Endeavour Mining plc (OTCQX:EDVMF) Q3 2022 Earnings Conference Call November 10, 2022 8:30 AM ET
Company Participants
Martino De Ciccio – VP, Strategy & IR
Sebastien De Montessus – President, CEO
Joanna Pearson – EVP & CFO
Mark Morcombe – EVP & COO
Conference Call Participants
Amos Fletcher – Barclays
Harmen Puri – Bank of America
Daniel Major – UBS
Don DeMarco – NBC
Sandeep Peety – Morgan Stanley
Ovais Habib – Scotiabank
Mohamed Sidibe – CIBC
Operator
Good day, and thank you for standing by. Welcome to the Endeavour Mining Q3 2022 Results Conference Call. [Operator Instructions] 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.
Martino De Ciccio
Hello, everyone. I am Martino, Vice President of Strategy and Investor Relations, and I’d like to welcome you to our Q3 2022 results webcast. On the call, I am joined by Sebastien, 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 Sebastien to walk you through the highlights. Sebastien?
Sebastien De Montessus
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 maximizing 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 dividends 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, ’23 in cash, which will both reduce our gross 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 Lafigue will add lower cost [products] to 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 ounces to 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 rankings 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 host — while our lost time injury frequency rate has continued to improve over recent quarters we were saddened to report the fatal accident at our Ity mine on October 27, when one of our contract [Technical Difficulty] as a result of injuries sustained during the blasting activity. This is a reminder that it doesn’t matter how good your LTI rates 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 the 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 guided range as well. This is very important to us as it will be the 10th consecutive year of meeting or beating our guidance 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 noted 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 benefited from continuous operational improvements from the pricing mechanisms resulting from our long-term supply contracts, from favorable exchange rate 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 ounce level over the last three years. We’re looking forward to both the Sabodala-Massawa expansion and the Lafigue 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 coal price coming off a bit. During the quarter, we made a gain of approximately $20 million which equates to around $60 per ounce sold.
On the next slide, 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.
And as mentioned earlier, this strong cash flow generation is [Technical Difficulty] on 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?
Joanna Pearson
Thanks, Sebastien. 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 Sebastien 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 withholding tax payments 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 large impact has been the lower gold price, followed by the higher working capital outflows and higher taxes paid, which were offset by lower operating expenses. Of note, the working capital outflow was 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 the current volatile cost environment. And lastly, the income taxes paid increased [Technical Difficulty] 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; you see the bridge from Q2 to Q3. In Q3, we generated $110 million from operations, net of reimbursing $50 million on the RCF. We then spent $30 million on growth capital.
And, as Sebastien 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 $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 changes in our net cash also includes the $52 million impact of the remeasurement of our cash holdings 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 and similar [Technical Difficulty] slide. What is nice to see is that the strong cash flow generation we have achieved during the first nine 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 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 repayments projected until 2026.
Turning to Slide 19, as we continue improving our gross debt position, it is important to note that we are already one of the lowest leverage major gold producers given our net cash position. While we believe that our business could and should have time 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 times, and quickly deleverage ourselves when we are not in the 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 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 Sebastien.
Sebastien De Montessus
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 ’23. The reason we did this is so that we can provide a strong outlook on shareholder returns while pursuing our growth plans. And 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. And 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 $0.5 billion since the start of ’21, and is expected to return a minimum of $780 million by the end of ’23. 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.
And Slide 23 highlights our attractive pipeline of growth projects. Our priorities are the construction of the Sabodala-Massawa expansion and the Lafigue 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 Lafigue project construction are underway. Construction at our Sabodala-Massawa expansion is progressing well with approximately 50% of the initial capital now committed. At Lafigue, 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 Cote 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 Cote d’Ivoire. Given the success, we are pleased to reiterate that we are on track to achieve our five year discovery target of 15 to 20 million ounces of indicated resources at less than $25 per ounce.
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 the 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 Ivorian government to support the training of 150 youth in the communities surrounding our Lafigue project, so they can learn a trade and become employable as the mine construction progresses. Another example is 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 and will train around 300 entrepreneurs in the recycling and recovery of plastics to clean up the [past] into reusable products.
And finally, another great initiative that complements our mine site [Technical Difficulty] 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 social economic challenges to affected countries’ populations. Once complete, the Great Green Wall will be the largest living structure on the planet, 3x the size of the Great Barrier Reef. And 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 UK continues to increase significantly with more than 40% of our shares traded in the UK and over 34% of our shares held in the UK. This has been helped by our inclusion into the FTSE 100 as we continue to attract UK and European investors, given we are the largest pure gold producer on the premium segment of the LSE and are attractive investment proposition.
I will now hand over to Mark to talk you through our performance by mine. Mark?
Mark Morcombe
Thanks, Sebastien. Today, we are speaking to you from Abidjan in Ivory Coast where we’ve just completed visits to our flagship assets. We’re also very happy to welcome our Board members on site [indiscernible]. 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’re tracking towards our full year guidance. As you can see, our strong Group production is driven by outperformances at our Hounde, 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 all-in sustaining costs which are fitting 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 during — through various site initiatives.
I will now walk through the performance of each asset starting with Sabodala-Massawa on Slide 31. At Sabodala-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 pit grades quarter-on-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 pits. 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 throughput as well.
Going into a bit more detail on Bambaraya on Slide 32, we’ve 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 minable ounces 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’ve 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 derisk 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 has been involved throughout the studies and detailed design to ensure all minor operational details affected into the final design ahead of the construction, while helping to identify areas where we can save costs.
Moving to Slide 34, at Hounde, 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 tonnes processed despite the rainy season, which is largely due to ongoing optimization initiatives. Due to this great performance, we accelerated Stage 3 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 2, 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 3 and source ore predominantly from Vindaloo Main and Kari West, which should 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 cost decreased due to less waste stripping activity during the quarter. The increase in production was driven by higher proportion of higher grade fresh and transitional ore 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.
As outlined earlier — sorry, I’m moving on to Slide 36. As outlined earlier this year, we are working on several optimization initiatives across the Group and the Recyanidation project at Ity is a good example. This circuit aims to improve cost 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 3 of the West pit. We expect this trend too in mine grades to continue. However, supply chain delays have limited on productivity 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 have 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 Mana open pit to establishing the Wona underground and the commencement of mining at the new Mauola open pit. We are progressing very well with the development of the Wona underground. We completed 1,553 meters of advance during the quarter. In addition, 45 meters was vertical development for ventilation rises and the sky rise. We are on track to commence mining starts later this year, once the establishment of initial primary infrastructure has been completed. At the same time, we are pre-stripping in the Maoula pit and on track to start feeding ore from Maoula in early quarter four 2022. In the fourth quarter, we expect to continue feeding high grade ore from the Siou underground, with additional ore tonnes expected from Wona underground and Maoula satellite pit. As such, we expect grade and recovery to be higher. As all historical stockpiles have been depleted, we will have short periods where we stop processing in order to build stocks, which will enable further preventative maintenance to be undertaken.Before handing back to Sebastien, I’ll highlight some of the main optimization initiatives we are working on. We’re always looking to improve our production and all-in sustaining costs, to strengthen the resilience of our business. Particularly this year, as cost inflationary pressures have been impacting the mining sector.
As you can see on Slide 40, each of the operations are undergoing key optimization to improve costs, 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 Hounde 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 fields. 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 and 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. Sebastien, back to you.
Sebastien De Montessus
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 ’22 and on into ’23. As always, I’d like to thank my team for their 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?
Question-and-Answer Session
Operator
Thank you. [Operator Instruction] The First question for Amos Fletcher from Barclays.
Amos Fletcher
Yes. 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?
Sebastien De Montessus
Hi, Amos, Sebastien. Supply chain I mean is not — I mean a significant problem is, from time-to-time, we can have some delay depending on the security environment for the convoys, I mean to get to the mine site and obviously, you’ve seen that there was coup at the end of — at the end of September and therefore, this was disrupted a bit by delaying by a few days, some of the convoys and goods that were expected to the mine sites. But overall, I mean it’s more sometimes some delays which might impact from one quarter then and benefit from the other quarter, so minimal disruptions, but we have to flag it. Overall, we are very happy and confident on the way it is currently operating.
Amos Fletcher
Great. And then 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 in the PLC currently? And are there any thin cap constraints on how much you can lend from the subs to the PLC? So, just trying to think about whether we should expect these type of withholding tax and minority dividends to be a recurring issue over the longer term as and when you move into a sort of higher cash distribution mode?
Sebastien De Montessus
Sure. I mean, so I mean this quarter was a bit unique, because overall we upstream close to a bit more than $600 million from dividends from the entities within West Africa. So, when you take out I mean the withholding tax and the minority interest, that $500 million-plus that we’ve repatriated at the holding level and 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 two-third in country and one-third at the PLC level in terms of split between where the cash is located.
Amos Fletcher
Okay, got it. And then last question I just wanted to ask was on Wahgnion, where the all-in sustaining costs obviously well above your typical thresholds, mine life also below target. I just wanted to ask you, 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 see your filters? Thanks.
Sebastien De Montessus
Sure. Well, ’22 with a bit of a transition year, I mean at Wahgnion. So, we still see a lot of potential in terms of exploration for Wahgnion going forward and therefore at this stage, I mean it’s still an asset within the portfolio. I mean clearly you know in ’24 with the increased production at Sabodala-Massawa and with Lafigue coming online with 200,000 ounce and 250,000 ounce annual at low all-in sustaining cost, then by that time we’ll probably review some of those less I would say critical assets, which are currently in the portfolio, but that’s more for ’24.
Operator
[Operator Instructions] The next question for Harmen Puri from Bank of America.
Harmen Puri
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 are 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?
Sebastien De Montessus
Sure. Hi, Harmen. I mean, it’s a bit early, I mean for us, I mean to comment on ’23 given that the budget sessions are due at the end of this month. So, I don’t have yet I would say numbers. We usually I mean disclose the guidance for the year around the end of January. I would only say that the objective is 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 we’d would expect ’23 to be in between those two range. So, $900 and $950, I mean is the expectations for ’23 and then we would expect things to continue to improve as we get in ’24, the new projects on stream with the Sabodala-Massawa expansion and with Lafigue that we’ll be operating at $900 or below.
Operator
We are now taking our next question from Daniel Major from UBS.
Sebastien De Montessus
Yes, we can hear you Dan.
Daniel Major
Oh, hi. Sorry, my line was a little unclear. Yes, thanks for the questions. Yes, the first question just on the CapEx outlook, it looks this year is that you’re trending a little bit below your guidance for sustaining CapEx and perhaps a little bit above for — for non-sustaining, could you just give any steer on what we should be expecting in the fourth quarter for CapEx items? Also now you’ve approved Lafigue, what’s the sort of CapEx or growth CapEx item we should be seeing in Q4? And then I guess the second part of the — I appreciate you’re still probably doing the budgets. But directionally, how we should be thinking about those two items into 2023? Yes, sustaining, non-sustaining and then the level of spend at — at Lafigue? Thanks.
Sebastien De Montessus
Sure. Thanks, Dan. I mean on the sustaining and non-sustaining, obviously there are some phasing sometimes due to depending where the progress on the different assets. In Q4, I mean we would expect a with a 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 between the two. So, higher sustaining in Q4 compared to Q2, Q3, but lower non-sustaining in Q4 versus Q2, Q3.
Daniel Major
Very clear. Thanks. And just one other financial question as it basically follows up on Amos’s question slightly. When we think about 2023, can you give us any guidance range on where we should be thinking about P&L and cash tax rates for ’23, factoring-in some of the I guess the scope for sort of more upstreaming like you saw last quarter?
Sebastien De Montessus
Sure. Again, I think we’re still expecting the overall budget process I mean to converge at the end of the month, but I would say that next year you probably see a slightly lower impact in terms of dividend, withholding tax and so on, as we have mainly focused this year for upstream cash for the repayment of the convert in — in March, but the rest I mean will be in line in terms of overall tax rate.
Daniel Major
Okay. So, would that be kind of Group effective tax rate in the high 20%s or — high 20%s, 30%s, is that the right sort of level?
Sebastien De Montessus
I would say between 20% to 25% as Group.
Daniel Major
Okay. Thanks. And then just last question, it sounds interesting discovery I guess in West Ivory Coast, can you give us any more details on I guess the logistics and the kind of development trajectory beyond obviously the [indiscernible] results that you’ll publish in due course? Are we close to good infrastructure and a little bit more color on the location of the project?
Sebastien De Montessus
Sure. So, there will be a specific press release that will be out in the next — in the next week. I mean, in particular on Tanda-Iguela. In terms of infrastructure, that’s about 400 kilometers away from Abidjan, but alongside a very good infrastructures, so pretty easy I mean to access. The environment there in terms of road and so on, the environment there is pretty, pretty clear.Also we are about 30 kilometers away from Wahgnion border and yes, I mean, overall, the environment is pretty, pretty positive. That’s what we like, it’s a bit like Lafigue, you don’t go into complex I would say environment, completely isolated. It’s not, you don’t have either big — big cities or villages, which are close by that would require a huge resettlement. So yes, I mean, overall the environment there is very, very attractive and that’s why, beyond some of the drilling results that we will be presenting, we’re pretty excited by this target.
Operator
The next question from Don DeMarco from NBC.
Don DeMarco
Thank you, operator, and good morning, Sebastien and team. My first question, Sebastien, has to do with the non-sustaining CapEx. As noted the release that the guidance is expected to be above $204 million, can you provide a little bit more color here? For example, how much do you expect it will be over and does this actually offset some spend in 2023?
Sebastien De Montessus
Joanna, you want to comment?
Joanna Pearson
It would be — 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 Sabodala-Massawa, BIOX project, as well as Lafigue. So, we would expect some compensation next year.
Don DeMarco
Okay. And so, do you expect just a sort of a nominal top-up above the $204 million, or is it more like 10% or 15%?
Joanna Pearson
Yes, I wouldn’t expect it to be significantly higher. Just, it really depends on the timing of some of the cash flows in the quarter and where we’re at in terms of the timing of some of the commitments, but yes, so we would expect to be just slightly over guidance.
Sebastien De Montessus
Yes. We brought forward, I mean some CapEx using — using that we’ve deferred, for example, the Lafigue project. So, we’ve been deferring some growth CapEx that was initially expected for 2022. So, 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. So, overall CapEx I mean I think is in line for ’22 and consistent through ’23. We’ll have probably less non-sustaining CapEx in ’23.
Don DeMarco
Okay. Good. And I guess on a similar topic then, with net cash easing and you’ve got the growth CapEx increasing with Lafigue and so on, do you plan to put some of your share buybacks on hold temporarily?
Sebastien De Montessus
Yes, Q3 lower net cash flow is really due to the current quarter. I mean, we’re expecting a good and strong Q4, that should see back again net free cash flow at the similar levels that what we saw in Q1, Q2 for Q4, and therefore we don’t see, given the strong performance of the — of the operations, why the buyback program should be reduced. We still have a very strong and healthy balance sheet, net cash positive. So, that’s part of the program. And again, that’s why also we had this hedge in place in order to allow to continue to generate strong cash flow during this constriction period, irrespective of the gold price.
Operator
The next question is from Sandeep Peety from Morgan Stanley.
Sandeep Peety
I have couple of them. I’ll take one at a time. So firstly, it’s a follow-up question. So, 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? And should we expect some of those to roll forward to 2023, i.e., implying higher all-in sustaining CapEx going into next year?
Sebastien De Montessus
Well, 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 Hounde, but also on the Bambaraya at Sabodala-Massawa which resulted in more pre-stripping non-sustaining activities in Q3. Overall, compared to our guidance for the full-year, we might be slightly lower compared to the initial guidance. But overall, I would say in line when you add sustaining and non-sustaining.
Sandeep Peety
Okay. And 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 and as such should we be expecting slight cost year-on-year for 2023 on spot oil prices?
Sebastien De Montessus
Well, I think that as you probably saw, we tend to have — the fuel price in country is regulated by the government, which has provided a bit of immune compared to the rally on the oil price in particular in Q1 and up to the end of Q2, with lower increases in fuel cost in the countries where we operate compared to the oil price rally. The — usually the fuel price I mean is changing in country on a quarterly basis or semi-annual basis. So 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, we should see that reflecting progressively not at the same path and speed as you will see it in North America and Australia for example, but at some point it should again retranslate also. The key point has been clearly that we are monitoring has been the FX also between euro and dollar, is a big part of our cost, 60% of our cost is euro denominated and therefore has been benefiting from a weaker euro and a stronger dollar during the period.
Operator
Thank you for your question. We are now taking our next question from Ovais Habib from Scotiabank.
Ovais Habib
Hi Sebastien 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, I apologize if you’ve answered — the questions have been already answered. But my first question was, in terms of — looks like you — Endeavour would be on the lower end of the all-in sustaining cost guidance and Sabodala expansion seems to be progressing really well as well. Sebastien, are you seeing some relief on inflationary pressures as you head into 2023?
Sebastien De Montessus
I would say it’s probably a bit early I mean to say that. And first of all, as you saw, we’ve been less impacted than others in West Africa. And I’m expecting the budget review I mean to happen at the end of the month. So, this will give us much better view on what to expect for 2023. Yes, so I would say that if overall inflation elsewhere 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 other regions, the same way it was deferred when it started I mean to peak off — to peak higher at the beginning.
Ovais Habib
Got it. And I guess my follow-up 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?
Sebastien De Montessus
Sure. Difficult for me, I mean to comment beyond what we can read in the papers, given that we don’t have operating mines in Mali. So, Kalana is not audited given that it’s not in operation, so there is no particular tax angle. So, it’s not been affected I mean on that front. But, 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.
Operator
Thank you for your question. We are now taking our next question from Mohamed Sidibe from CIBC.
Mohamed Sidibe
Most of my questions have been answered on the OpEx and CapEx front into next year. So, thank you and congrats on the quarter.
Sebastien De Montessus
Thanks, Mohamed, speak later.
Operator
Thank you. There are no further question at the moment, I will hand back the conference over to the management.
Sebastien De Montessus
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 talk soon.
Operator
That concludes the conference for today. Thank you for participating. You may all disconnect.
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