry into the final quarter of 2022 and on into 2023. As always, I'd like to thank my team for the tremendous work and dedication. We are fortunate to have fantastic people within the organization that are pushing every day to make sure we hit or exceed our targets. With that, I would like to thank you all for dialing in and open the line up to questions. Operator?
Thank you. As a reminder, if you wish to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. We prioritize questions from analysts. Please stand by while we compile the Q&A queue. We are now taking our first question, so please stand by. The first question for Amos Fletcher from Barclays.
Yeah, good afternoon, everyone. I wanted to ask a question about the supply chain issues at Boungou. Can you just talk about them a bit and how long you think it will take for them to normalize? Thanks.
Hi, I'm Sébastien. Supply chain, I mean, is not, I mean, you know, a significant problem. It's from time to time we can have, you know, some delay depending on the security environment for the convoys, I mean, to get to the mine site. Obviously you've seen that there was a coup at the end of September. Therefore this has disrupted things by delaying by a few days, you know, some of the convoys and goods that were expected to the mine sites. Overall, I mean, it's more, you know, sometimes some delays which might impact, you know, from one quarter but then benefit from the other quarter. Minimal disruptions, but we had to flag it.
Overall, we are very, you know, happy and confident on the way it is currently operating.
Great. I just wanted to follow up on the upstreaming of cash. Obviously, that was quite a big driver of the EPS miss and net cash reduction in the quarter. Can you let us know how much cash you have sitting at the PLC currently? And are there any thin cap constraints on how much you can lend from the sub to the PLC? So, you know, just trying to think about, you know, whether we should expect these type of withholding tax of minority dividends to be a recurring issue over the longer term, as in when you move into a sort of higher cash distribution mode. Thanks.
Sure. I mean, this quarter was a bit unique because overall, we upstreamed close to a bit more than $600 million from through dividends, you know, from the entities within West Africa. When you take out the withholding tax and the minority interest, that's $500 million + that we've repatriated at the holding level. The main reason for that is to prepare ourselves to be able to pay down the convertible in cash in March next year.
Overall, we have, I mean, if you look at the balance, I would say, 2/3 in country and 1/3 at the PLC level in terms of split between where the cash in a way is located.
Okay. Got it. Last question I just wanted to ask was on Wahgnion, where the all-in sustaining costs, obviously, you know, well above your typical thresholds, mine life also below target. I just wanted to ask, you know, at what point do you say, "Okay, this isn't an Endeavour asset." Are there any thresholds or timelines or targets you have to demonstrate that this mine can fit your filters? Thanks.
Sure. Well, 2022 was a bit of a, you know, transition year, I mean, at Wahgnion. You know, we still see a lot of potential in terms of exploration for Wahgnion going forward. Therefore, at this stage, I mean, it's still, you know, an asset within the portfolio. I mean, clearly, you know, in 2024 with the increased production at Sabodala-Massawa and with Lafigué coming online, you know, with 250,000 oz annual at low all-in sustaining cost. You know, then, you know, by that time we'll probably review some of those less, I would say, critical assets which are currently in the portfolio. But, you know, that's more for 2024.
Great. Thank you very much.
Thank you for your question. We are now taking our next question. The next question from Harmen Puri from Bank of America. Please go ahead.
Hi. Thank you for taking my question. I just wanted to ask about, just looking ahead into 2023, can you provide any color on where we might see costs to sort of land? I know we've previously said that, we're aiming for costs, all-in sustaining costs under $900 an ounce. Can you just sort of provide any color on whether or not that might still hold? Thank you.
Sure. Hi, Harman. I mean, a bit early, I mean, for us, I mean, to comment on, you know, 2023, given that the budget sessions are due at the end of this month. I don't have yet, I would say, numbers. We usually, I mean, disclose the guidance for the year around end of January. I would only say that, you know, the objective is, you know, to maintain, I mean, the portfolio with this low-cost approach, I mean, compared to our peers. You've seen that we had a very good Q1 at $845. The last two quarters were more around $960, and I would say that I would expect, you know, 2023 to be in between, you know, those two range.
950, I mean, is the expectations, you know, for 2023. Then we would expect, you know, things to continue to improve as we get in 2024, the new projects on stream, with the Sabodala-Massawa expansion and with the Lafigué that will be operating at $900 or below.
Perfect. Thank you so much.
Thank you for your question. We are now taking our next question from Daniel Major from UBS.
Hello?
Yes, we can hear you, Daniel.
Oh, hey. Sorry, my line was a little unclear. Yeah, thanks for the questions. Yes, first question, just on the CapEx outlook. It looks this year as if you're trending a little bit below your guidance for sustaining CapEx, and perhaps a little bit above for non-sustaining. Could you just give me a steer on what we should be expecting in the fourth quarter for CapEx items? Also, now you've approved Lafigué, what sort of CapEx or growth CapEx item we should be seeing in Q4?
I guess the second part of it, appreciate you're still probably doing the budgets, but directionally, how we should be thinking about those two items into 2023, sustaining, non-sustaining, and then the level of spend at Lafigué. Thanks. That's all.
Sure. Thanks, Daniel. I mean, on the sustaining and non-sustaining, obviously there are some phasing sometimes, you know, due to, depending where the progress are on the different assets. In Q4, I mean, we would expect, you know, a bit higher sustaining capital number for Q4 compared to the previous quarter. But on the other side, much lower on the non-sustaining for Q4. Overall, I mean, we've got an envelope between sustaining and non-sustaining, which is in line between the quarters. It's more the split, you know, between the two. Higher sustaining in Q4 compared to Q2, Q3, but lower non-sustaining in Q4 versus Q2, Q3.
Very clear. Thanks. Just one other financial question I suppose, follows up on Amos' question, slightly. When we think about 2023, can you give us any guidance or range on where we should be thinking about P&L and cash tax rates for 2023, factoring in, you know, some of the, I guess, the scope for sort of more upstreaming like you saw last quarter?
Sure. Again, I think we still, you know, expecting the overall budget process, I mean, to converge at the end of the month. I would say that next year you probably see a slightly lower impact in terms of dividend withholding tax and so on, as we've mainly focused, I mean, this year for upstream cash for the repayment of the convert in March. But, you know, the rest, I mean, will be in line in terms of, you know, overall tax rate.
Would that be a kind of group effective tax rate in the high 20s or 30-ish? Is that around the right sort of level?
I would say between 20 to 25, you know, as group.
Okay. Thanks. Just last question. Sounds like an interesting discovery, I guess in sort of west Côte d'Ivoire. Can you give us any more details on, I guess, the logistics and the kind of development trajectory beyond obviously the geological results that you'll publish in due course? Are we close to good infrastructure? A little bit more color on the location of the project.
Sure. There will be a specific press release that will be out in the next two weeks. I mean, in particular on Tanda-Iguela. In terms of infrastructure, that's about 400 km away from Abidjan, but alongside, you know, very good infrastructures. You know, pretty easy, I mean, to access. The environment there in terms of road and so on, the environment there is pretty clear also. We are about 30 km away from the Ghanaian border. Yeah, I mean, overall the environment is, you know, pretty positive. That's what we like. You know, it's a bit like Lafigué. You don't go into a complex, I would say, environment, completely isolated. It's not.
You don't have either, you know, big cities or villages which are close by, you know, that would require a huge resettlement. Yeah, I mean, overall, the environment there is very attractive. That's why, you know, beyond, you know, some of the drilling results that we will be presenting, we're pretty excited by, you know, this target.
Great. Look forward to some more details in a few weeks. Thanks. That's it for me.
Thank you.
Thank you for your question. We're taking our next question. The next question from Don DeMarco, from National Bank Financial.
Thank you, operator, and good morning, Sébastien and team. My first question, Sébastien, has to do with the non-sustaining CapEx, as noted, with the release that the guidance is expected to be above $204 million. Can you provide a little bit more color here? Like, for example, how much do you expect it will be over? Does this actually offset some spend in 2023?
Joanna, you wanna comment?
We would expect that to be compensated next year, yes, because we did move the timing of some of our non-sustaining CapEx up into this year, given the delays in the growth projects with Fala-Fala and the Sabodala-Massawa BIOX project as well as Lafigué. We would expect some compensation next year.
Do you expect it just as sort of a nominal top up above the $204, or is it more like 10% or 15%?
Yeah, I wouldn't expect it to be significantly higher. It really depends on the timing of some of the cash flows in the quarter and you know, where we're at in terms of the timing of some of the commitments. Yeah, we would expect to be just slightly over guidance.
Yeah. We brought forward, I mean some CapEx using that, you know, we've deferred for example, the Lafigué project. We've been deferring some gross CapEx that was initially expected for 2022. We took the opportunity in exchange, I mean, to bring forward some sustaining, non-sustaining CapEx, a bit of accelerated element also on the waste. Overall CapEx, I mean, I think is, you know, in line for 2022 and consistent through 2023. We'll have probably less non-sustaining CapEx in 2023.
Okay, good. I guess on a similar topic then, with net cash easing and you've got the growth CapEx increasing with Lafigué and so on, do you plan to put some of your share buybacks on hold temporarily?
No. The you know Q3 lower you know net cash flow is really you know due to the current quarter. I mean, we're expecting you know a good and strong you know Q4 that should you know see back again you know net free cash flow you know at the similar levels that what we saw in Q1, Q2 for Q4. Therefore, we don't see given the strong you know performance of the of the operations why you know the buyback program should be reduced. We still have a very strong and healthy balance sheet net cash positive. So you know that's part of the program.
Again, that's why also we have this hedge in place, you know, to allow to continue to generate strong cash flow during this construction period, irrespective of the gold price.
Okay. Well, thank you. That's helpful. Good luck with the rest of the year.
Thank you, Don.
Thank you for your question. We can now take the next question. The next question from Sandeep Peety, from Morgan Stanley.
Thank you for taking my questions. I have a couple of them. I'll take one at a time. Firstly, it's a follow-up question. You are now expecting lower sustaining CapEx for the full year 2022 versus prior guidance. This has somewhat helped you to maintain all-in sustaining CapEx guidance level. Can you help us to understand key reasons behind it, apart from the phasing point that you highlighted? Should we expect some of those to roll forward to 2023, i.e. implying higher all-in sustaining CapEx going into next year?
I would just say that, I mean, due to strong production performance year to date, we've been bringing forward some deposits, including the Kari Pump Stage 3 at Houndé, but also on the Bambaraya at Sabodala-Massawa, which resulted in more pre-stripping, non-sustaining activities in Q3. Overall, compared to, you know, our guidance, you know, for the full year, you know, we might be slightly lower compared to the initial guidance, but, you know, overall, I would say, you know, in line, when you add sustaining and non-sustaining.
Okay. Thank you. The second question is, since the oil prices are regulated in the regions where Endeavour Mining operates, do you think that the cost benefit from lower oil prices will flow through to Endeavour? As such, should we be expecting flat cost year on year for 2023 on spot oil prices?
Well, I think that, as you probably saw, we tend to have, you know, the fuel price in countries regulated by the government, which has provided a bit of immunity compared to the rally in the oil price, in particular in Q1 and up to the end of Q2, with lower increases in fuel costs in the countries where we operate compared to, you know, the oil price rally. Usually the fuel price, I mean, is changing in country on a quarterly basis or semiannual basis. That's why we've seen, I mean, the impact more, I mean, towards the end of Q2 and in Q3.
With oil price, I mean, dropping, you know, we should see that reflecting progressively, not at the same path and speed, you know, as you would see it in North America and Australia, for example. You know, at some point it should again retranslate also. The key point has been, you know, clearly that we are monitoring has been the FX also between euro and dollars is a big part of our cost. 60% of our cost, you know, is euro denominated. Therefore has been benefiting from, you know, a weaker euro and a stronger dollar during the period.
Very helpful. Thank you.
Thank you for your question. We are now taking our next question from Ovais Habib from Scotiabank.
Thanks, operator. Hi, Sébastien and Endeavour team. Congrats on a good quarter despite the rainy season. Also congrats on the year-over-year improvements in the ESG ratings as well. Couple of questions from me. I think a lot of these questions probably have been answered. I was having some technical difficulties, so apologize if these questions have been already answered. My first question was in terms of, you know, looks like you, Endeavour will be on the lower end of the all-in sustaining cost guidance, and Sabodala expansion seems to be progressing really well as well. Sébastien, are you seeing some relief on inflationary pressures as you head into 2023?
Thanks, Ovais. I would say it's probably a bit early, I mean, you know, to say that. First of all, as you saw, we've been less impacted than others in West Africa. I'm expecting the budget review, I mean, to happen at the end of the month. This will give us, you know, a much better view on what to expect for 2023. Yeah. I would say that, you know, if overall, you know, inflation elsewhere, you know, starts to reduce, we will see the benefit in West Africa, that's for sure. At what speed?
I would say probably a bit deferred compared to, you know, other regions, the same way it was deferred when it started. I mean, to peak higher at the beginning.
Got it. Thanks for that, Sébastien. Just my following question, just last time we spoke, you mentioned that there is an audit taking place in Mali. Can you provide any sort of color on this audit, and was Kalana audited?
Sure. Difficult for me, I mean, to you know, to comment beyond, you know, what we can read, you know, in the papers, given that we don't have operating mines in Mali. You know, Kalana is not audited given that it's not in operation, so there is no particular tax angle. We've not been affected, I mean, on that front. We've heard that there is effectively big reviews going on by the government of Mali on the tax side for all the existing and big operations.
Okay. Thanks for that, Sébastien. That's it for me. Thank you.
Thank you for your question. We are now taking our next question to Mohamed Sidibé from CIBC.
Hi, thanks. Most of my questions have been answered on the OpEx and CapEx front into next year, so thank you, and congrats on the quarter.
Thanks, Mohamed. Speak later.
Thank you. We are now taking the next question. There are no further questions at the moment. I will hand back the conference over to the management.
As there are no more questions, we'll finish the call. We will, of course, remain available to address any further questions offline. Thank you everyone for dialing in, and chat soon.
That concludes the conference for today. Thank you for participating. You may all disconnect.