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TABLE OF CONTENTS Nov 25 - Dec 1, 2013 Volume 99 Number 41 - 0 comments

Houndé looks like a winner for Endeavour

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VANCOUVER — The Houndé project in Burkina Faso could be developed into a mine churning out almost 180,000 oz. gold annually for an investment of just US$315 million, according to a new feasibility study from Endeavour Mining (TSX: EDV; US-OTC: EDVMF).

Now Endeavour just has to permit the project. Thankfully that is a process the company understands, having already permitted and built a gold mine in the country.

Houndé is in southwest Burkina Faso, 250 km southwest of Ouagadougou. Endeavour owns the project in its entirety, though the government would assume a 10% ownership stake if the project is developed. African Barrick Gold (LSE: ABG; US-OTC: ABGLF) holds a 2% net smelter return royalty.

The project hosts the Vindaloo deposits, which are intrusion-hosted gold zones spread along 7 km of tested strike. The mineralized package strikes northeast and dips steeply west, and remains open along strike and to depth. A separate, smaller resource is located in the Madras area to the north.

The deposits at Vindaloo and Madras host 29.4 million measured and indicated tonnes grading 1.98 grams gold per tonne, plus 1.84 million inferred tonnes averaging 2.24 grams gold.

The feasibility study looked into developing five open pits along the Vindaloo trend and two pits at Madras, over an 8.1-year timeline. At Vindaloo the closely spaced pits would stretch out along 4.8 km of strike and tap into saprolite, transition and fresh mineralization. The two pits at Madras would only produce saprolite and transition ore, and would extend along 900 metres of strike.

The planned pits encompass 24.6 million proven and probable tonnes grading 1.95 grams gold, for 1.55 million contained oz. Metallurgical studies completed on 22 Vindaloo and Madras samples indicated that a conventional crushing, milling and carbon-in-leach process would recover 93.4% of the ore’s contained gold.

With a 9,000-tonne-per-day processing facility, the operation would produce 178,000 oz. gold annually for eight years.

A natural valley 4 km west of the plant would be used to store tailings. A near-surface layer of clay-rich material means the facility would not need a liner, and the valley is large enough that the facility could hold twice the planned volume of tailings, creating room for expansion.

The deposits sit less than 3 km from a paved highway, and a 225 kV power line runs through the property. Sonabel, the state power entity, has agreed in principle to supply Houndé with power, though Endeavour and Sonabel have yet to negotiate terms.

The mine would employ 470 people. An on-site camp for 130 people would house senior staff. The rest of Houndé’s employees would live in nearby communities.

There are lots of nearby communities — in fact, to develop the Houndé mine, Endeavour would have to move and compensate numerous subsistence farmers. The farmers rent their land from a small group of landowners who control the 20 sq. km of land Endeavour would need to buy. Endeavour says that “compensation mechanisms for the land, buildings, trees and crops are part of the ongoing permitting process.”

Endeavour expects to complete that permitting process in the next six to nine months. Once regulators approve, Endeavour’s board will give the mine a green light. Endeavour expects development would take 21 months. 

The mine would cost US$315 to develop. For that investment Endeavour could produce an ounce of gold for US$775, including sustaining costs and royalties. Using a gold price of US$1,300 per oz. and a 5% discount rate, the project carries an after-tax net present value of US$230 and should generate a 22.4% internal rate of return.

Endeavour already operates three gold mines in  Ghana, Mali and Burkina Faso. Together the operations produce over 300,000 oz. gold annually.

A fourth mine is under construction at the Agbaou project in Côte d’Ivoire, where initial gold output is expected in the first quarter of 2014. Agbaou will add more than 100,000 oz. to Endeavour’s annual output.

With so much on its plate, Endeavour is holding back on a development decision at Houndé.

“While work continues on obtaining the Houndé mining permit, we are evaluating how best to integrate Houndé into Endeavour’s production-growth plans,” said Neil Woodyer, Endeavour’s CEO, in a statement.

On news of the Houndé feasibility study Endeavour shares rose 3¢ to 63¢. The share price has struggled at similar levels for several months, after falling from above $2 to 45¢ in the first half.  There are 412.5 milllion shares outstanding, for a $251-million market cap.

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