FeaturedEndeavorMining

Endeavor Mining Capital Corp. (EFV-T)
Issue Date Featured	Accompanying Article or Commentary
July 2003	Endeavor Mining Capital has a different mandate from the typical company that Financial Insights follows. It is a spin-off from Endeavor Financial and began trading in September, 2002. I view it as offering less risk than a junior mining venture while presenting great profit potential. Rather than being a mineral exploration or development company, its purpose is to support these companies in their quest to achieve their objectives. Endeavor accomplishes this goal by supplying the junior companies with financial guidance, help in mergers and acquisitions, and most of all by supplying them with capital. Endeavor is a newly formed merchant banking company. Their primary source of income is by loaning money to junior companies in the mining field. In return, they receive interest on their loans and equity in the companies that they finance. Endeavor will only lend money to companies that have sufficient assets, that can be encumbered, to assure the return of their capital. In effect, they protect themselves from loss if the financed project fails. The expertise of Endeavor’s management spans the gamut of mining, finance, investment management and banking. Its chairman is Michael Beckett. He is also the chairman of several other companies including Ashanti Goldfields and Oxus Mining. Neil Woodyer, its CEO, is the past CEO or Lloyds International Trading, a subsidiary of Lloyds Bank. Frank Giustra, a director, was the CEO and Chairman of Yorkton Securities for several years. Yorkton was one of the largest Canadian brokerage firms that specialized in junior mining companies. Mr. Giustra was instrumental in their success. In a word, the background and expertise of the various members of the team guiding Endeavor is awesome. The exploration and mining business is incredibly capital intensive. In fact, the inability to fund its activities will lead to either a company’s dormancy or demise. On the other hand, if a company has access to capital it has the opportunity to achieve its ultimate success. Given the great difficulty that junior companies often have in acquiring needed capital, the existence of Endeavor Mining Capital offers them many benefits. For example: a company has moved a mining project to a point where it is ready to build a mine but needs financing to proceed. If Endeavor believes that they will succeed they will advance them the necessary capital. In return, the company will guarantee the loan with their assets, pay a reasonable rate of interest on the loan, and also issue Endeavor warrants on shares of their stock as a sweetener. The company benefits because they can move forward. They will also increase their shareholder’s value and the attending rise in their share price. Endeavor benefits from their interest payments and fees for guiding and funding the company, but primarily from exercising their warrants. Prior to being spun out from Endeavor Financial, Endeavor Capital successfully financed among others, Wheaton River, Bema Gold, and Thistle Mining. A share price is determined by the marketplace’s perceived future value of that company. If a company is advancing towards success, its shares will prosper. On the other hand, if the entity is struggling its share price will suffer. When Endeavor agrees to fund a junior company the company’s shares will typically be severely depressed. This will result from the enterprise’s earlier inability to advance their projects and the belief of many investors that they may fail to achieve their goal. This condition allows Endeavor to acquire their warrants when the shares are at distressed prices. Warrants allow its owner the option to acquire shares in a company at a stated price for a specific time-frame. This allows Endeavor the opportunity to greatly benefit from the success of the company, which it directly fosters, and at no risk to themselves. They receive the warrants when the common stock of the company is cheap, give the marketplace reason to revalue the stock at far higher prices, and profit from the greatly appreciated warrants. Endeavor is based in the Cayman Islands and is subject to no direct taxation. They’ve covered all of their bases. The management of Endeavor receives an annual management fee of 2% on the first $50 US million of net assets, 1.5% on the next $50 US million and 1% on amounts in excess of $100 US million. Further, as a performance incentive, following the first 15% return on equity for Endeavor Mining, their management receives 20% of additional annual profits. Thus, their desire to generate great profits is truly in their best interest The first two quarters of operations have already proven quite successful for the fledgling public company. Endeavor Mining posted net earnings of $0.76 C. in their December 31 quarter and recently announced $0.12 C. for their March 31 quarter. Given their current share price of $2.00 C., and their working capital of over $28,000,000 C. the company appears to be incredibly undervalued. By now you must be asking yourself why the stock is so cheap. I did! I believe that Endeavor Mining temporarily resides on the bargain counter. I feel that the reason the market has overlooked this gem is the fact that investors do not understand the company’s fundamentals. Yes, they finance companies who are desperately in need of capital, from which they derive interest and some fees. But, what I believe that the market does not understand is the enormous profit that they generate when they exercise their warrants. One example should suffice. When Endeavor financed Wheaten River they received warrants that were exercisable at $0.50 C. Today, Wheaton is trading at $1.67. When you acquire shares of Endeavor Capital you are not only benefiting from the financial and managerial expertise of its directors but also from the “free” warrants accompanying each deal. I believe that as the Bull Markets in both gold and gold mining equities matures, Endeavor Mining will blossom. The only company that I can liken it to is Franco-Nevada Mining Co. which recently merged with Newmont Mining. It was essentially a royalty based holding company. It profited from the income generated from the various royalties that it possessed on producing mines. Endeavor Mining should similarly profit. But for them it will stem from exercising their cheaply acquired warrants, at a substantial premium to their cost basis, after they give the shares a reason to trade at higher levels.
November 2003	Endeavor Mining Capital released an impressive earnings report. It amounted to about $23 C. million or $1.55 C. per share for the year ending August 31, 2003. This increased their investment capital base from about $36 C. million to about $56 C. million. Additionally, their current net asset value of $3.71 C. remains less than their share price. I continue to believe that the marketplace is only now beginning to recognize their potential. I am confident that they will one day trade in excess to their NAV which will likely trend considerably higher.
December 2003	Endeavor Mining Capital announced the issuance of semi-annual dividends. They anticipate their first of $0.035 C. per share to occur in February, 2004. Additionally, they closed a $25 C. million equity financing. This gives Endeavor a substantial amount of working capital which will enable them to take the company to their next stage, and to finance larger and likely more profitable projects.
February 2004	In my opinion, Endeavor Mining Capital remains completely misunderstood by the marketplace. This week they released their earnings for their November 30, quarter. It was an astounding $26.9 U.S. million. As usual the market took it with a yawn. This is nearly $2 C. per share. Given the fact that the company is only trading at $4.13 C. I believe that this company likely represents the most undervalued company in the industry. If you will recall, they not only receive payment for advising junior companies but they also have the first opportunity to finance them. This allows them to acquire shares and warrants in companies that they will help direct, before their share prices have reflected the effect of their input. Endeavor’s board boasts among the most successful people in the mining industry.
July 2005	Endeavor Mining Capital announced a $2.4 C. million profit, or $0.11 C. per share, for the quarter ending February 28, 2005. Further, their net asset value was about $5.06 C. per share. This represents an enormous premium to its current $2.50 C. share price. Further, for the six month period ending Feb. 28, the corporation recorded net income of over $26 C. million or about $1.16 C. per share. Endeavor continues to be misunderstood by the resource community. They earn most of their money from the appreciation of the shares and warrants that they acquire, by financing the companies who also pay for their financial advice. They should be looked upon as possibly the best and most conservative mutual fund type investment in the resource industry available to the average investor.
November 2005	Endeavor Mining Capital recorded net income of $24.9 U.S. million, or approximately $1.28 C. per share, for the year ended Aug. 31, 2005. Further, they have hired U.S. Global Investors Inc. as its equity investment adviser, and Frank E. Holmes has been appointed as a member of the board of directors and is the company's new chairman. I continue to believe that Endeavor is greatly under appreciated by the market and is also quite undervalued. With the appointment of Mr. Holmes, it is likely that Endeavor will finally be brought to the attention of the marketplace.
January 2006	Endeavor Mining Capital continues to generate substantial income while remaining unrecognized by the investment community. For the quarter ended November 30, they earned $11 C. million or $0.55 C. per share. This was in a poor resource market! When the marketplace finally understands the economics of this company its shares should trade far higher.
May 2006	Endeavor Mining Capital earned $31.89 U.S. million or $1.57 C. per share in the quarter ending February 28, 2006. Additionally, they will buy back as many as 2.31 million of their shares on the market. Their management stated that, “the corporation's common shares have been trading in a price range which does not adequately reflect their value in relation to the corporation's unique business model and its future business prospects”.
July 2006	Endeavor Mining Capital posted a net income of $35.6 U.S. million or $1.53 U.S. per share for the quarter ending May 31, 2006. This is about $1.69 C. per share. This company is finally being recognized as one of the most conservative plays in the mining sector. They are consultants to numerous junior resource companies and finance them as well. Their ability to receive free stock warrants in addition to the shares in their private placements, gives them great leverage to price advances in the companies in which they invest. This feature allows them to demonstrate exceptional profitability.