Good day, and thank you for standing by. Welcome to Endeavour Mining's Third Quarter 2025 Results Webcast. At this time, all participants are in a listen-only mode. After management's presentation, there will be a question-and-answer session. For those who wish to ask a question, please dial into the phone line. Please note that due to time constraints, we will be prioritizing questions from covering analysts. If each analyst could limit themselves to two questions before jumping back in the queue. 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 hand the call over to Endeavour's Vice President of Investor Relations, Jack Garman.
Hello everyone, and welcome to Endeavour's Third Quarter 2025 Results Webcast. Apologies for the slight delay getting started. Please note our usual disclaimer. On the call today, I'm joined by Ian Cockerill, Chief Executive Officer; Guy Young, Chief Financial Officer; Djaria Traoré, Executive Vice President of Operations and ESG; and Sonia Scarselli, EVP of Exploration. Today's call will start with Ian presenting the highlights, followed by Guy walking through the financials. Djaria will present our operating results by mine, and Sonia will provide an exploration update before handing back to Ian for his closing remarks. We'll then open the line up for questions. With that, I'll now hand over to Ian.
Thanks very much, Jack. Hello everybody, and again, as Jack said, apologies. Unfortunately, me and the team, we're here in Dakar today, and unfortunately, Orange decided to do some unscheduled maintenance on the line, so hence the delay. Glad to say we're back up and running. As I said, we're dialing in today from Dakar, having just returned from our Sabodala-Massawa mine with the board. We had a very productive trip, and it was pleasing to see the strong and consistent performance, specifically from the BioX plant. Q3 2025 has marked another quarter of solid operating performance for Endeavour. As previously guided, production was a little lower, with costs a little higher than the prior quarter, with operational performance set to improve going into Q4.
Our strong year-to-date production leaves us well positioned to achieve the top half of our production guidance, with 82% of the low end of the range already achieved. Meanwhile, our year-to-date all-in sustaining costs of GBP 1,365 per ounce is on track to achieve our guidance, accounting for the impact of the higher gold prices on royalty costs. Looking ahead, we're focused on our organic growth pipeline. On slide seven, you can see our performance so far this year. We've maintained a low loss time injury frequency rate, significantly below the industry average, and we had no loss time injuries during the quarter as we continue to strive for zero harm. We've produced 911,000 ounces year-to-date, and with a strong Q4 outlook, we're well positioned to achieve the top half of our production guidance.
Our year-to-date all-in sustaining cost of GBP 1,362 per ounce is on track to achieve the full year guidance. We have seen approximately GBP 103 per ounce impact on royalty costs from the higher realized gold prices compared to our guidance gold price of GBP 2,000 per ounce. Accounting for this, our all-in sustaining cost is in the middle of the guidance range, with Q4 performance expected to be an improvement on Q3. Turning to slide eight, our year-to-date performance has significantly improved this year compared to last year, following the start-up of our two projects in Q3 2024. We have produced 170,000 ounces, or 23% more so far this year, and our all-in sustaining margin is 90% higher than last year, aided, of course, by the strong gold price.
While our margin has improved significantly, thanks largely to the gold price, it is important to highlight that our all-in sustaining cost remains firmly in the first cost quartile, despite the gold price-driven increases in our royalty costs, and amongst the best of our peers year-to-date. While we expect to see all-in sustaining cost increases across the sector in the near term, we will continue to focus on controlling what we can control, delivering productivity initiatives, and the development of our low-cost pipeline projects, which will more than offset any cost increases in the medium term. Firstly, through our tier one Asafu project, which continues to advance on track, with the environmental permit now approved and the definitive feasibility study expected in early 2026, we're making good progress towards first gold in H2 2028.
Secondly, we're accelerating our exploration program, primarily at our cornerstone mines, but also through our greenfield programs. We're expanding our pipeline to strengthen our long-term organic growth options, and we'll be announcing our new exploration strategy in the coming weeks. On the financial side, our solid Q3 performance underpins significantly improved free cash flow, which is expected to increase materially in Q4 and into next year. Year-to-date, we've generated a record GBP 680 million, and over the past 12 months, we've generated nearly a billion dollars, another record that's equivalent to a 19% free cash flow yield from the start of Q4 last year. This cash flow has supported our balance sheet strength, and we've seen improvements in our net debt and leverage, which remains constantly below our target. We also significantly reduced our gross debt, paying down the balance of our RCF during the quarter.
With solid operational performance and strong cash flow generation, we continue to increase shareholder returns, returning GBP 233 million so far this year, already exceeding our minimum commitment. With the announcement of our H2 dividend in January, we expect to return the minimum of GBP 346 million to shareholders for the complete year. In January, we'll also announce our updated shareholder returns program. We expect to significantly increase returns and continue to be sector leading throughout the upcoming Asafu build phase. With strong momentum built over the last 12 months and an even stronger outlook, we're well positioned to continue delivering sector-leading organic growth and sector-leading shareholder returns. On slide 10, our strong year-to-date operating performance, coupled with strong prices, translated into a 110% increase in adjusted EBITDA compared to the same period last year, to more than GBP 1.6 billion.
Our adjusted EBITDA margin also increased by 10 percentage points to a very healthy 55%. We translated this performance into stronger free cash flow, as you can see on slide 11. For the first three quarters of the year, we generated GBP 680 million of free cash flow, and over the last 12 months, generated GBP 948 million, or the 19% free cash flow yield, from the start of Q4 2024. As we look forwards, we expect stronger operational performance in the coming quarter, coupled with reduced seasonal taxes and higher gold prices. This will underpin even stronger free cash flow generation. On slide 12, you can see that given our strong operational and financial performance, we've continued to increase our shareholder returns. During the quarter, we paid our record H1 2025 dividend of GBP 150 million, which we supplemented with GBP 83 million of share buyback so far this year.
Total returns paid have come to GBP 233 million, exceeding the GBP 225 million minimum dividend. With our H2 2025 dividend to be announced in January, which will be a minimum of GBP 112.5 million, we expect to return that minimum GBP 346 million to shareholders this year, and that is before any supplemental dividends for H2 or any buybacks for Q4. On slide 13, we have returned over GBP 1.4 billion to our shareholders over the last four and a half years, 83% higher than our minimum commitment over the period. That is equivalent to 72% of our free cash flow generation over that period, demonstrating our commitment to returning supplemental cash to our shareholders. Looking ahead, we will be unveiling our updated shareholder returns program early next year, covering the next growth phase.
We expect to outline significantly higher minimum commitments going forward and maintain the sector-leading returns, as you all become used to, through our upcoming growth phase. On the growth side, our outlook compares very favorably against the consensus growth outlooks for our peers, and that does not include some of the brownfield opportunities that we are advancing, which can supplement this outlook possibly even further. A significant part of this growth is expected to come from our tier one Asafu project in Côte d'Ivoire, which you can see on slide 15. The Asafu project continues to advance with a definitive feasibility study tracking for completion in Q1 2026. We were very pleased to receive the environmental permit approval in September, which we believe is a significant milestone towards full project approval, with the last major approval being the exploitation permit, which we expect towards the end of Q1 next year.
On slide 16, you can see we've continued to accelerate exploration, and we've made good progress at Sabodala-Massawa, Houndé, and Asafu. We're also looking at other tier one gold provinces to strengthen and diversify our long-term organic growth outlook. Our aim is to have multiple potential development projects, each competing for internal capital, that extend our pipeline even beyond Asafu. We completed the first transaction with Kulu Gold in Côte d'Ivoire last year, and just recently, we completed the second transaction with East Star Resources in Kazakhstan, a relatively modest GBP 5 million investment over a two-year period to identify potential tier one targets in one of the world's most prolific and underexplored gold provinces. Sonia will take you through this in a little bit more detail later on.
Before I hand over to Guy to go through the financials, I just wanted to touch on our commitment to ESG and our social license to operate. Sustain Analytics has improved our score and reiterated our low score rating, which again positions us as the best-rated gold producer in the sector, recognizing our long-term work on ESG. We're also proud to see recognition for the work we're doing reflected in our host countries, with national honors including Best Mining Company in Senegal and Best Company Committed to Local Content in Burkina Faso. Congratulations to Ity's General Manager, Bruce Asoro, for winning the National Award of Manager of the Year in Côte d'Ivoire. These recognitions highlight our deep commitment to developing and promoting local talent, boosting local economies, and empowering our host communities. With that, let me pass you over to Guy to talk you through our financial results.
Guy, over to you.
Thanks very much, Ian. Moving straight into our quarterly financial results. Without going through all of the details on slide 19, I'll just pick out some of the key line items that I will come to later on in the slides. Our production in Q3 was slightly lower and our costs slightly higher than Q2, in line with our mine sequence and as noted in each of our quarterly presentations this year. This resulted in slightly lower earnings, whilst operating cash flow before working capital improved by 33% and free cash flow improved by 59%, benefiting from seasonally lower withholding and income taxes, as well, of course, as higher gold prices.
Turning to slide 20, our operational performance remained solid during Q3, and we are on track to achieve the top half of our production guidance, with costs adjusted for the impact of higher gold prices on royalties also within the guidance range. Production declined during the quarter due to lower grades processed across the portfolio, coupled with the impact of the wet season, which reduced throughput at Houndé and Lafigué specifically, and was exacerbated by the acceleration of production in H1 at Houndé to de-risk our annual production targets. Our all-in sustaining margin decreased slightly, despite the higher gold prices, due to lower grades processed, lower mining and processing productivity as a result of the wet season, and the impact of higher gold prices on royalties.
Moving to slide 21, our adjusted EBITDA decreased quarter over quarter due to the lower production and slightly higher costs, while the impact of the higher gold prices was lessened by the realized losses on financial instruments related to the settlement of the gold collar. Our operating cash flow increased by 22% quarter over quarter, as shown on slide 22, mainly due to the lower withholding and income tax payments, as well as the higher gold prices. The majority of our income taxes and all of our withholding taxes have now been paid for the year, with less than 15% of total taxes outstanding and to be paid in Q4. With improved production and costs expected, coupled with lower cash taxes and higher gold prices, we're extremely well positioned to deliver stronger operating cash flow in Q4.
If we turn to slide 23 now and compare Q3's operating cash flow with Q2's, the improvement was driven by, firstly, a GBP 97 per ounce increase in the realized gold price to GBP 3,247 per ounce, inclusive of the impact of the realized losses on gold collars. A decrease in cash operating expenses as a result of lower production and a stockpile build. Lower income taxes paid due to the timing of payments in the region generally being more weighted towards Q2, and the timing of withholding taxes, which are typically paid in Q2 and Q3, but were expedited this year, reflecting an improvement in the efficiency of the upstreaming process internally and with the West African Central Bank.
These increases were offset by lower gold sales related to lower production and a working capital outflow related to inventory and receivable build-up that I'd like to walk you through in more detail now. Slide 24 shows the two key drivers of the working capital increase of GBP 85 million in the quarter, being inventory and receivables. The majority of the inventory increase, both in the quarter and year-to-date, is due to stockpile increases at Sabodala-Massawa, Lafigué, and Ity. Stockpiles have increased at Sabodala-Massawa as we have mined and stockpiled the exceptionally high-grade Massawa North Zone deposit, which we expect to start processing in the second half of next year. At Lafigué and Ity, we've also been accelerating mining activity to build stockpiles and are expecting to see continued improvement from the plants, which will draw down on these stockpiles starting in Q4 of this year.
The increase in receivables is entirely due to higher VAT receivables and exacerbated by a foreign exchange revaluation of more than GBP 20 million year-to-date. In Burkina Faso, VAT refunds continue to be delayed this year, except for an offset arrangement of GBP 23 million in Q3 that is reflected in financing activities in the cash flow. We are actively looking at opportunities to resolve this through various factoring solutions to help expedite the receipt of these refunds that should see a reduction from next year. In Côte d'Ivoire, VAT refunds are processed quarterly, and at our new Lafigué mine, the setup of the administrative process to claim these VAT refunds has been slow. We've started to receive VAT reimbursement claims in Q3, and we expect this to now start accelerating into next year.
In Senegal, where we have monthly VAT refunds, they continue as usual, with a slight build-up related to the startup of the BioX plant and additional VAT being paid. We expect this to normalise from early next year. While we expect a full year of working capital outflow, we should start seeing progressive improvements in both our inventory and receivables from Q4, and we'll further accelerate this improvement into 2026. In terms of our free cash flow shown on slide 25, we continue to generate strong free cash flow in Q3, delivering GBP 166 million, GBP 61 million higher than the prior quarter due to the lower cash taxes and higher realized gold prices I've already touched on. As mentioned, we expect free cash flow to grow in Q4 with the improved operational performance, lower taxes, and higher gold prices.
Moving now to slide 26, the strong free cash flow generation has allowed us to strengthen our balance sheet and reduce our leverage to 0.21 times net debt to adjusted EBITDA, comfortably below our targets of 0.5 times. Given our strong cash flow outlook, our low leverage positions us well ahead of our upcoming growth phase to be able to deliver our organic growth project and continue paying sector-leading shareholder returns. As I've mentioned in the past, we are not looking to build up a net cash position, as we can comfortably meet our strategic objectives with leverage below 0.5 times. On slide 27, we're pleased to have materially reduced our gross debt through the full repayment of our revolving credit facility during Q3. We paid down GBP 472 million quarter on quarter and reduced gross debt by 38% to GBP 678 million.
We expect this to be reduced further over the coming year as we progressively pay down our Lafigué term loan in line with the amortization schedule. Finally, moving on to net earnings on slide 28 and focusing on just the key items impacting the quarter, we incurred a GBP 49 million loss on financial instruments, which included a GBP 69 million realized loss on gold collars, which was partially offset by an unrealized gain on the outstanding gold collars for Q4. The final delivery into our gold collar program will be 50,000 ounces at the end of this quarter, which, based on prevailing gold prices, should support improved cash flows in 2026. Our income tax expense was significantly low during the quarter. This was due to lower taxable profits and lower withholding taxes recognized.
Our deferred tax expense was also higher due to movement in foreign exchange on the opening deferred tax balances and the accrual of FY25 withholding taxes. Adjustments were limited during the quarter as the unrealized gain on gold collars was largely offset by other expenses in foreign exchange on our deferred tax balances. We reported another strong quarter of adjusted net earnings per share of GBP 0.66, albeit slightly below the prior quarter, largely due to the lower earnings from operations and the higher realized loss on gold collars. Thank you. With that, I'd like to hand over to Djaria.
Thank you, Guy. During quarter three, I'm pleased to report that we maintain our industry-leading safety record with a lost time injury frequency rate of 0.05, unchanged from quarter two 2025. Most importantly, we had no lost time injury. While our safety performance positioned among the safest mining companies globally, we remain vigilant and we reject complacency. We continue to focus on training to foster the strong safety culture that we have across the business. Moving on to slide 31, quarter three marked another strong quarter of operating performance, which contributed to our strong year-to-date production of 911,000 ounces and put the company on track to achieve the top half of our production guidance range.
On cost, we're pleased with the year-to-date performance, with all-in sustaining cost of GBP 1,362 per ounce, which has been impacted by GBP 103 per ounce of higher royalty due to higher gold prices than our guidance, set at GBP 2,000 per ounce. Adjusting for this impact, our all-in sustaining cost is firmly in the middle of the guidance range. Across the portfolio, all the assets are on track to achieve the production guidance, with Houndé and Sabodala-Massawa expected to achieve the top half of the range, while Lafigué is expected to achieve the lower half. On cost, Ity, Sabodala-Massawa, Houndé, and Lafigué are on track, with Lafigué expected to land near the top end and Mana expected to be above the top end of the range. Despite this, at the group level, we are well positioned to achieve our guidance range when accounting for the impact of royalties.
I will now run through the mine-by-mine details, starting with our mine of Ity on slide 32. Production decreased quarter on quarter as expected. We processed lower-grade ore from the Le Plaque and Ity pits in line with the mine sequence. All-in sustaining costs increased, driven primarily by lower gold sales volume, higher royalties due to increased gold price, and higher sustaining capital. Ity is on track to achieve its 2025 production and cost guidance, and we are evaluating opportunities to reduce mining costs through development of the Ity Donut. This should provide us efficiencies by deploying a hybrid mining fleet within an expanded, optimized fleet over the coming years. Let's now turn our attention to our Houndé mine on slide 33. Houndé had a very strong start of the year as we have accelerated high grade into H1 to de-risk the impact of the wet season.
As expected, production decreased quarter on quarter. On cost in quarter three, we saw all-in sustaining costs decrease, driven primarily by lower sustaining capital as well as stripping requirement eased. Houndé is well positioned to deliver production in the top half of the guidance range, with costs well in line. As we have highlighted previously, looking ahead to the next year, we expect we will continue stripping at the Vindaloo main pit, phase three cutback, and mining lower grade from Kari West and Vindaloo, which will result in high costs for the first half of the year. We should progressively improve as the stripping concludes, giving access to higher grade ore. Moving now on to Mana on slide 34.
Production declined slightly in quarter three as we mined and processed lower grade from the Wona underground deposit, while the costs increased slightly due to the lower grade, lower production and sales, and the higher gold price impacting royalty costs. At Mana, we are pleased with our production performance, but there is still work to be done on cost. Importantly, we are now completing the changeover of our underground contractor, and we expect to start realising some of the productivity benefits, including a significant increase in development rate and total development metres next year, driven by expected improvement in equipment availability as well as the operating efficiencies by using one single underground contractor, which we expect will drive unit cost improvement into next year.
At the same time, we are improving the underground mine power stability through the installations of a transformer and the automation of our onsite power plants through smooth switching between the grid and self-generated power. Combined, this initiative should allow us to increase our reliance on the lower-cost grid power for the underground from early next year, which should also support cost improvement. For the year, Mana is well on track to achieve the production guidance, but costs are expected to be above the guided range due to the reliance on self-generated power for the underground and higher sustaining capital as we are accelerating development in the Wona deposit to gain access to higher grade more quickly.
At Sabodala-Massawa on slide 35, production decreased only slightly in quarter three as lower grades were processed through the CIL plant, despite higher throughput and recovery through the CIL plant and higher grade, as well as recovery through the BioX plant. On all-in sustaining costs, increased largely due to the impact that the unusually long and heavy rainfall had on mining and processing productivity, as well as higher royalty costs due to higher gold prices. It's pleasing to see the technical review at Sabodala-Massawa starting to positively impact performance. Following the acceleration of mining activity at Massawa Central Zone, we are now mining consistent higher grade, which came in at over 4 grams per tonne for quarter three.
On recovery in the BioX plant, we were pleased as well to achieve an average of 82% for the quarter, which is a significant improvement from where we started last year and well on track to achieving our life-of-mine target of 85%. Recovery improvements have been driven partly by increased and better quality fresh ore from Masawa Central Zone, but also better feed consistency, which allows us to optimize flotation control and flotation tail leaching. We expect to drive more improvements as we optimize the gravity circuit later this year into next year. Looking ahead to quarter four, we expect higher production from the CIL plant due to improved throughput and grades, while our production from the BioX plant is expected to remain consistent. We will achieve the top half of the production guidance, with costs in line with guidance.
Looking ahead to next year, we are continuing to drive the technical review forward to outline an incrementally improved production outlook as we accelerate underground development to drive further production improvement over the coming years. Lastly, turning to Lafigué on slide 36, production declined during quarter three as we saw lower throughput, though up 35% year on year, and reduced grade mined and processed from the main pit as mining activity shifted towards stripping to accelerate access to more higher grade to support the processing plant, which is now consistently running above design nameplate. All-in sustaining costs increased, but mainly due to lower gold sales and higher royalty costs due to gold prices.
As we move into quarter four, we are expecting grade and cost to improve, and Lafigué is tracking towards the lower half of its four-year production guidance, with all-in sustaining costs near the top end of the range due to lower level of production. I will now turn over to Sonia to walk you through our exploration highlights from the quarter. Sonia.
Thank you, Djaria. I'm pleased to be joining the quarterly webcast to provide you with an update of our exploration activities and some of the key properties. This is also a timely update as we expect to announce our new exploration strategy for the next five years later this quarter. The new strategy will underpin our continued sector-leading organic growth. At Sabodala-Massawa, on slide 38, we are advancing the two high-priority exploration targets called Makana and Kautara. At Makana, we are accelerating the resource definition of two high-grade, non-refractory mineralized deposits. This could potentially support the near-term mine plan at Sabodala-Massawa and offsetting some lower-grade feed and improving production. Kautara is a potentially large non-refractory resource located approximately 35 km south of Sabodala-Massawa and can support a significant increase in the endowment and provide increased life-of-mine optionality. Maiden reports are expected next year.
Moving to Houndé on slide 39, we have increased our exploration budget as we continue to drill high-grade intercepts at the Vindaloo Deep deposit. The target looks to be very large and very high grade and could support a material improvement in the mine plan. We expect to have a maiden report for Vindaloo Deep in Q1 2026. Elsewhere in the operating portfolio, we have completed the drilling at Mana to delineate the continuation of the Wona underground deposit. At Ity, we are developing several early-stage opportunities along the Ity trend, and at Lafigué, we expect to start drilling on several near-mine targets early next year. Moving now to slide 40 in our Tier 1 Asafu project. During Q3 2025, we completed a 23,000-metre drill program at the Pala Trend 2 and Pala Trend 3 targets located a few kilometres to the west of the main Asafu deposit.
Drilling successfully expanded the mineralisation over a 3 km strike length along a similar turquoise and viridian contact to the one at the Asafu deposit on the southwest side of the Asafu basin. We expect to complete the definition of maiden resources for the Pallatrend targets later in Q4. Finally, on slide 41, I want to give you a bit more color on our new joint venture with East Star Resources that Ian mentioned earlier. While our new exploration strategy will prioritize existing operations, we will also be increasing our greenfield exploration spend, focused on strengthening and diversifying our exploration pipeline to support our longer-term organic growth. While we expect most of this growth to come from our existing West African portfolio, we are also entering into some highly prospective Tier 1 gold provinces with low exploration maturity and where we have an early mover advantage.
We are taking a low-risk and low-cost venture approach, giving us the ability to leverage our joint venture partners' technical expertise and their knowledge of the operating environments in this region. We signed a joint venture with East Star Resources, a Kazakhstan-based gold and base metal explorer targeting two highly prospective belts in northern and central Kazakhstan within the highly prospective Central Asian Orogenic Belt, the ORS multiple Tier 1 gold deposit. We will invest GBP 5 million over a two-year period to earn a 51% interest in the joint venture company that will be operated by East Star Resources, who are well integrated in the country having been operating there for over five years. From day one, we will have control over the exploration program through our board and technical committees itself.
We expect to continue to leverage local exploration vehicles in highly prospective Tier 1 gold provinces to expand our exploration pipeline and ensure that we have multiple high-quality organic growth projects that will compete for capital with each other and will underpin continued portfolio pipeline and production growth. With that, Ian, back to you.
Thank you, Sonia. With our strong operating momentum and the supportive gold price environment, we're well positioned to build on our year-to-date performance through the remainder of this year and into 2026. The high quality of our portfolio and the resilience of our business ensures that we are well positioned to sustainably deliver both sector-leading organic growth and sector-leading shareholder returns. We look forward to talking to you in January when we come back with the Q4 results, and we're very, very looking forward to seeing how they turn out. It's looking promising. With that, let me hand you back to the operator for Q&A.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one and one on your telephone and wait for your name to be announced. We will be prioritizing questions from covering analysts at this time. If each analyst could limit themselves to two questions before jumping back in the queue. If you wish to cancel your request, please press star one and one again. Once again, please press star one and one if you wish to ask a question. Please stand by while we compile the Q&A queue. We are now going to proceed with our first question. The questions come from the line of Wayne Lam from TD Securities. Please ask your question.
Thanks. Good morning, everyone. Maybe at Sabodala, just wondering if you might be able to give us a bit of colour on what you're seeing in terms of the stability of the government on the ground there. Are you in discussions on any potential renegotiation on the mining code in country?
Wayne, thanks. Look, in terms of stability of the government, having spent the last week in the country, you get a good sense just being in the streets, in the towns, talking to people. I'm not seeing anything abnormal here. There are some current discussions going on at government level around what they're doing. We are not in any negotiations with regard to change in mining codes in the country. Would I suspect that they will come? I think we've seen elsewhere in West Africa, there is a tendency to want to modify, bearing in mind that the mining code in this country goes back to 2013. So it probably, it's fair to say, it's likely to be due for renewal. If it comes, would I be surprised? No. The dialogue between ourselves and government, I think, is fairly good.
I think if there are going to be any changes, they're certainly going to be well telegraphed. I would sincerely hope that we all have a high degree of input into what goes into them. I don't see any immediate change in the immediate future.
Okay, great. Thanks. Maybe just wondering on the recent JV signed with East Star Resources. Can you just talk about the strategy going forward regionally for the company? Just given Endeavour's long-standing history of operation in West Africa, are you still keen on expanding within the countries where you operate, or are you now looking to diversify out into other developing regions globally?
I think the answer is, as I've mentioned previously, Wayne, we still see good potential in West Africa. We're really sort of doubling down, particularly on our brownfield exploration. I think you can see what Sonia mentioned about specifically at places like Sabodala-Massawa, highly, highly prospective piece of real estate. We've just got to go and look for it. We are certainly not walking away from West Africa, far from it. We do recognise that looking forward, and bear in mind, exploration is a long-term game. This is not something that we're doing for the next quarter. The reason why we're expanding and taking sort of baby steps outside of West Africa is we're actually looking longer term. We're looking for the mines that we will develop in the 2030s. That's the sort of time horizon that we're looking at.
Our focus is going to be on those areas that we think are highly prospective, relatively underexplored, and where we believe that our unique exploration expertise can be applied and we can be equally as successful over the next decade as we've been, if you look back over the past decade, in terms of cost-effective discovery advances in gold.
Okay, great. Thanks for taking my questions.
We are now going to proceed with our next question. The questions come from the line of Richard Hatch from Berenberg. Please go ahead. Your line is opened.
Thanks. Yeah, hi, Ian and team. Yeah, two questions. Firstly, just following on from the previous questions around tax and royalty regimes in West Africa, it has been a theme amongst some shareholders, just questions around that. I guess you've got your stability agreement in Senegal, and Burkina has already moved on that. What about Côte d'Ivoire? What are you kind of hearing or seeing in Côte d'Ivoire? How should we think about changes to royalty regimes in Côte d'Ivoire? Tax and royalty regimes in Côte d'Ivoire. That's the first one. Thanks.
Hey, Richard, Guy. Richard, in Côte d'Ivoire, I think a relatively well-publicized discussion continues between the Chamber of Mines, on which we're obviously represented, and the state. The state's primary focus appears to be, amongst other things, on the royalty rates. It's important to us, obviously, predominantly with regards to Asafu, because that's the site which we'd like to start developing, but for which we don't have any signed convention. That's the key aspect for us. In terms of Ity in particular, we do have, as you know, a stabilization clause on which we would rely to avoid any near-term increase in royalty. At such times, we're looking for permit renewal. Lafigué, we would hope to be signing a convention relatively soon, at which point we'd be able to confirm.
There is no doubt there is ongoing and upward pressure from all of the states, including Côte d'Ivoire, particularly in terms of that royalty rate.
Okay, understood. Thanks. I'll ask my second one, but just to be clear, you can go forward with Asafu construction without having that convention signed, or would you prefer to have it signed before you go forward? The follow-up, sorry, was how significant is a significant hike in the dividend, right? If I look at GBP 225 million, I mean, a significant hike could be 30%, but that takes it to 300 million. Is 300 million like a fair number, rule of thumb, or could it be more, or how do we think about the significance of significant? Thanks.
Richard, in terms of the numbers that you've spoken of, you may say that we couldn't possibly comment at this stage.
Thanks, Ian.
Richard, we will, of course, be coming out with some more directional numbers very early next year. It's just a question, so significance is obviously a subjective term, and a qualitative one at that, open to interpretation. It's just that we do need to get to the end of our annual planning process. We need to take some views on gold pricing, reassessing cash flows, making sure we understand where we think the Asafu numbers are going to land. In any of those scenarios, we see some significant—apologies—capacity for us to improve the current scenario, which we believe is relatively sector-leading anyway and is only upside from here. It won't be long, and we'll be able to provide you with a lot more quantitative directions.
Okay, much appreciated. Thanks, team. Cheers. Get well.
We are now going to take our next question. The questions come from the line of Uvais Habib from Scotiabank. Please go ahead. Your line is open.
Thanks, operator. Hi, Ian and Endeavour team. Congrats on a good quarter, and really glad to hear that production is tracking towards the top end of guidance. Ian, a couple of questions for me. I just wanted to start off with, sorry, Asafu. Exploitation permit approval and DFS looks like they're on track to completion in Q1. Ian, there was a lot of drilling completed over the last couple of quarters, and Sonia did mention that mineralisation extends over a 3 km strike length and remains open. Obviously, that looks like there's a lot more further upside over here. Is this drilling going to be included in the DFS, and is there any change or scope change in the DFS that we should expect?
Uvais, great question. Thank you. Look, I mean, we've actually addressed this issue previously. At some point, you actually have to sort of close off the reserve because you've got to do it against your published reserve and resource statement. We've taken the view that the numbers that we used in the PFS, which was a 4.1 million ounce reserve, would be the number that we would use for the study. We're cognizant of the fact that there is potential upside from there. Having said that, it's our belief that the 4.1 million ounces is more than enough against which we can do a realistic study, the final feasibility study.
We will make sure that whatever design we come up with and that we finally go with has inbuilt flexibility, and there will be the assumption that over the life of this project, there will be scope to expand the throughput over and beyond the five million tonne a year, which is the design profile that we're using for the initial study. We have decided to fix our view at that level, but the design will be flexible. We will not sort of bottle ourselves in. We will leave lots of room and shape and capacity in the design. If we wish to increase capacity, we could do so. It is not going to make life difficult for ourselves. That is the approach that we have decided to take.
Okay, thanks for that, Ian. Just moving on to exploration, the new five-year exploration strategy is expected in Q4. Are we going to get a resource target like we did previously? Maybe a part two to that is, where's kind of the low-hanging fruit that you would be targeting in the near term?
Yep, thanks a lot for the question. As I mentioned, the strategy will be present on the next quarter. However, just looking at the next five years, we will definitely double down in our existing operation. We have a pipeline of brownfield and greenfield that have been identified that will move forward, especially the brownfield in the short term, and greenfield that will be progressed in the next two, three years to really keep building on that pipeline. In parallel, we are really looking to expand the portfolio. That is why we are looking at this low-cost entry strategy of joint venture with partnership and juniors in different countries. Definitely, in the short term, we have identified a strong pipeline for brownfield in our existing areas and hoping, applying new technologies, new data sets to actually continue expanding on that.
As we did previously, Uvais, it would be the intention that we will be setting ourselves internal targets for achievement. So that we'll be doing as well.
Thanks for that, Sonia and Ian. And just in terms of brownfields, like you talked about brownfields targets, is the Ity donut concept still on the plate right now? And that's going to be a focus going into 2026?
Look, as a plan, absolutely. I mean, you've seen the plans. We're busy doing the engineering studies. We're looking at the implications of what is meant by this. I think, as we said previously, one of the real issues that we have at Ity is a very, very tight site. The Ity donut requires a fairly high degree of ground movement. The question is, where best do we put all the, particularly the waste material? That's what's requiring some very careful thought, requiring us to do some fairly rapid condensation drilling to make sure that, in terms of waste pile positioning, we're not putting it on any future ore reserves and sterilizing stuff that we could go into in the future. It's absolutely a very important part of organic growth opportunity potential within the group.
Perfect. Thanks for that, Ian. Thanks for taking my questions. Sonia, looking forward to meeting you soon.
Me too.
We are now going to proceed with our next question. The questions come from the line of Farhad Tariq from Jefferies. Please ask your question. Your line is open.
Hi, thanks for taking my questions. Ian, I just wanted to come back to your first answer on Senegal. There was a Bloomberg article just this morning talking about the government seeking to perhaps change its mining code by the end of the year, given the debt crisis in the country. Your answer said you don't see an immediate change in the immediate future. Can you maybe just comment on that? Is it based on discussions that you've had with the government or the team has had with the government? Thanks.
Look, Farhad, we've not had any discussions with government around the change. We also saw that comment. I think there's a huge difference between an aspiration and an ability to deliver. I think, being realistic, there's no way that government may want to have a change in the mining code. I do believe that it's not really going to happen. I mean, at Sabodala-Massawa, our current mining code extends to 2040. Any changes to the existing 2016 mining code are unlikely to affect us at Sabodala-Massawa in the short term. There's always lots of commentary. In fairness, as I think Guy mentioned earlier, all jurisdictions are looking at ways of increasing their take with the higher gold price received. Let's be frank, that's not unique to countries where we're mining. Every country around the world is looking at ways of grabbing extra tax dollars.
If you were asking me, is there going to be a change by the end of the year, I would say that's not going to happen. If you were asking me what is the trajectory, I think it's fair to say that the trajectory, like in all countries, is likely to be higher, but over the longer term. Timeline of which, I'm afraid at this stage, I can't actually define.
That's helpful. Thanks. Just switching gears to exploration, philosophically, is there a prioritization of mines that are, let's say, around the 10-year mine life and you want to maybe extend those mine lives, for example, Houndé and Ity, or is it really just based on where you're seeing the most geologic potential and that's where the exploration focus and the rigs will be?
I think it would always be great if you had a short mine life and there was lots of potential and you could focus there. That would be the logical thing to do. Your exploration focus is absolutely going to be where you believe is the maximum potential. We're very fortunate that in our portfolio, we have some great potential. Historically, there's been perhaps insufficient emphasis on the underground potential. If you look at Sabodala-Massawa, Ity, Houndé, all three of those mines have been fabulous mines within the portfolio that have really good underground potential. We've recognized this, that this is a great internal upside potential for the group. We are increasing our focus on underground exploration, but importantly, also bringing on board people into the group who've got extensive underground mining, planning, execution capability.
We're preparing ourselves that a future within Endeavour is not just going to be open cut. It'll be open cut as well as appropriate and commercially viable underground operations as well.
Great. Thank you.
We are now going to proceed with our next question. The questions come from the line of Marina Calero from RBC Capital Markets. Please go ahead. Your line is open.
Hi, good afternoon. Thanks for the call. I have two questions on my side. The first one is a follow-up from previous questions on the JV agreement announced today. You're clearly looking to diversify into new regions. Can you comment where else you're seeing potential at the moment? As an extension of that, how much capital are you looking to invest in these types of agreements going forward? Thank you.
Yeah. Marina, again, I think previously we've flagged that we certainly have an interest in the Tethyan Belt. Clearly, that's why Kazakhstan has been flagged as being high potential. Let me reiterate what I said earlier, which is areas of high prospectivity, the potential for tier one deposits, as well as being relatively underexplored, where we can apply our previously acquired expertise and knowledge, and also perhaps our familiarity with specific geology, which is why we've also said that parts of sort of northern South America are highly prospective. It's the same geology as we're exploiting in West Africa. Those are the areas of focus. It's not just a shotgun approach to expanding our exploration portfolio.
It is a very deliberately focused program where we believe our approach to exploration, our ability to have a higher probability of success, we believe that we can actually repeat the success that we've had over the past decade and going forward do the same, generate more greenfield ounces and prepare ourselves for the next mines post-Asafu.
Thank you. That is very clear. I have one more question for Sonia. On the non-refractory target that you are drilling at Sabodala-Massawa, can you give us a bit more color on that and when we could see those coming into the mine plan?
For the Kalsara, we are still completing the drilling campaign that has two aspects. One, on already a high-grade part of the resources, it was infill drilling to really get the two next year to uninfer the resource. In parallel, we are also doing the exploratory drilling to really understand the full extension of the resource. What we see today is an extension of potential over 5 km where the mineralisation continues. That is why we are working with the team to fully understand the resource size, which will impact where it will be scheduled on the mine plan. On the other opportunity, Makana, this is a brownfield opportunity nearby our CIL facility, our plant. We will accelerate in 2026 the drilling campaign to get into indicated resources.
The goal is to actually accelerate to the mine plan as we get into 2027 and display the lower-grade resources.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Anita Soni from CIBC World Markets. Please go ahead. Your line is open.
Hi, good morning, Ian, team. I just wanted to ask a couple of CapEx-related questions. On Lafigué, I think the CapEx has been shifting from sustaining to non-sustaining. I think, can you just give me some color on that? I thought you said it was related to a focus on the different kinds of stripping that you're doing. Should we then assume that that sustaining capital will catch up next year? Is that a good assumption or not?
Hi, Anita, Guy. I'll try this and if Jory wants to add anything. Yes, you're absolutely right. There is a slight change in the Lafigué CapEx split. So there's another 10 million in our non-sustaining. That is effectively associated with a revision to our stripping plan. So we're increasing some stripping at the main pit that's effectively allowing us better access in the short term to fresh ore and ounces. We will push stripping into non-sustaining from sustaining if the pushback or the strip itself is both ahead of life of mine strip ratio as well as accessing ore that's going to be mined over multiple years. In this particular case, those criteria have been met and consequently it's moved from sustaining to non-sustaining. I think over the longer term, we don't have any fundamental shift in our expectation for total CapEx at the site.
This is a question of short-term changes to mine plan.
Oh, okay. So the strip ratio is higher than life of mine, and so it moved from the sustaining to.
In this particular strip.
Okay. And then secondly, on Sabodala-Massawa, the processing costs dropped this quarter. I'm just wondering, is that a function of something that's, I guess, more sustainable, or is that really just a function of the higher contribution of the CIL ore, which I presume is slightly cheaper than the BioX?
Anita, maybe I can chat to you offline, just understand exactly the quantums you're looking at. I think it is fair to say, though, from a broader trend perspective, yes, our processing costs at Sabodala-Massawa have benefited from some improvement in recoveries, which we touched on earlier in the call. The other impact that you're likely to see having started to come through in our 2025 numbers and arguably going to be a bigger contributor into 2026 is the solar investment. Our solar investment, which started coming online this year, is an investment which we've been very proud of, not only for its ESG credentials, but the fact that it does have a fundamental improvement to our operating costs. As the solar has ramped up, it's starting to contribute to a greater proportion of our overall power consumption.
I think, again, as a long-term trend, should be underpinning some of the improvements you're seeing in processing costs at Sabodala.
Thank you. That's it for my question.
Thank you. As a reminder to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. Once again, it is star 11 on your telephone and wait for your name to be announced. We are now going to proceed with our next question. The questions come from Zalinda Mohamed Sidibe from National Bank Capital Markets. Please go ahead. Your line is open.
Thank you. Good morning, Ian and Tim, and thanks for taking my questions. Guy, I think you mentioned that the goal is not to stockpile cash as you're advancing through the next year. Could you maybe help us understand what's the minimum amount of cash you would like to hold while advancing the build-out assessment in order to better understand maybe your capital return profile or your capital allocation priorities? Thank you.
No problem. I'm afraid I'm not going to be able to give you, even through the back door, sufficient quantification to kind of reverse engineer the shareholder returns. What I can just point to, which I think we've discussed before, is in terms of minimum cash requirements, we fundamentally look to hold sufficient liquidity at both mine sites as well as offshore. When we look at those numbers, we tend to look at GBP 150 million of liquidity offshore. We also like to keep around GBP 15 million-GBP 20 million of liquidity at mine site. I do keep trying to underline the liquidity point here. If we hold it in cash, that's fine, but it does not necessarily have to be in cash. It just needs to be liquidity availability. I would reiterate the point made during the presentation itself.
We have no stated short or medium-term ambition to be holding cash piles. However, those cash piles, as you would expect, form part of a capital allocation and ongoing capital allocation. We will look to, of course, provide the right levels of liquidity and balance sheet strength. Equally, we will continue to focus on shareholder returns and cash CapEx requirements of the business for organic growth. There is not a substantial amount of cash requirements or liquidity at either an offshore or a site level.
All right. Great. Thanks for that. Maybe if I could follow up on the working capital side of things, you noted that you expect a big part of that to be coming out and flowing out in 2026. Could we expect this to be mostly coming out in 2026, or would some be seen in 2027 as well? Just wanted to think about the amount and levels into next year. Thank you.
Sure. Sorry, just to make sure I understood. You're talking about the unwind profile?
Exactly. The unwinding of the inventory and accounts receivable.
Okay. Perfect. I think from a stockpile perspective, which is arguably the most material number, yes, we see going particularly into 2026, partly as a result of the mine plans, the ability to start unwinding. In particular, as I mentioned, it's likely to be happening at Lafigué as well as Sabodala-Massawa. Sabodala-Massawa, as we start blending slightly differently and looking to change our process plant feed, we should see North Zone material starting to become consumed in H2 of 2026. Lafigué, it's the same point. We've got a plant that is currently managing to produce well above nameplate capacity. As a result, we've stockpiled in order to be able to ensure that that plant is filled through 2026.
While I think the trajectory is better for 2026, I think it would be presumptuous to assume that we'd be able to consume all of our stockpiles. Clearly, there are going to be stockpiles consumed over life of mine, but there is an improving trend between 2025 and 2026, as I've described. I think slightly more difficult to answer is on the VAT. Where we have higher degrees of confidence is in and around Côte d'Ivoire and Senegal. Côte d'Ivoire is associated with Lafigué. Lafigué having just come online and, as it turns out, simultaneously, the state of Côte d'Ivoire implemented a new administrative process, an online automated process in the same year. Those two things did end up slowing down our ability to submit and claim VAT reimbursements. The quarterly nature will not change.
I expect us to be able to stabilize at a level which is slightly lower than where we are now. That should, and that would be in 2026. That would flatten in terms of overall movements unless the nominal amount changes. In Senegal, we remain on track. It is a monthly process. That is just a question of lead time. The nominal amount, if it goes up associated with cost, it might increase slightly, but that I expect to remain relatively flat. The big unanswered one and very difficult to answer one is Burkina Faso. We do not see Burkina Faso as a counterparty risk, which is why we do not account for it as such. Our ECL associated with our VAT receivables is focused entirely on timing.
The Burkina Faso state has always remained true to its word, and when it owes us money, it pays us. The question is around timing because they're under their own cash constraints. We do not see the counterparty risk, but we remain cautious in terms of being able to commit to timing. Consequently, we're looking at alternatives where we might be able to look into some kind of factoring that allows us access to the cash. Failing that, arguably, this is going to be a slightly longer-term issue, but not one which we believe is insurmountable. We'll continue to work on it. Between 2025 and 2026, we should see some improvement. Thereafter, we'll have to wait and see whether the success of the factoring program can be repeated.
Thanks so much for that detailed answer, Guy.
We are now going to proceed with our next question. The questions come from Zalinda Mohamed Sidibe and Felicity Robson from Bank of America. Please go ahead. Your line is open.
Thank you for taking my question. At Mana, you're expecting costs above the top end of the guide, in part due to higher power costs and issues around grid stability. How can we think about the cost profile going forward there, please?
Thank you, Felicity. I think, as we previously mentioned last quarter, we know that we do have issues around costs at Mana, and we do still have a lot of work to do. We mentioned that the two or three key elements here are the reliance still on the self-generated power. Hence, we are currently improving some of the initiatives, one of them being the transformer that we will be setting up. Normally, by the beginning of next year, we should be seeing an improvement, at least on the power cost, because what that will allow us to do with that transformer is to be able to then use the grid on the underground mining. That is one thing. I think in quarter three, what we've seen as well is that one-off cost due to the transition from two contractors to one contractor now, which we're very comfortable with.
That means that there is a lot of productivity initiatives that we'll be putting in place. One thing is for sure for Mana, I think what we've seen quarter on quarter is that in terms of production, which are stable, Mana is still contributing to the good productions as overall. It's still generating cash. I think for now, we just need to continue putting together some initiatives in order to reduce the costs at Mana.
Okay. Thank you.
Thank you, Felicity.
Thank you. That will conclude today's Q&A session and today's conference call. Thank you for your participation. You may now disconnect.