Management Discussion & Analysis...1.BUSINESS OVERVIEW ... › Basic earnings per share of $0.04 in...

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Management Discussion & Analysis

For the three and six months ended June 30, 2018 and 2017

(Expressed in Thousands of United States Dollars)

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Table of Contents

1.BUSINESS OVERVIEW ............................................................................................................... 3

1.1. OPERATIONS DESCRIPTION .....................................................................................................................3

2.HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2018 ................................................... 4

2.1. 2018 CORPORATE HIGHLIGHTS ...............................................................................................................4

2.2. HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018..................................................4

3.GUIDANCE .............................................................................................................................. 6

3.1. 2018 OUTLOOK ........................................................................................................................................6

4.OPERATIONS REVIEW .............................................................................................................. 6

4.1. HEALTH, SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY .....................................................7

4.2. CONSOLIDATED RESERVES AND RESOURCES ...........................................................................................8

4.3. OPERATIONS REVIEW ..............................................................................................................................9

4.4. ASSET HELD FOR SALE ...........................................................................................................................17

4.5. DEVELOPMENT PROJECTS REVIEW ........................................................................................................19

5.RESULTS FOR THE PERIOD .......................................................................................................21

5.1. STATEMENT OF COMPREHENSIVE INCOME ..........................................................................................21

5.2. CASH FLOW ...........................................................................................................................................22

5.3. BALANCE SHEET .....................................................................................................................................24

5.4. ACCOUNTING POLICIES AND CRITICAL JUDGEMENTS ...........................................................................27

6.NON-GAAP MEASURES ...........................................................................................................28

6.1. ALL-IN SUSTAINING MARGIN AND ADJUSTED EBITDA ...........................................................................28

6.2. CASH AND ALL-IN SUSTAINING COST PER OUNCE OF GOLD SOLD ........................................................29

6.3. ADJUSTED NET EARNINGS AND ADJUSTED NET EARNINGS PER SHARE .................................................31

6.4. FREE CASH FLOW AND ADJUSTED CASH FLOW .....................................................................................31

6.5. NET DEBT AND NET DEBT/ADJUSTED EBITDA RATIO .............................................................................32

7.QUARTERLY AND ANNUAL FINANCIAL AND OPERATING RESULTS .............................................32

8.RISK FACTORS ........................................................................................................................34

8.1. FINANCIAL RISKS ....................................................................................................................................34

9.CONTROLS AND PROCEDURES ................................................................................................36

9.1. DISCLOSURE CONTROLS AND PROCEDURES ..........................................................................................36

9.2. INTERNAL CONTROLS OVER FINANCIAL REPORTING .............................................................................36

9.3. LIMITATIONS OF CONTROLS AND PROCEDURES ...................................................................................37

9.4. COMMITMENTS AND CONTINGENCIES .................................................................................................37

10.APPENDIX A: DETAILED RESERVES AND RESOURCES ...............................................................38

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This Management Discussion and Analysis (“MD&A”) should be read in conjunction with Endeavour Mining Corporation’s (“Endeavour Mining” or the “Corporation”) condensed interim consolidated financial statements for the three and six months ended June 30, 2018, as well as the audited consolidated financial statements for the years ended December 31, 2017 and 2016 and notes thereto which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) or (“GAAP”). This Management Discussion and Analysis contains “forward-looking statements” that are subject to risk factors set out in a cautionary note contained herein. The reader is cautioned not to place undue reliance on forward-looking statements. All figures are in United States Dollars, unless otherwise indicated. Tabular amounts are in thousands of United States Dollars, except per share amounts and where otherwise indicated. This MD&A is prepared as of August 1, 2018. Additional information relating to the Corporation, including the Corporation’s Annual Information Form, is available on SEDAR at www.sedar.com.

1. BUSINESS OVERVIEW

1.1. OPERATIONS DESCRIPTION

Endeavour Mining is a TSX-listed intermediate gold producer, focused on developing a portfolio of high quality mines in the prolific West-African region where it has established a solid operational and construction track record. Endeavour Mining is ideally positioned as a major West-African multi-operation gold mining company, operating five mines in Côte d’Ivoire (Agbaou and Ity), Burkina Faso (Karma and Houndé), as well as one asset in Mali (Tabakoto) which is classified as an asset held for sale. In 2018, Endeavour Mining expects to produce between 555,000 and 590,000 ounces of gold at an all-in sustaining cost1 (“AISC”) of $760 to $810 per ounce from continuing operations. The development of the Ity Carbon-In-Leach (“CIL”), and Kalana projects are expected to increase Endeavour Mining’s group production to over 800,000 ounces per annum and decrease average AISC to approximately $800 per ounce by 2019, while additional exploration will aim to extend all mine lives to over 10 years. 1 - Throughout this MD&A, cash costs, all-in sustaining costs, adjusted EBITDA, adjusted earnings attributable to shareholders, all-in sustaining margin, all-in margin, sustaining and non-sustaining capital expenditures, growth projects, free cash flow, net debt and net debt/adjusted EBITDA are non-GAAP financial performance measures with no standard meaning under IFRS, further discussed in the section Non-GAAP Measures.

Figure 1: Endeavour Mining’s principal properties in West Africa as of June 30, 2018

http://www.sedar.com/

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2. HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2018

2.1. 2018 CORPORATE HIGHLIGHTS

› On May 24, 2018, Endeavour Mining announced that the ongoing exploration program at its Houndé mine in Burkina Faso has successfully extended the Kari Pump high-grade mineralisation and has discovered two new large mineralised zones named Kari Centre and Kari West. More than 1,000 holes comprising 76,000 meters have already been drilled in the Kari area since late December, extending the mineralised zone, now measuring 4km long and 3km wide with approximately 25% of the gold-in-soil anomaly remaining to be drilled.

2.2. HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

› The strategic assessment completed on Tabakoto in Q2-2018 demonstrated the potential to reduce the mines’ AISC, mainly through capital investment to renew the underground fleet. These investments however do not meet Endeavour Mining’s capital allocation criteria and therefore a sale process has been launched. As at June 30, the Tabakoto mine has been classified as an asset held for sale.

› Gold production from continuing operations was 146,550 ounces for Q2-2018 and 298,856 for H1-2018, on track to meet the full-year guidance from continuing operations of 555,000 – 590,000 ounces.

› Revenues were $189.5 million in Q2-2018 and $388.4 million in H1-2018 which generated $43.1 million and $107.0 million in earnings from mine operations.

› Operating cash flow before non-cash working capital per share amounted to $0.64 in Q2-2018 and $1.52 in H1-2018, an increase of $0.07 and $0.39 in the same periods of 2017.

› Net loss for Q2-2018 was $15.4 million and net earnings of $12.2 million in H1-2018, compared to net earnings of $17.3 million and $15.1 million in the same periods of 2017.

› Basic earnings per share of $0.04 in Q2-2018 and $0.16 in H1-2018 compared to earnings per share of $0.16 and a loss per share of $0.04 in the same periods of 2017.

› Adjusted net earnings attributable to shareholders was $0.09 per share in Q2-2018 and $0.31 per share for H1-2018 compared to $0.07 per share and $0.02 per share in the same periods of 2017.

› Net Debt was $410.4 million at June 30, 2018, an increase of $75.2 million compared to March 31, 2018. The increase is mainly due to the drawdown of the revolving credit facility for an additional $70 million to fund growth projects.

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Table 1: Quarterly and H1 Highlights

1. Tabakoto is excluded from all data except operating cash flow before non-cash working capital and, as presented in the condensed interim consolidated financial statements. 2. Revenue is net of gold stream sales to Franco-Nevada and Sandstorm. 3. Throughout this MD&A, cash costs, all-in sustaining costs, adjusted EBITDA, adjusted earnings attributable to shareholders, all-in sustaining margin, all-in margin, sustaining and non-sustaining capital expenditures, growth projects, free cash flow, net debt, net debt/adjusted EBITDA, adjusted cash flow, and operating cash flow before working capital per share are non-GAAP financial performance measures with no standard meaning under IFRS, further

($000s) Units June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Operating Data 1

Gold produced oz 146,550 152,306 83,832 298,856 173,313

Gold sold oz 150,732 153,788 84,580 304,520 174,015

Realised gold price2 $/oz 1,257 1,293 1,188 1,275 1,176

All-in sustaining costs3 $/oz 780 685 791 732 824

All-in sustaining margin3 $/oz 478 608 397 543 352

Cash Flow Data 1

All-in sustaining margin3 $ 71,977 93,502 33,604 165,478 61,311

All-in Margin3 $ 48,480 67,820 35,429 116,303 64,106

Operating cash flow before non-cash working capital $ 68,578 94,778 54,974 163,299 106,913

Operating cash flow before non-cash working capital $/share 0.64 0.88 0.57 1.52 1.13

Profit and Loss Data 1

Revenues2 $ 189,515 198,894 100,520 388,409 204,701

Earnings from mine operations $ 43,077 63,931 26,376 107,008 48,092

Net (loss) / earnings $ (15,443) 27,659 17,269 12,216 15,077

Basic (loss) / earnings per share attributable to shareholders $/share 0.04 0.12 0.16 0.16 (0.04)

Adjusted EBITDA3 $ 68,092 91,525 36,410 159,617 63,528

Adjusted EBITDA margin3 % 36% 46% 36% 41% 31%

Adjusted net earnings attributable to shareholders3 $ 9,189 24,411 6,922 33,599 1,653

Adjusted net earnings per share attributable to shareholders3 $/share 0.09 0.23 0.07 0.31 0.02

Balance Sheet Data 1

Cash $ 78,762 93,863 122,702 78,762 122,702

Net Debt3 $ (410,376) (335,214) (182,561) (410,376) (182,561)

Net Debt / Adjusted EBITDA (LTM) ratio3 $ 1.49 1.24 0.76 1.49 0.76

THREE MONTHS ENDED SIX MONTHS ENDED

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3. GUIDANCE

3.1. 2018 OUTLOOK

› Production from continuing operations is expected to be 555,000 – 590,000 ounces and AISC are expected to land between $760 – 810 per ounce in 2018. The year over year changes are due to the full year benefit of Houndé, and improvements at both the Karma and Ity mines offsetting the expected declines of production at Agbaou.

Table 2: Production and Guidance, koz

(All amounts in koz, on a 100% basis)

QUARTER ENDED SIX MONTHS ENDED

2018 FULL-YEAR GUIDANCE Jun. 30, Mar. 31,

Jun. 30,

Jun. 30, Jun. 30,

2018 2018 2017 2018 2017

Agbaou 34 32 45 66 87 140 - 150

Ity 25 18 14 43 30 60 - 65

Karma 21 28 24 49 56 105 - 115

Houndé 67 74 - 141 - 250 - 260

PRODUCTION FROM CONTINUING OPERATIONS 147 152 84 299 173 555 - 590

Tabakoto (asset held for sale) 27 32 41 59 84 115 - 130

Nzema (divested in December 2017) - - 27 - 53

TOTAL PRODUCTION 173 185 152 358 311 670 - 720

Table 3: AISC and Guidance, $/oz

(All amounts in US$/oz)

QUARTER ENDED SIX MONTHS ENDED 2018 FULL-YEAR

GUIDANCE Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,

2018 2018 2017 2018 2017

Agbaou 818 752 606 786 631 860 - 900

Ity 713 829 780 759 838 790 - 850

Karma 885 869 755 875 751 780 - 830

Houndé 617 433 - 521 - 580 - 630

Corporate G&A 41 42 75 41 71 30 - 30

Sustaining Exploration 21 15 42 10 48 10 - 10

GROUP AISC FROM CONTINUING OPERATIONS 780 685 791 732 824 760 - 810

Tabakoto (asset held for sale) 1,397 1,208 1,054 1,298 1,013 1,200 - 1,250

Nzema (divested in December 2017) - - 985 - 967

GROUP AISC 878 774 896 825 900 840 - 890

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4. OPERATIONS REVIEW

4.1. HEALTH, SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY

Endeavour Mining puts the highest priority on safe and healthy work practices and systems. Our business principles and policies are based on targeting the achievement of a “zero harm” performance, reducing the lost time injury frequency rate (“LTIFR”) at all the operations and striving to continually improve our performance. The following table shows the safety statistics for the six months ended June 30, 2018 and twelve months ended December 31, 2017.

Table 4: LTIFR Statistics for the six months ended June 30, 2018 and year ended December 31, 2017

Endeavour Mining views itself as an integral part of the communities in which it operates, as well as a responsible development partner. Endeavour Mining collaborates and engages with government, local communities and outside organisations to ensure it supports economic sustainability and social development. Projects include skills training, educational scholarships, healthcare, water and sanitation, public infrastructure maintenance, institutional capacity building and livelihood programs.

H1 2018

Incident Category Tabakoto Agbaou Karma Ity Houndé Total

Fatality - - - - - -

Lost Time Injury 2 - - - - 2

Total Man Hours 1,787,282 1,877,058 1,360,473 1,830,011 2,274,285 9,129,109

LTIFR1 1.12 - - - - 0.22

2017

Incident Category Tabakoto Agbaou Nzema Karma Ity Houndé Total

Fatality - - - - - - -

Lost Time Injury - 1 1 1 2 - 5

Total Man Hours 4,115,416 3,025,485 2,391,007 4,234,123 2,892,634 763,200 17,421,865

LTIFR1 - 0.33 0.42 0.24 0.69 - 0.291 Lost Time Injury Frequency Rate = (Number of LTIs in the Period X 1,000,000)/ (Total man hours worked for the period)

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4.2. CONSOLIDATED RESERVES AND RESOURCES

› Detailed information regarding reserves and resources is contained in the Corporation’s Annual Information Form (“AIF”) for the year ended December 31, 2017. A summary of this information is provided in appendix A of this MD&A with total reserves shown in table 7 below.

› Proven and Probable (“P&P”) Reserves at December 31, 2017 were 9.0 million ounces on a 100% basis, which increased by 1.9 million ounces (+27%) compared to 7.1 million ounces at the end of 2016 mainly due to the reserve conversion at Ity, the Avnel acquisition which offset the sale of Nzema and the reserve depletion at other mines.

› Measured and Indicated (“M&I”) resources at year-end 2017 were 14.9 million ounces, which increased by 2.3 million ounces (+18%) compared to 12.6 million ounces at the end of 2016 mainly due to strong exploration success at Ity, the Avnel acquisition, and net additions at Tabakoto, which offset depletion reserve at other mines and the sale of Nzema.

Table 5: Reserves and Resources Summary

In millions of ounces on a 100% basis December 31, 2017

December 31, 2016

December 31, 2015

Δ Dec 31, 2017 vs. Dec 31, 2016

P&P Reserves 9.0 7.1 5.9 +1.9 +27% M&I Resources (inclusive of Reserves) 14.9 12.6 11.0 +2.3 +18% Inferred Resources 3.7 3.7 2.4 - -

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4.3. OPERATIONS REVIEW

The following tables summarise operating results for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017 and the six months ended June 30, 2018, and June 30, 2017.

Houndé Gold Mine, Burkina Faso

Table 6: Houndé key performance indicators

1.Non-GAAP measure. Refer to the Non-GAAP Measures section for further details. 2. Strip ratio includes capital waste. 3. Financial data is not presented for the pre-commercial production period before November 1, 2017.

Unit June 30, 2018March 31,

2018June 30, 2017 June 30, 2018 June 30, 2017

Operating Data:

Tonnes ore mined Kt 1,312 1,361 - 2,673 -

Tonnes of waste mined Kt 8,049 8,948 - 16,997 -

Open pit strip ratio2 w:o 6.13 6.57 - 6.36 -

Tonnes milled Kt 982 898 - 1,880 -

Average gold grade milled g/t 2.20 2.59 - 2.39 -

Recovery % 95% 95% - 95% -

Gold produced: oz 66,873 73,781 - 140,654 -

Gold sold (A): oz 68,366 74,200 - 142,566 -

Financial Data ($'000)

Revenues $ 88,726 99,130 - 187,856 -

Mining costs-open pit $ (18,717) (16,303) - (35,020) -

Processing cost $ (11,207) (9,794) - (21,001) -

G&A cost $ (7,264) (6,284) - (13,548) -

Capitalised waste $ 5,919 1,655 - 7,574 -

Inventory adjustments and other $ (1,819) 5,526 - 3,707 -

Total Cash Cost (B) $ (33,088) (25,201) - (58,288) -

Royalties $ (5,748) (6,919) - (12,667) -

Sustaining capital1 $ (3,320) - - (3,320) -

Total All-In Sustaining Costs1 (C) $ (42,156) (32,120) - (74,275) -

Non-sustaining capital1 $ (2,664) (1,590) - (4,254) -

All-In Margin1 $ 43,906 65,420 - 109,327 -

add back: Sustaining and non-sustaining capital1 $ 5,984 1,590 - 7,574 -

Depreciation/depletion $ (17,773) (15,745) - (33,518) -

Non-cash operating (income)/expense $ 852 - - 852 -

Earnings from mine operations $ 32,969 51,265 - 84,234 -

Unit cost analysis

Realised gold price $/oz 1,298 1,336 - 1,318 -

Open pit mining cost per tonne mined $/t 2.00 1.58 - 1.78 -

Processing cost per tonne milled $/t 11.41 10.91 - 11.17 -

G&A cost per tonne milled $/t 7.40 7.00 - 7.21 -

Cash cost per ounce sold1 D=B/A $/oz 484 340 - 409 -

Mine All-In Sustaining Costs1 E=C/A $/oz 617 433 - 521 -

THREE MONTHS ENDED3

SIX MONTHS ENDED3

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Q2 2018 vs Q1 2018 Insights

› Production decreased mainly due to an expected decrease in the average head grade fed to the plant. However, the operation continued to perform ahead of expectations as plant throughput increased from 20% to 30% above nameplate capacity. Tonnes of ore mined remained steady as mining activities continued to perform with a decrease in the strip ratio. Transitional and fresh ore from the Vindaloo Main deposit continued to be the ore source, supplemented by oxide

ore from the Vindaloo North deposit where mining began in late Q1-2018, and from the Vindaloo Central deposit where mining began ahead of schedule in Q2-2018.

Tonnes milled increased while the ore blend continued to be primarily transitional/fresh ore with oxide ore representing 25% of the mill feed.

The average grade milled decreased slightly due to the anticipated mine sequence. Recovery rates remained steady at 95%

› AISC increased mainly due to the lower processed grades, as well as higher unit costs and increased sustaining capital spend. Mining unit costs increased from $1.58 to $2.00 per tonne due to the volume effect of lower tonnes mined, slightly

higher fuel prices, as well as additional blasting requirements. Processing unit costs increased from $10.91 to $11.41 per tonne milled mainly due to the transition to fresh ore.

› Sustaining capital spend increased by $3.3 million from $nil due to waste capitalisation.

› Non-sustaining capital increased by $1.1 million to $2.7 million due to pre-stripping activities in the Vindaloo pit.

H1-2018 vs H1-2017 Insights

› Commercial production began in Q3-2017.

H2-2018 Outlook

› Houndé is well on track to meet full-year 2018 guidance of 250,000 – 260,000 ounces at an AISC of $580-630 per ounce.

› Production is expected to decline slightly and AISC to increase due to the upcoming rainy season, lower expected grades, and an increase in the strip ratio.

› Relocation activities at the higher grade Bouere deposit are progressing well. To minimise Hounde’s non-sustaining capital spend while constructing the Ity CIL project, pre-stripping is expected to occur in early 2019.

Exploration Activities

› Houndé is the strongest exploration focus for Endeavour in 2018 with more than 121,000 meters already drilled in H1-2018, mainly focused on the Kari anomaly.

› As announced in May, the Kari mineralized zone has been significantly extended to a large area now measuring 4km long and 3km wide with three discoveries made and approximately 20% of the gold-in-soil anomaly remaining to be drilled.

› A further 60,000-meter drilling campaign is underway to delineate the two latest discoveries, with in-fill drilling ongoing on the Kari Pump target where a maiden resource is expected by year-end.

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Agbaou Gold Mine, Côte d’Ivoire

Table 7: Agbaou key performance indicators

1.Non-GAAP measure. Refer to the Non-GAAP Measures section for further details. 2. Strip ratio includes capital waste


2018June 30, 2017 June 30, 2018 June 30, 2017

Operating Data

Tonnes ore mined Kt 611 682 709 1,293 1,333

Tonnes of waste mined Kt 7,190 7,270 6,243 14,460 11,975

Open pit strip ratio2 w:o 11.77 10.66 8.81 11.18 8.98

Tonnes milled Kt 727 726 693 1,453 1,376

Average gold grade milled g/t 1.60 1.43 2.23 1.52 2.16

Recovery % 92% 93% 94% 93% 94%

Gold produced: oz 33,653 32,074 45,489 65,727 87,426

Gold sold (A): oz 34,471 33,559 46,722 68,030 86,703


Revenues $ 44,703 44,562 58,888 89,265 107,476

Mining costs-open pit $ (20,698) (22,873) (16,653) (43,571) (32,234)

Processing cost $ (5,482) (5,660) (5,316) (11,142) (9,975)

G&A cost $ (3,013) (3,263) (2,689) (6,276) (5,763)

Capitalised waste $ 3,772 7,950 525 11,722 868

Inventory adjustments and other $ 595 2,751 (558) 3,346 464

Total Cash Cost1 (B) $ (24,826) (21,095) (24,691) (45,921) (46,640)

Royalties $ (1,638) (1,834) (2,107) (3,472) (3,814)

Sustaining capital1 $ (1,749) (2,303) (1,526) (4,052) (4,261)

Total All-in Sustaining Costs1 (C) $ (28,213) (25,232) (28,324) (53,445) (54,715)

Non-sustaining capital1 $ (2,877) (7,950) - (10,827) -

All-In Margin1 $ 13,613 11,380 30,564 24,993 52,761

add back: Sustaining and non-sustaining capital1 $ 4,626 10,253 1,526 14,879 4,261

Depreciation/depletion $ (8,806) (7,615) (7,361) (16,421) (16,175)

Non-cash operating (income)/expense $ 1 (1,317) (25) (1,316) (25)

Earnings from mine operations $ 9,434 12,701 24,704 22,135 40,822

Unit cost analysis

Realised gold price $/oz 1,297 1,328 1,260 1,312 1,240

Open pit mining cost per tonne mined $/t 2.65 2.88 2.40 2.77 2.42

Processing cost per tonne milled $/t 7.54 7.80 7.67 7.67 7.25

G&A cost per tonne milled $/t 4.14 4.49 3.88 4.32 4.19

Cash cost per ounce sold1 D=B/A $/oz 720 629 528 675 538

Mine All-In Sustaining Costs1 E=C/A $/oz 818 752 606 786 631


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› Production slightly increased due to the higher grades of material milled as low-grade stockpiles continued to supplement the mine feed allowing waste capitalisation activities to progress. Tonnes of ore mined decreased as greater emphasis was given to waste mining, thereby increasing the total strip

ratio from 10.7 to 11.8, with the operating strip ratio increased from 6.6 to 9.4. Mill throughput remained steady and at a high level as the proportion of fresh ore processed slightly decreased to

28% from 31%. Average processed grades increased mainly due to stockpiles supplementing the mine feed. Recovery rates slightly decreased to 92%.

› All-in sustaining costs increased due to an increase in operating strip ratio which was partially offset by lower mining and processing costs as well as lower sustaining costs. Mining unit costs decreased from $2.88 to $2.65 per tonne as higher elevations of the West pit were mined. Processing unit costs decreased from $7.80 to $7.54 per tonne mainly due to continued cost savings realised on

reagents following the implementation of a group procurement strategy.

› Sustaining capital costs decreased by $0.6 million to $1.8 million due to a reduction in the capitalised waste.

› Non-sustaining capital decreased by $5.1 million to $2.9 million as lower pre-stripping at West pit 5.


› As guided, production decreased and AISC increased as low-grade stockpiles supplemented the mine feed to allow waste capitalisation activities to progress.

H2-2018 Outlook

› Agbaou is on track to meet full-year 2018 guidance of 140,000 – 150,000 ounces at an AISC of $860-$900 per ounce.

› 2018 is expected to be a transition year for Agbaou, as a focus on waste capitalisation activities are expected to give future access to high grade areas.

› Production is expected to significantly increase in the latter portion of the year as the waste capitalisation activities are expected to give access to higher grade areas, while costs are expected to continue to trend towards the guided range as a hard ore blend continues to be processed and operating strip ratio increases.


› In H1-2018 more than 26,000 meters were drilled with the majority occurring in Q2-2018.

› A total of more than 20,000 meters, representing most of the drilling, was focused on open pit targets located along extensions of known deposits and on parallel trends. Mineralisation was confirmed at the extensions of several deposits including the MPN, North Pit Satellite 3, West Pit 5 and Beta, with 5,000 meters of follow-up drilling planned in H2-2018.

› The at-depth potential of the North pit was tested, and mineralisation was confirmed. However, as a potential resource in this area may not be suitable for open pit operations, the focus was directed to the abovementioned open pit targets.

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Ity Gold Mine, Côte d’Ivoire

Table 8: Ity key performance indicators


Unit June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Operating Data:

Tonnes ore mined Kt 304 370 374 674 703

Tonnes of waste mined Kt 792 1,201 1,614 1,993 3,074


Tonnes of ore stacked Kt 308 357 243 665 510

Average gold grade stacked g/t 2.81 2.17 2.15 2.46 2.02

Recovery % 88% 73% 84% 82% 91%

Gold produced: oz 25,000 18,265 14,120 43,265 30,012

Gold sold (A): oz 26,270 17,530 13,226 43,800 31,573


Revenues $ 34,207 23,477 16,684 57,684 39,151


Processing cost $ (5,179) (5,236) (3,895) (10,415) (8,018)

G&A cost $ (3,584) (2,844) (2,415) (6,428) (5,025)

Capitalised waste $ - - 1,693 - 1,835

Inventory adjustments and other $ 436 3,143 2,034 3,579 (1,140)

Total Cash Cost (B) $ (16,789) (12,767) (8,268) (29,556) (22,021)

Royalties $ (1,165) (919) (643) (2,084) (1,413)

Sustaining capital1 $ (786) (838) (1,400) (1,624) (3,011)

Total All-In Sustaining Costs1 (C) $ (18,740) (14,524) (10,311) (33,264) (26,445)

Non-sustaining capital1 $ - - (1,776) - (2,187)

All-In Margin1 $ 15,467 8,953 4,597 24,420 10,519

add back: Sustaining and non-sustaining capital1 $ 786 838 3,176 1,624 5,198


Non-cash operating (income)/expense $ (409) (1,724) (509) (2,133) (416)

Earnings from mine operations $ 8,374 650 1,548 9,024 4,191

Unit cost analysis



Processing cost per tonnes stacked $/t 16.81 14.67 16.03 15.66 15.72

G&A cost per tonnes stacked $/t 11.64 7.97 9.94 9.67 9.85




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› Production increased significantly due to higher grades being stacked as mining activities at Bakatouo produced higher grades as well an increased recovery rate. Tonnes of ore mined decreased to match stacking capacity. Less tonnes were mined at the Ity and Zia North East

pits as mining ramped-up at the Bakatouo pit following its start in Q1-2018. Ore stacked slightly decreased due to the focus on stacking the high-grade Bakatouo ore. The stacked grade increased significantly also due to the focus on Bakatouo ore. Recovery rates increased significantly due to the improved leach kinetics associated with the change in ore type

as well as reagent optimisation.

› AISC decreased mainly due to an increase in ounces sold and lower sustaining capital costs, which were partially offset by increased unit mining and stacking costs. Mining unit costs increased from $4.98 to $7.72 per tonne mainly due to longer haul distances and costs associated

with fleet rentals. Processing unit costs increased from $14.67 to $16.81 per tonne due to lower tonnes being stacked and greater

reagent consumption associated with the increase in recovery rates.

› Sustaining capital costs decreased by $0.1 million to $0.8 million as the heap leach operation winds down.

› There was no non-sustaining capital spend in the quarter.


› Production increased and AISC decreased mainly due to increased stacked tonnages and higher grades from the Bakatouo pit, which compensated for lower recovery rates.

H2-2018 Outlook

› Ity is on track to meet full-year 2018 guidance of 60,000 – 65,000 ounces at an AISC of $790-$850 per ounce.

› As guided, 2018 is expected to be a transition year for the heap leach operation with greater priority given to the CIL construction activities. Open pit mining activities for the heap leach operation are expected to continue until the end of Q3-2018. The aim is to create a stockpile sufficient to feed stacking requirements for the latter portion of the year. Short mining campaigns may then be opportunistically conducted based on equipment availability and progression of the Ity CIL mining activities.


› A $3 million exploration campaign has been planned in 2018 to further explore near-mill targets (including testing of extensions at the Mont Ity, Bakatouo, Daapleu, and Le Plaque deposits) with the aim of delineating additional resources for the CIL project.

› In H1-2018, more than 35,000 meters have been drilled, mainly focused on: The Le Plaque target where additional resources are expected to be delineated in H1-2019. The Daapleu deposit where mineralization was confirmed at-depth. In addition, a deep hole was drilled below the heap leach pad which confirmed the occurrence of

mineralization 200 meters southwest of the Bakatouo deposit.

› In H2-2018 the focus is expected to be the Le Plaque target, with over 10,000 meters of drilling planned.

15

Karma Gold Mine, Burkina Faso

Table 9: Karma key performance indicators

1.Non-GAAP measure. Refer to the Non-GAAP Measures section for further details. 2. Strip ratio includes capital waste. 3. Revenue and realised gold price are net of gold stream sales to Franco/Nevada and Sandstorm.


2018June 30, 2017 June 30, 2018 June 30, 2017

Operating Data:

Tonnes ore mined Kt 1,636 1,536 1,035 3,172 2,085

Tonnes of waste mined Kt 3,298 2,280 2,581 5,578 5,874


Tonnes of ore stacked Kt 838 1,241 852 2,079 1,806

Average gold grade stacked g/t 0.93 0.88 1.24 0.90 1.15

Recovery % 78% 74% 83% 76% 85%

Gold produced: oz 21,024 28,186 24,223 49,210 55,875

Gold sold (A) : oz 21,625 28,499 24,632 50,124 55,739


Revenues3 $ 21,879 31,725 24,948 53,604 58,074


Processing cost $ (8,794) (9,726) (7,922) (18,520) (14,699)

G&A cost $ (3,372) (3,728) (3,626) (7,100) (7,510)

Capitalised waste $ 1,431 2,358 230 3,789 479

Inventory adjustments and other $ 4,090 (918) 2,220 3,175 (1)

Total Cash Cost (B) $ (16,912) (21,577) (16,187) (38,486) (36,744)

Royalties $ (1,703) (2,511) (1,916) (4,214) (4,165)

Sustaining capital1 $ (516) (664) (487) (1,180) (964)

Total All-In Sustaining Costs1

(C) $ (19,131) (24,752) (18,590) (43,880) (41,873)

Non-sustaining capital1 $ (5,482) (3,215) (1,562) (8,697) (5,434)

All-In Margin1 $ (2,734) 3,758 4,796 1,027 10,767



Non-cash operating (income)/expense $ (2,231) 1,225 378 (1,009) 5

Earnings (loss) from mine operations $ (8,807) 788 1,764 (8,019) 3,451

Unit cost analysis

Realised gold price3 $/oz 1,012 1,113 1,013 1,069 1,042


Processing cost per tonnes stacked $/t 10.50 7.84 9.30 8.91 8.14

G&A cost per tonne stacked $/t 4.02 3.00 4.26 3.42 4.16




16


› Production decreased significantly due to lower stacked tonnes despite an increase in grades and recovery rate. Tonnes mined increased as expected as mining activity ramped up in anticipation of the rainy season in Q3-2018

and to expose higher grade ore to be mined in future periods. Mining at the GG2 pit was completed during the quarter and mining increased at the Kao pit where mining began in late Q1-2018.

Stacking decreased due to a change in ore characteristics and ore flow through the leach pad conveying and stacking circuit.

Stacked grade increased due to transition to the higher-grade area of the Kao pit. As expected, recovery rates increased due to mining activities focusing mainly on oxide ore from the Kao deposit.

› AISC increased mainly due to higher processing unit costs associated with lower tonnes stacked. Mining unit costs decreased from $2.51 to $2.08 per tonne due to the volume effect of more waste mined which

has resulted in lower drill and blast costs at the Kao deposit. Processing unit costs increased from $7.84 to $10.50 per tonne due to lower tonnes stacked. Sustaining capital costs decreased by $0.1 million to $0.5 million mainly due to a decrease in capital stripping costs.

› Non-sustaining capital spend increased by $2.3 million to $5.5 million mainly due to pre-stripping at the Kao deposit.


› Production decreased and AISC increased due to the lower recovery rate associated with treating the GG2 transitional ore in H1-2018 while H1-2017 benefited from higher recovery rates associated with oxide ore and high-grade ore from the mined-out Rambo deposit.

H2-2018 Outlook

› Karma is on track to meet full-year 2018 guidance of 105,000 – 115,000 ounces at an AISC of $780-830 per ounce as the second half of the year is expected to benefit from oxide ore from the Kao deposit. This is expected to have higher grades, higher recovery rates and lower unit costs.


› In H1-2018, more than 23,000 meters were drilled, mainly focused on the Eastern extension of the North Kao deposit, on Yabonsgo and on Rambo West where indicated resources are expected to be delineated by year-end. In addition, auger drilling, and soil geochemical sampling was conducted on earlier stage targets such as Rounga and Zanna.

› A further 5,000 meters of drilling are expected to be completed in H2-2018.

17

4.4. ASSET HELD FOR SALE

Tabakoto Gold Mine, Mali

Table 10: Tabakoto key performance indicators



2018June 30, 2017 June 30, 2018 June 30, 2017

Operating Data

Tonnes ore mined- Open pit Kt 109 209 157 318 374

Tonnes of waste mined - Open pit Kt 1,187 1,631 1,393 2,818 3,064


Tonnes mined- Underground Kt 189 202 253 391 564

Ore tonnes mined - Underground Kt 143 151 184 294 420

Tonnes milled Kt 423 441 407 864 812

Average gold grade milled g/t 2.11 2.51 3.32 2.32 3.41

Recovery % 92% 93% 94% 92% 94%

Gold produced: oz 26,819 32,367 41,248 59,186 84,276

Gold sold (A): oz 28,595 31,363 41,390 59,958 85,202


Revenues $ 37,350 41,387 51,975 78,738 105,718

Mining costs- Open pit $ (4,465) (4,873) (5,772) (9,338) (12,281)

Mining costs- Underground $ (12,912) (14,419) (15,479) (27,331) (33,412)

Processing cost $ (7,513) (8,120) (7,734) (15,633) (16,865)

G&A cost $ (4,599) (4,129) (3,820) (8,728) (8,397)

Capitalised waste $ 3,268 3,573 8,612 6,841 10,068

Inventory adjustments and other $ (3,925) (1,194) (8,993) (5,119) (6,059)

Total Cash Cost1 (B) $ (30,146) (29,162) (33,186) (59,307) (66,946)

Royalties $ (2,237) (2,474) (3,138) (4,711) (6,303)

Sustaining capital1 $ (7,563) (6,244) (7,313) (13,807) (13,095)

Total All-In Sustaining Costs1 (C) $ (39,946) (37,880) (43,637) (77,825) (86,344)

Non-sustaining capital1 $ (891) - (235) (891) (235)

All-In Margin1 $ (3,487) 3,507 8,103 22 19,139



Non-cash operating (income)/expense $ (17,369) (2,979) 2,469 (20,348) (3,719)

Earnings (loss) from mine operations $ (21,000) 2,209 7,070 (18,789) 7,466

Unit cost analysis



Underground mining cost per tonne mined $/t 68.32 71.38 61.18 69.90 59.24

Processing cost per tonne milled $/t 17.76 18.41 19.00 18.09 20.77

G&A cost per tonne milled $/t 10.87 9.36 9.39 10.10 10.34

Cash cost per ounce sold1 D=B/A $/oz 1,054 930 802 989 786

Mine All-In Sustaining Costs1 E=C/A $/oz 1,397 1,208 1,054 1,298 1,013


18

Strategic assessment update

› The strategic assessment completed in Q2-2018 demonstrated the potential to reduce the mines’ AISC, mainly through capital investment to renew the underground fleet.

› These investments however don’t meet Endeavours’ capital allocation criteria and therefore a sale process has been launched and non-binding offers were received.

› As at June 30, the Tabakoto mine has been classified as an asset held for sale.


› Production decreased mainly due to lower average head grades and slightly lower throughput and recovery rates. Open pit ore mined decreased as the Kofi B pit approached its end of useable life while extraction at the Tabakoto

North pit was ongoing. Underground tonnes mined decreased as lower equipment availability slowed production. Processing activities continued to perform well, with throughput rates slightly declining. The average gold grade milled decreased as lower-grade stockpiles were used to supplement the plant feed. The recovery rate decreased due to the change in ore fed to the plant associated with milling the low-grade

stockpile.

› AISC increased due to increased sustaining capital, and higher mining unit costs which was partially offset by lower processing and underground mining costs. Open pit mining costs increased from $2.65 to $3.45 per tonne due to additional blasting requirements at Kofi B. Underground mining unit costs decreased from $71.38 to $68.32 due to lower costs associated with the cement

rock fill at Tabakoto underground. Processing unit costs decreased from $18.41 to $17.76 per tonne as cyanide and lime consumption was reduced

to interact with the characteristics of the ore blend processed. Sustaining capital costs increased by $1.3 million to $7.6 million mainly due to increased spend on underground

development.

› Non-sustaining capital spend of $0.9 million was due to once-off expenditures on infrastructure.


› Production decreased and AISC increased mainly due to a decrease in processed grades following the completion of the high-grade Kofi C pit in 2017. In addition, lower grade stockpiles supplemented the plant feed in H1-2018 to compensate for lower underground tonnage mined following a decrease in equipment availability.

H2-2018 Outlook

› Tabakoto is on track to meet its full-year 2018 production guidance of 115,000 – 130,000, however it is expected to be above the guided $1,200 - $1,250 per ounce due to increased sustaining capital development work planned. H2-2018 is expected to benefit from increased underground equipment availability.


› During H1-2018 nearly 5,000 meters were drilled on open pit targets while more than 13,000 meters were drilled in the underground mines with the aim of replenishing depletion.

› For H2-2018, a further 12,000 meters are expected to be drilled on both open-pit targets and in the underground mines.

19

4.5. DEVELOPMENT PROJECTS REVIEW

Ity CIL Project, Côte d’Ivoire

› The engineering optimisation study was published in September 2017 and demonstrated that Ity CIL will be another flagship asset with a 14-year mine life, average annual production of 235,000 ounces at AISC of $494 per ounce over the first five years, an after-tax NPV 5% of $710 million, and IRR of 40% at $1,250 per ounce.

› On July 27, 2017, Endeavour Mining announced that Indicated Resources had increased by 1.0 million ounces since the beginning of the year to 3.8 million ounces. This was a 1.5-million-ounce increase in the Indicated Resources base since the publication of the November 2016 Feasibility Study (“FS”), representing a 65% increase.

› A construction decision was made in Q3-2017, and an updated reserve estimate was published in September 2017 as part of an Optimisation Study (“OS”) which is based on a 4.0Mtpa gravity circuit/CIL plant, an increase from the previously contemplated 3.0Mtpa plant, to better capture the value created from recent exploration success.

June 30, 2018 - Achievements to date

› Construction is progressing well and remains on-time and on-budget with the first gold pour expected by mid-2019.

› The major milestones achieved to date include: More than 3.1 million man-hours worked with zero lost-time injuries. Overall project completion stands at over 50%, tracking well against schedule. Over 85% of the total capital cost of $412 million has already been committed and $211 million capital

expenditure incurred (inclusive of the first portion of the equipment financing received of approximately $33 million). As at June 30, 2018, the remaining project spend amounted to $191 million, with the expected remaining cash outflow amounting to circa $160 million as an additional $30 million of equipment financing is expected to be drawn.

The ball and semi-autogenous grinding mills have arrived on site, three months earlier than planned. Plant construction is progressing with all eight bolted CIL tanks installed with four already hydro tested. Tailings storage facility earthworks are progressing well against schedule with over 60% already completed prior

to the start of the rainy season. Camp construction is progressing well with all 312 rooms completed and available for occupation. The 90kv transmission line and power station construction are progressing well against schedule with over 60%

already completed. The land compensation process and resettlement activities are proceeding positively. More than 2,100 personnel, including contractors, are currently employed on-site, 95% of which are locals.

20

Kalana Project, Mali

› Following the close of the acquisition in late Q3-2017, Endeavour Mining completed the integration of Avnel and initiated pre-development activities to optimise the Kalana Project, which include: Ceasing the current small-scale operations and clearing the underground workings and existing infrastructure

to allow for the development of future open pits, as well as to establish access for exploration. Resuming exploration activities on both the Kalana deposit and nearby targets including Kalanako. Launching a revised Feasibility Study with the goal of increasing the current plant design capacity to increase the

average annual production and shorten the mine life based on current reserves, integrating the exploration results from the upcoming drilling campaign, whilst leveraging Endeavour Mining’s construction expertise and realized operating synergies.

Dedicated Kalana Project Community Relations and health, safety and environment teams were created to validate the census and stakeholder mapping, with the aim of defining a resettlement action plan before relocation activities commence.

June 30, 2018 - Achievements to date

› An intensive exploration program, consisting of 48,000 meters of drilling, was finalized in early Q2-2018 on the Kalana and Kalanako deposits.

› At the Kalana deposit: Drilling confirmed the geological model, and in-fill drilling results are expected to convert a portion of the

inferred resources in the North Eastern part of the deposit. The remaining results from of the gold assays are expected to be received in the coming weeks Endeavour is rebuilding the geological model based on both the drilling done by the previous owners and that

completed this quarter, while using a more conservative top-cut assumption. In total, more than 2,200 holes and more than 221,000 assays will be used to build the geological model which will form the basis of the updated feasibility study.

An updated resource study is expected to be published in late Q3-2018.

› At the Kalanako deposit, the drilling has confirmed the continuation of the mineralization and therefore is expected to convert a portion of the previously classified inferred resources.

› In parallel to completing the resource model, initial work has commenced for the updated feasibility study which is expected to be published in Q1-2019.

21

5. RESULTS FOR THE PERIOD

5.1. STATEMENT OF COMPREHENSIVE INCOME

Table 11: Statement of comprehensive income

1. The financial results of Tabakoto and Nzema have been classified as a discontinued operation in accordance with IFRS reporting standards.

Review of results for the three and six months ended June 30, 2018:

› Revenues for Q2-2018 were $189.5 million and $388.4 million for H1-2018 compared to $100.5 million and $204.7 million in the same period of 2017. The increase is primarily due to the increase in realised gold price, and the inclusion of the Houndé mine from Q4-2017.

› Operating expenses for Q2-2018 were $92.6 million and $175.9 million in H1-2018 compared to $49.3 million and $105.8 million in the same periods of 2017. The upward trend compared to 2017 is due to the inclusion of the Houndé mine, as well as an increase in operating expenses at Ity against the comparative periods.

› Depreciation and depletion in Q2-2018 was $43.5 million and $83.0 million in H1-2018 compared to $20.2 million and $41.4 million in the comparative periods of 2017. The increase is primarily due to the addition of Houndé mine, as well as the change in depletable ounces in 2018.

› Corporate costs for Q2-2018 were $6.1 million and $12.6 million for H1-2018 compared to $6.4 million and $12.3 million in the comparative periods of 2017. The decreases over the comparative periods are due to the realisation of corporate cost saving initiatives.

› Share based compensation was $10.1 million in Q2-2018 and $12.8 million for H1-2018, compared to $1.8 million and $9.4 million in the same periods of 2017. The change in the expense is due to the expensing of the fair value of the PSUs into earnings over the terms of the previously granted PSUs.

› Exploration expense was $2.3 million in Q2-2018 and $5.0 million in H1-2018 compared to $2.0 million and $4.2 million in the same periods of 2017. The slight increase is due to increased exploration in H1-2018 that includes more greenfield work, as management continues to focus on unlocking exploration value within the portfolio.

› Finance costs were $4.6 million for Q2-2018 and $12.1 million in H1-2018. The finance costs are related to charges for the RCF which has been drawn $90.0 million as at June 30, 2018, as well as costs associated with the convertible bond.

($000s) June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Revenue 189,515 198,894 100,520 388,409 204,701

Operating expenses (92,646) (83,276) (49,276) (175,922) (105,807)

Depreciation and depletion (43,538) (39,504) (20,202) (83,042) (41,410)

Royalties (10,254) (12,183) (4,666) (22,437) (9,392)

Earnings from mine operations 43,077 63,931 26,376 107,008 48,092

Corporate costs (6,130) (6,488) (6,365) (12,618) (12,295)

Acquisition and restructuring costs - - (936) - (2,460)

Share-based compensation (10,109) (2,668) (1,808) (12,777) (9,443)

Exploration costs (2,284) (2,754) (1,995) (5,038) (4,236)

Earnings from operations 24,554 52,021 15,272 76,575 19,658

(Losses)/gains on financial instruments 10,922 (11,403) 3,408 (481) (8,478)

Finance costs (4,549) (7,496) (5,328) (12,045) (11,202)

Other (expenses)/income (818) (165) (847) (983) 2,690

Earnings from continuing operations before taxes 30,109 32,957 12,505 63,066 2,668

Current income tax expense (17,095) (10,772) (5,418) (27,867) (6,681)

Deferred taxes recovery/(expense) (4,432) 4,881 6,301 449 8,783

Net (loss)/gain from discontinued operations1 (24,025) 593 3,881 (23,432) 10,307

Total net and comprehensive earnings (loss) (15,443) 27,659 17,269 12,216 15,077


22

5.2. CASH FLOW

The following table reconciles the AISC margin, and all-in margin to the quarterly change in cash.

Table 12: Free cash flow1

1. Non-GAAP financial performance measures with no standard meaning under IFRS. Refer to the Non-GAAP Measures section for further details. 2. Exploration expense per the statement of comprehensive earnings (loss). This cash outflow relates to expenditure on greenfield exploration activity. 3. M&A activities include acquisition and disposal costs, as well as any cash received from disposed operations.

$(000's) June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Gold ounces sold 150,732 153,788 84,580 304,520 174,015

Realised gold price 1,257 1,293 1,188 1,275 1,176

Revenue 189,515 198,894 100,520 388,409 204,701

Total cash costs (91,675) (80,640) (48,884) (172,316) (105,156)

Royalties (10,254) (12,183) (4,666) (22,437) (9,392)

Corporate costs (6,130) (6,488) (6,365) (12,618) (12,295)

Sustaining capex1 (6,371) (3,805) (3,413) (10,176) (8,236)

Sustaining exploration1 (3,108) (2,276) (3,588) (5,384) (8,311)

All-in Sustaining Margin from continuing operations1 71,977 93,502 33,604 165,478 61,311

All-in Sustaining Margin from discontinued operations1 (2,596) 3,507 17,384 913 37,418

All-in Sustaining Margin from all operations1 69,381 97,008 50,988 166,391 98,729

Less: Non-sustaining capital1 (10,397) (14,272) (6,699) (24,669) (19,061)

Less: Non-sustaining exploration1 (10,504) (14,915) (8,860) (25,419) (15,562)

All-In Margin1 48,480 67,820 35,429 116,303 64,106

Operating working capital changes as per statement of cash flows (9,012) (46,418) (27,671) (55,430) (22,783)

Changes in long-term inventories (7,213) (3,055) - (10,268) -

Taxes paid (5,626) (2,290) (10,173) (7,916) (11,294)

Interest paid and financing fees (14,188) (8,086) (5,801) (22,274) (6,987)

Cash settlements on hedge programs, gold collar premiums (1,744) (581) (1,829) (2,325) (3,658)

Net free cash flow1 10,697 7,390 (10,045) 18,090 19,384

Growth projects1 (87,933) (74,780) (67,751) (162,713) (128,362)

Exploration expense2 (2,284) (2,754) (1,995) (5,038) (4,236)

M&A Activities3 - - (53,915) - (55,439)

Cash paid on settlement of share appreciation rights, DSUs and PSUs (1,890) (2,557) (929) (4,447) (1,101)

Net equity proceeds (43) 602 47,019 559 51,806

Restructuring costs - - (936) - (936)

Proceeds (repayment) of long-term debt 70,000 (280,000) 80,000 (210,000) 80,000

Convertible senior bond - 330,000 - 330,000 -

Other (foreign exchange gains/losses and other) (310) (6,740) 6,259 (7,055) (548)

Cash outflow for the period (11,764) (28,839) (2,293) (40,604) (39,432)


23

› All-in margin for Q2-2018 was $48.5 million compared to $37.3 million for Q2-2017. The increase is mainly due to the inclusion of the Houndé mine and an increase in gold sold at Ity which offset the decrease in revenue generated by Agbaou.

› Net free cash flow for Q2-2018 was an inflow of $10.7 million compared to an outflow of $8.1 million in Q2-2017. The change is mainly due to the $18.7 million working capital variation between periods, as well as a decrease in taxes paid and the inclusion of Houndé. The main drivers of the Q2-2018 $9.0 million working capital outflow are as follows: $3.8 million-dollar outflow of trade and other receivables driven by gold sales received at Houndé, which was

offset by an increase in VAT receivable at Karma. $2.8 million outflow of inventory due to an increase in stockpiles at Houndé and Karma as the mines begin to

ramp-up stock for the rainy season. $3.7 million outflow of prepaid expenses mainly due to the prepayment of reagents at Houndé. $1.3 million inflow of trade and other payables as payables were increased through the normal course of

business.

› Growth projects cash outflow was $162.7 million in H1-2018 which was comprised of $135.8 million on the Ity CIL project, $4.7 million on a new ERP implementation, $4.6 million on Kalana construction, as well as a $17.6 million working capital outflow associated with the Ity CIL construction.

24

5.3. BALANCE SHEET

Table 13: Balance sheet

($000s) June 30, 2018 March 31, 2018December 31,

2017

ASSETS

Cash 78,762 93,863 122,702

Cash-restricted 665 807 1,327

Trade and other recievables 50,444 46,168 50,698

Income taxes receivable 378 378 627

Inventories 123,381 157,174 134,766

Current portion of derivative financial assets 7,762 - -

Prepaid expenses and other 32,987 45,492 44,514

Assets held for sale 130,909 - -

CURRENT ASSETS 425,288 343,882 354,634

Mining interests 1,378,126 1,394,833 1,317,952

Deferred income taxes 4,637 6,169 6,267

Other long term assets 29,588 19,928 14,658

TOTAL ASSETS 1,837,639 1,764,812 1,693,511

LIABILITIES

Trade and other payables 149,891 181,470 220,781

Current portion of equipment finance obligations 19,452 22,636 17,658

Current portion of derivative financial liabilities - 4,161 -

Income taxes payable 22,652 2,991 2,746

Liabilities held for sale 57,714 - -

CURRENT LIABILITIES 249,709 211,258 241,185

Equipment finance obligations 49,686 56,441 36,744

Long-term debt 410,204 341,168 286,440

Other long term liabilities 38,688 52,740 52,615

Deferred income taxes 73,827 71,750 75,906

TOTAL LIABILITIES 822,114 733,357 692,890

Share capital 1,738,131 1,735,859 1,735,074

Equity reserve 59,309 58,526 56,041

Deficit (808,470) (793,159) (806,251)

Non-controlling interest 26,555 30,229 15,757

TOTAL EQUITY 1,015,525 1,031,455 1,000,621

TOTAL EQUITY AND LIABILITIES 1,837,639 1,764,812 1,693,511

THREE MONTHS ENDED

25

Net Debt Position

Equipment Finance Obligations On May 9, 2017, the Corporation entered into a financing arrangement with the Komatsu Group to acquire mining fleet equipment for the Ity CIL project. The Corporation made an initial down-payment of $5.9 million on July 1, 2017 and the remaining $33.2 million of payments are to be made between the first quarter of 2018 and first quarter of 2022. Convertible Senior Notes (Long-term Debt) On February 6, 2018, the Corporation completed a private placement of convertible senior notes with a total principal amount of $330 million due in 2023 (the “Notes”). The initial conversion rate is 41.8363 of the Corporation’s common shares (“Shares”) per $1,000 Note, or an initial conversion price of approximately $23.90 (CAD$29.47) per share. The Notes bear interest at a coupon rate of 3% payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018. The Notes mature on February 15, 2023, unless earlier redeemed, repurchased or converted in accordance with the terms of the Notes. The Corporation may, subject to certain conditions, elect to satisfy the principal amount due at maturity or upon redemption through the payment or delivery of any combination of Shares and cash. The key terms of the Notes include:

› Principal amount of $330 million.

› Coupon rate of 3% payable on a semi-annual basis.

› The term of the notes is 5 years, maturing in February 2023.

› The notes are reimbursable through the payment or delivery of shares or, and cash.

› The initial conversion price is $23.90 (CAD $29.47) per share.

› The reference share price of the notes is $18.04 (CAD $22.24) per share. For accounting purposes, the Corporation measures the Notes at amortized cost, accreted to maturity over the term of the Notes. The conversion option is an embedded derivative and is accounted for as a financial liability measured at fair value through the profit or loss, as the Corporation has the ability to settle the option at fair value in cash, common shares, or a combination of cash and common shares in certain circumstances. Revolving Credit Facility (Long-term Debt) On September 19, 2017, the Corporation signed a $500 million revolving credit facility with a syndicate of leading international banks. On February 10, 2018, the Corporation reduced the principal available of the RCF to $350 million, as result of the Corporation completing a private placement of $330 million convertible senior notes. On March 9, 2018, the Corporation made a repayment of $280 million on the new RCF. To align with the reduction in the amount available under the new RCF, $3.6 million of deferred financing charges were expensed in the quarter ended March 31, 2018. No further reductions have been made. The key terms of the RCF include:


› Interest accrues on a sliding scale of between LIBOR plus 2.95% to 3.95% based on the Corporation’s leverage ratio

› Commitment fees for the undrawn portion of the new RCF of 1.03%.

› The term of the new RCF is four years, maturing in September 2021.

› The principal outstanding on the new RCF is repayable as a single bullet payment on the maturity date.

› Banking syndicate includes Société Générale, ING, Citibank N.A., Investec Bank Plc, Macquarie Bank Ltd, Barclays Bank Ltd, HSBC and BMO.

› The new RCF can be repaid at any time without penalty.

26

The following table summarises the Corporation’s net debt position as at June 30, 2018, March 31, 2018, and June 30, 2017.

Table 14: Net debt position

Adjusted EBITDA ratio is per table 17 and is calculated using the trailing twelve months Adjusted EBIDTA as presented in prior reporting

Equity and Capital

Endeavour Mining’s authorised capital is 200,000,000 shares divided into 100,000,000 ordinary shares with a par value of $0.10 each and 100,000,000 undesignated shares; no undesignated shares have been issued. The table below summarises Endeavour Mining’s share structure at June 30, 2018.

Table 15: Outstanding shares

As at August 1, 2018, the Corporation had 107,737,655 shares issued and outstanding, as well as 50,535 stock options outstanding.

Financial instruments

In the period ended June 30, 2018, the Corporation implemented a deferred premium collar strategy (“Collar”) using written call options and bought put options for the 15-month period from February 2018 to April 2019. The program covers a total of 400,000 ounces, representing approximately 50% of Endeavour’s total estimated gold production for the period, with a floor price of $1,300 per ounce and ceiling price of $1,500 per ounce. The Collar was not designated as a hedge by the Corporation and was recorded at its fair value at the end of each reporting period with changes in fair value recorded in the consolidated statement of comprehensive loss. As at June 30, 2018, 293,329 ounces remain outstanding under the Collar derivative liability. An unrealized gain of $11.9 million and $7.8 million was recognized in the three and six months ended June 30, 2018. The total premium payable for entering into the Collar of $8.7 million is included as part of the Collar fair value and will be cash-settled on a net basis as monthly contracts mature. In the three and six months ended June 30, 2018, the Corporation incurred $1.7 million and $2.3 million in premium costs, included in realized losses on derivative financial instruments.

$'(000's) June 30, 2018 March 31, 2018 December 31, 2017

Cash 78,762 93,863 122,702

Less: Equipment finance obligation (69,138) (79,077) (54,402)

Less: Convertible senior bond (330,000) (330,000) -

Less: Drawn portion of $350 million RCF (90,000) (20,000) (300,000)

Net Debt (410,376) (335,214) (231,700)

Net Debt / Adjusted EBITDA LTM ratio 1.49 1.24 1.05

June 30, 2018 March 31, 2018 December 31, 2017

Shares issued and outstanding 107,727,522 107,727,522 107,533,007

Stock options 60,668 61,637 144,877

27

5.4. ACCOUNTING POLICIES AND CRITICAL JUDGEMENTS

New accounting policies

The Corporation has reviewed the impact of revised or new IFRS standards that have been issued effective 1 January 2018. The following evaluates the expected impact of the standards on the Corporation’s accounting policies and financial statements:

› IFRS 9, Financial Instruments: (effective January 1, 2018) introduces new requirements for the classification and measurement of financial assets and liabilities. In July 2014, IFRS 9 Financial Instruments was issued as a complete standard, including the requirements previously issued related to classification and measurement of financial assets and liabilities, and additional amendments to introduce a new expected loss impairment model for financial assets including credit losses. The Corporation has adopted this standard on the effective date of January 1, 2018. IFRS 9 replaced the multiple classification and measurement models for financial assets that currently exist under IAS 39 Financial Instruments, and the basis on which financial assets are measured will determine their classification as either, at amortized cost, fair value through profit and loss, or fair value through other comprehensive income.

› IFRS 15 Revenue, The Corporation has adopted the requirements of IFRS 15 Revenue from Contracts with Customers ("IFRS 15") as of January 1, 2018. The principle of IFRS 15 Revenue principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. Specifically, IFRS 15 introduces a five-step approach to revenue recognition with an entity recognizing revenues when a performance obligation is satisfied, which is when “control” of the goods have transferred to the customer. Upon evaluating the transfer of control, the Corporation concluded there is no material change in the timing of revenue recognized under the new standard. The point of transfer of risks and rewards for goods and services under IAS 18 compared to the transfer of control under IFRS 15 occur at the same time based on contractual terms, the delivery of gold doré. For the purposes of evaluating variable consideration, the Corporation reviewed historical assay results and adjustments, as well as variable consideration with regards to timing of residual precious metal pricing. All these factors were considered insignificant and therefore no changes to revenue were recorded upon the adoption of IFRS 15.

› The Corporation has determined that there is no impact of the change in the accounting policy in the accounting for revenue at the transition date.

The Corporation has not applied the following standards that has been issued but was not yet effective at June 30, 2018. The Corporation is currently evaluating the impact this standard is expected to have on the Corporation’s accounting policies and financial statements:

› IFRS 16 Leases (effective January 1, 2019), was issued in January 2016 and provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.

Critical judgements and key sources of estimation uncertainty

The Corporation’s management has made critical judgments and estimates in the process of applying the Corporation’s accounting policies to the consolidated financial statements that have significant effects on the amounts recognised in the Corporation’s condensed interim consolidated financial statements. These estimates include commencement of commercial production, determination of economic viability, functional currency, business combinations, exchangeable shares, and capitalisation of waste stripping. There have been no significant changes compared to December 31, 2017.

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6. NON-GAAP MEASURES

6.1. ALL-IN SUSTAINING MARGIN AND ADJUSTED EBITDA

The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use the all-in sustaining margin and adjusted earnings before interest, tax, depreciation and amortisation (“Adjusted EBITDA”) to evaluate the Corporation’s performance and ability to generate cash flows and service debt. These do not have a standard meaning and are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The following tables provide the illustration of the calculation of this margin and Adjusted EBITDA, for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017 and six months ended June 30, 2018 and June 30, 2017.

Table 16: All-In Sustaining Margin1

1Data does not include Tabakoto or Nzema.

Table 17: Adjusted EBITDA

1Found on the consolidated statement of comprehensive earnings.

($'000) June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Revenues 189,515 198,894 100,520 388,409 204,701

Less: Royalties (10,254) (12,183) (4,666) (22,437) (9,392)

Less: Total cash costs (91,675) (80,640) (48,884) (172,316) (105,156)

Less: Corporate G&A (6,130) (6,488) (6,365) (12,618) (12,295)

Less: Sustaining capital (6,371) (3,805) (3,413) (10,176) (8,236)

Less: Sustaining exploration (3,108) (2,276) (3,588) (5,384) (8,311)

All-in sustaining margin from continuing operations 71,977 93,502 33,604 165,478 61,311



Earnings/(loss) from continuing operations before taxes1 30,109 32,957 12,505 63,066 2,668

Add back: Depreciation and depletion1 43,538 39,504 20,202 83,042 41,410

Add back: Acquisiton and restructuring costs1 - - 936 - 2,460

Add back: Other income (expenses)1 818 165 847 983 (2,690)

Add back: Finance costs1 4,549 7,496 5,328 12,045 11,202

Add back: (Gains)/losses on financial instruments1 (10,922) 11,403 (3,408) 481 8,478

Adjusted EBITDA from continuing operations 68,092 91,525 36,410 159,617 63,528


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6.2. CASH AND ALL-IN SUSTAINING COST PER OUNCE OF GOLD SOLD

The Corporation reports cash costs based on ounces sold. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors may find this information useful. However, there are no standardised meanings, and therefore this additional information and should not be considered in isolation, or as a substitute for measures of performance prepared in accordance with GAAP. The following table provides a reconciliation of cash costs per ounce of gold sold (including the ounces sold from ore purchased), for the for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017 and six months ended June 30, 2018 and June 30, 2017.

Table 18: Cash Costs

1 Figures include Tabakoto and Nzema.

The Corporation is reporting all‐in sustaining costs per ounce sold. The methodology for calculating all‐in sustaining costs per ounce was developed internally and is calculated below. This non‐GAAP measure provides investors with transparency regarding the total cash cost of producing an ounce of gold in each period. Readers should be aware that this measure does not have a standardised meaning. It is intended to provide additional information and should not be considered in isolation, or as a substitute for measures of performance prepared in accordance with GAAP.

$'000's except ounces sold June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Operating expenses from mine operations (93,466) (82,456) (49,276) (175,922) (105,807)

Non-cash and other adjustments 1,791 1,816 392 3,606 652

Cash costs from continuing operations (91,675) (80,640) (48,884) (172,316) (105,156)

Operating expenses from discontinued operations (47,513) (32,141) (52,707) (79,654) (116,208)

Non-cash and other adjustments from discontinued operations 17,371 2,978 (2,435) 20,348 3,067

Total cash costs (121,817) (109,804) (104,026) (231,621) (218,297)

Gold ounces sold 179,327 185,151 152,215 364,478 314,523

Total cash cost per ounce of gold sold1 679 593 683 635 694

Excluding discontinued operations

Cash costs from continuing operations (91,675) (80,640) (48,884) (172,316) (105,156)

Gold ounces sold 150,732 153,788 84,580 304,520 174,015

Total cash cost per ounce from continuing operations 608 524 578 566 604


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Table 19: All-In Sustaining Costs

1 Figures include Tabakoto and Nzema.

Table 20: Sustaining and non-sustaining capital

1 Per note 7 of the condensed interim consolidated financial statements which include all additions from Tabakoto. 2 Total expenditure for growth projects in the period. The amounts do not agree to the free cash flow as those figures reflect the amounts physically paid.

$'000's except ounces sold June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Total cash cost for ounces sold1 (121,817) (109,804) (104,026) (231,621) (218,297)

Royalties1 (12,491) (14,657) (9,757) (27,148) (19,625)

Corporate G&A1 (6,130) (6,488) (6,365) (12,618) (12,295)

Sustaining capital1 (13,934) (10,049) (12,624) (23,983) (24,652)

Sustaining exploration (3,108) (2,276) (3,588) (5,384) (8,311)

All-in sustaining costs from all operations (157,480) (143,273) (136,360) (300,754) (283,180)

Gold ounces sold1 179,327 185,151 152,215 364,478 314,523

All-in sustaining cost per ounce sold 878 774 896 825 900

Excluding discontinued operations

add back: all-in sustaining costs from Nzema and

Tabakoto39,946 37,880 69,491 77,825 139,839

All-in sustaining costs from continuing operations (117,535) (105,393) (66,869) (222,928) (143,341)

Gold ounces sold 150,732 153,788 84,580 304,520 174,015

All-in sustaining costs per ounce sold from continuing

operations780 685 791 732 824


($'000 ) June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017

Expenditures and prepayments on mining interests1 129,627 130,324 122,538 259,951 214,148

Non-sustaining capital expenditures (10,397) (14,272) (6,699) (24,669) (19,061)

Non-sustaining exploration (10,504) (14,915) (8,860) (25,419) (15,562)

Sustaining exploration (3,108) (2,276) (3,588) (5,384) (8,311)

Growth projects2 (91,684) (88,812) (90,768) (180,496) (159,654)

Sustaining Capital 13,934 10,049 12,623 23,983 11,560


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6.3. ADJUSTED NET EARNINGS AND ADJUSTED NET EARNINGS PER SHARE

Net earnings have been adjusted for items considered exceptional in nature and not related to Endeavour Mining’s core operation of mining assets. The presentation of adjusted net earnings may assist investors and analysts to understand the underlying operating performance of our core mining business. However, adjusted net earnings and adjusted net earnings per share do not have a standard meaning under IFRS. They should not be considered in isolation, or as a substitute for measures of performance prepared in accordance with IFRS and are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. The following table reconciles these non‐GAAP measures to the most directly comparable IFRS measure.

Table 21: Adjusted net earnings

6.4. FREE CASH FLOW AND ADJUSTED CASH FLOW

The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use free cash flow to assess the Corporation’s ability generate and manage liquid resources. These terms do not have a standard meaning and are intended to provide additional information. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Table 22: Adjusted Operating Cash Flow (AOCF) and AOCF per share


Total net earnings/(loss) (15,443) 27,659 17,269 12,216 15,077

Net gain (loss) from discontinued operations 24,025 (593) (3,881) 23,432 (10,307)

Deferred income tax (recovery)/expense 4,432 (4,881) (6,301) (449) (8,783)

Loss/(Gain) on financial instruments (10,922) 11,403 (3,408) 481 8,478

Other income/(expenses) 818 165 847 983 (2,690)

Share-based compensation 10,109 2,668 1,808 12,777 9,443

Acquisition and restructuring costs - - 936 - 2,460

Non-cash and other adjustments 1,791 1,816 392 3,606 652

Adjusted net earnings 14,810 38,237 7,662 53,046 14,330

Attributable to non-controlling interests 5,621 13,826 740 19,447 12,676

Attributable to shareholders of the Corporation 9,189 24,411 6,922 33,599 1,653

Weighted average number of shares issued and outstanding 107,727,522 107,634,310 95,807,936 107,681,174 94,757,477

Adjusted net earnings per share (basic) from continuing operations 0.09 0.23 0.07 0.31 0.02


Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,

2018 2018 2017 2018 2017

CASH GENERATED FROM OPERATING ACTIVITIES 59,566 48,303 27,303 107,869 84,130

Add back changes in non-cash working capital (9,012) (46,418) (27,671) (55,430) (22,783)

OPERATING CASH FLOWS BEFORE NON-CASH WORKING CAPITAL 68,578 94,721 54,974 163,299 106,913

Divided by weighted average number of O/S shares, in millions 107,728 107,634 95,808 107,681 94,757

OPERATING CASH FLOW PER SHARE 0.64 0.88 0.57 1.52 1.13

SIX MONTHS ENDED THREE MONTHS ENDED

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6.5. NET DEBT AND NET DEBT/ADJUSTED EBITDA RATIO

The Corporation is reporting Net Debt and Net Debt/Adjusted EBITDA ratio. This non‐GAAP measure provides investors with transparency regarding the liquidity position of the Corporation. It is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The calculation of net debt is shown in table 14, calculated as nominal undiscounted debt including leases, less cash. The following table explains the calculation of net debt/Adjusted EBITDA ratio using the last twelve months of Adjusted EBITDA.

Table 23: Net Debt/ Adjusted EBITDA ratio

1 Trailing twelve month Adjusted EBITDA is as reported in previous filings. Prior quarter results include the Nzema discontinued operations.

7. QUARTERLY AND ANNUAL FINANCIAL AND OPERATING RESULTS

The following tables summarise the Corporation’s financial and operational information for the last eight quarters and three fiscal years. The significant factors affecting results in the quarters presented below are volatility of realised gold prices, the addition of the Houndé mine in Q4-2017, the commencement of production of the Karma mine on October 1, 2016, non-cash inventory write downs at Tabakoto, and non-cash impairment of the Nzema mineral interest.

Table 24: 2018 - 2017 Quarterly Key Performance Indicators

Table 25: 2017 - 2016 Quarterly Key Performance Indicators

($000's) Unit June 30, 2018 March 31, 2018December 31,

2017

September 30,

2017

Gold ounces sold oz 150,732 185,151 190,511 110,789

Gold revenues $ 189,515 240,281 206,550 135,110

Cash flows from continuing operations $ 59,566 48,303 82,497 55,164

Earnings from mine operations $ 43,077 66,140 55,660 7,442

Net earnings (loss) and total comprehensive earnings (loss) $ (15,443) 27,659 (133,824) (64,522)

Net earnings (loss) attributable to shareholders $ (15,311) 13,092 (101,832) (64,104)

Basic earnings (loss) per share from continuing operations $ 0.04 0.12 (1.24) (0.26)

Diluted earnings (loss) per share from continuing operations $ 0.04 0.12 (1.24) (0.26)

FOR THE THREE MONTHS ENDED

($'000' except ounces sold) Colonne2 June 30, 2017 March 31, 2017December 31,

2016

September 30,

2016

Gold ounces sold 127,355 162,308 169,803 127,507

Gold revenues 160,373 193,140 199,825 169,313

Cash flows from operations 27,302 53,291 71,898 23,466

Earnings from mine operations 37,945 27,115 45,393 51,644

Net earnings (loss) and total comprehensive earnings (loss) 17,268 (2,190) (69,116) 24,253

Net earnings (loss) attributable to shareholders 13,444 (7,714) (49,727) 13,361

Basic earnings (loss) per share from continuing operations 0.14 (0.13) (0.62) 0.16

Diluted earnings (loss) per share from continuing operations 0.14 (0.13) (0.62) 0.16

FOR THE THREE MONTHS ENDED

$'(000's) June 30, 2018 March 31, 2018 December 31, 2017

Net Debt 410,376 335,214 231,700

Trailing twelve month Adjusted EBITDA1 275,312 270,807 219,912

Net Debt / Adjusted EBITDA LTM ratio 1.49 1.24 1.05

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Table 26: Annual Key Performance Indicators1

1 2016 comparative period is presented as per the year-end 2017 consolidated financial statements, and the 2015 data is presented as in the 2016 consolidated financial statements. * Adjusted net earnings have been modified for the year ended December 31,2016 from $1.15 to $1.02 as the Non-Controlling Interest portion has been adjusted.

($000'except per share amounts)Year Ended December 31,

2017

Year Ended December 31,

2016

Year Ended December 31,

2015

Gold ounces sold 654,393 545,689 519,812

Gold revenues 652,079 566,486 522,652

Cash flows from operations 221,791 153,897 147,301

Earnings from mine operations 121,926 170,610 59,949

Net earnings (loss) and total comprehensive earnings

(loss)(177,068) (52,423) 35,601

Net earnings (loss) attributable to shareholders (156,337) (66,722) 18,227

Basic earnings (loss) per share (1.59) (0.83) 0.42

Diluted earnings (loss) per share (1.59) (0.83) 0.42

Total assets 1,693,511 1,357,098 1,054,318

Total long term financial liabilities 451,705 246,811 303,483

Total attributable shareholders' equity 984,864 908,789 564,103

Adjusted earnings per share 0.67 1.23 0.91

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8. RISK FACTORS

Readers of this MD&A should consider the information included or incorporated by reference in this document and the Corporation’s condensed interim financial statements and related notes for the period ending June 30, 2018. The nature of the Corporation’s activities and the locations in which it works mean that the Corporation’s business generally is exposed to significant risk factors, many of which are beyond its control. The Corporation examines the various risks to which it is exposed and assesses any impact and likelihood of those risks. For discussion on all the risk factors that affect the Corporation’s business generally, please refer to the most recent Annual Information Form filed on SEDAR at http://www.sedar.com/, and the 2017 year-end audited consolidated financial statements. The risks that affect the financial statements specifically, and the risks that are reasonably likely to affect them in the future, are discussed below.

8.1. FINANCIAL RISKS

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Corporation by failing to discharge its obligations. There has been no change in the Corporation’s objectives and policies for managing this risk in the quarter ended June 30, 2018. The Corporation’s maximum exposure to credit risk is as follows:

Table 27: Exposure to credit risk

Liquidity risk

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Corporation has a planning and budgeting process in place to help determine the funds required to support the Corporation’s normal operating requirements.

Currency risk

Currency risk relates to the risk that the fair values or future cash flows of the Corporation’s financial instruments will fluctuate because of changes in foreign exchange rates. Exchange rate fluctuations may affect the costs that the Corporation incurs in its operations including its capital expenditures. Gold is sold in US dollars and the Corporation’s costs are incurred principally in CFA Franc, Canadian dollars, Euros, Australian dollars, UK pounds, and US dollars. The Corporation also holds cash and cash equivalents, marketable securities, and other receivables that are denominated in non-US dollar currencies which are subject to currency risk. The Corporation has not hedged its exposure to foreign currency exchange risk. Therefore, changes in currency exchange rates as well as associated transaction costs could adversely affect the Corporation’s results in any given period. Any fluctuations in the value of these foreign currencies relative to the US dollar may result in variations in the Corporation’s net income. Foreign currencies are affected by several factors that are beyond the Corporation’s control. These factors include economic conditions in the relevant country and elsewhere and the outlook for interest rates, inflation and other economic factors. To date, the Corporation has not entered into hedging or derivative arrangements to manage its foreign exchange risk.

($'000) June 30,2018 March 31, 2018 December 31, 2017

Cash 78,762 93,863 122,702

Cash - restricted 665 807 1,327

Trade and other receivables 50,444 46,168 50,698

Working capital loan 1,088 1,075 1,062

Marketable securities 7,762 955 981

Long-term receivable 1,132 188 208

139,853 143,056 176,978

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The table below highlights the net assets (liabilities) held in foreign currencies:

Table 28: Net assets in foreign currencies

The effect on earnings and other comprehensive earnings before tax as at June 30, 2018, of a 10% appreciation or depreciation in the foreign currencies against the US dollar on the above mentioned financial and non-financial assets and liabilities of the Corporation is estimated to be $3.4 million (March 31, 2018, $3.5 million), if all other variables remained constant.

Interest rate risk

Interest rate risk is the risk that future cash flows from, or the fair values of, the Corporation’s financial instruments wi ll fluctuate because of changes in market interest rates. The Corporation is exposed to interest rate risk primarily on its long-term debt. Borrowings under the Corporation’s RCF accrue interest at variable rates and any borrowings would expose the Corporation to interest rate cost and interest rate risk. If interest rates increase, the Corporation’s debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same. This would in turn result in a decrease in the Corporation’s net income and cash flows, limiting its ability to use resources for growth and investment in its operations. The RCF contains several typical financial covenants, including maximum leverage levels and minimum interest cover levels, which, if breached, may result in the enforcement by secured lenders of their collateral interests. Should this occur due to a credit event, it may result in the Corporation’s loss of control over business and a material adverse effect on shareholder value. Since marketable securities and government treasury securities held as loans are short term in nature and are usually held to maturity, there is minimal fair value sensitivity to changes in interest rates. The Corporation continually monitors its exposure to interest rates and is comfortable with its exposure given the relatively low short-term US interest rates and LIBOR. The effect on earnings and other comprehensive loss as at June 30, 2018, of a 10% change in the LIBOR rate on the RCF is estimated to be $0.1 million (March 31, 2018 - $0.5 million).

Price risk

Price risk is the risk that the fair value or future cash flows of the Corporation’s financial instruments will fluctuate because of changes in market prices. There has been no change in the Corporation’s objectives and policies for managing this risk and no significant changes to the Corporation’s exposure to price risk during the quarter ended June 30, 2018.

The Corporation’s business requires substantial capital expenditure and there can be no assurance that such funding will be available on a timely basis, or at all

The Corporation may require additional capital if it decides to develop other operations properties or make additional acquisitions. The Corporation may also encounter significant unanticipated liabilities or expenses. The Corporation’s ability to continue its planned exploration and development activities, as well as its ability to discharge unanticipated liabilities and expenses, depends on its ability to generate sufficient free cash flow from its operating mines, each of which is subject to certain risks and uncertainties. The Corporation may be required to obtain additional equity or debt financing in the future to fund exploration and development activities or acquisitions of additional projects. There can be no assurance that the Corporation will be able to obtain such financing in a timely manner, on acceptable terms or at all. In addition, any additional debt financings, if available, may involve financial covenants and the granting of further security over the Corporation’s assets.

The Corporation’s use of derivative instruments involves certain inherent risks, including credit risk, market liquidity risk, and unrealized mark-to-market risk

From time to time, the Corporation employs hedging tools for a portion of its gold production and commodity prices to protect a portion of its cash flows against decreases in the price of gold or increases in the price of the underlying

($'000) June 30, 2018 March 31, 2018 December 31, 2017

Canadian dollar 163 440 107

CFA Francs 30,601 33,447 (696)

Euro 95 508 -

Other currencies 3,010 (1,134) 2,843

33,869 33,261 2,254

36

commodities it uses. The main hedging tools available to protect against price risk are collar contracts which involve a combination of put and call options or forward sales. Various strategies are available using these tools. Although hedging activities may protect the Corporation against a low gold price or commodity price fluctuations, they may also (i) limit the price that can be realized on the portion of hedged gold where the market price of gold exceeds the strike price in forward sale or call option contracts, and (ii) stipulate a price at which a commodity (such as fuel) must be purchased, which may be higher than the prevailing market price for that commodity.

The Corporation’s business could be adversely affected by global financial conditions

Global financial conditions have been characterized by ongoing volatility. Global financial conditions could suddenly and rapidly destabilize in response to future events, as government authorities may have limited resources to respond to future crises. Global capital markets have continued to display increased volatility in response to global events. Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability, changes to energy prices or sovereign defaults. Such events are illustrative of the effect that events beyond the Corporation’s control may have on commodity prices, demand for metals, including gold, availability of credit, investor confidence and general financial market liquidity, all of which affect the Corporation’s business.

9. CONTROLS AND PROCEDURES

9.1. DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported on a timely basis to senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Additionally, these controls and procedures provide reasonable assurance that information required to be disclosed in the Corporation’s annual and interim filings (as such terms are defined under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) and other reports filed or submitted under Canadian securities law is recorded, processed, summarised and reported within the time periods specified by those laws, and that material information is accumulated and communicated to management including the CEO and CFO as appropriate to allow timely decisions regarding required disclosure. As at December 31, 2017, management evaluated the design and operating effectiveness of the Corporation’s disclosure controls and procedures as required by Canadian Securities Law. Based on that evaluation, the CEO and CFO concluded that as of December 31, 2017, the disclosure controls and procedures were effective. There have been no material changes in the Corporation’s disclosure controls and procedures since the year ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Corporation’s public disclosures.

9.2. INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Corporation’s management, with the participation of its CEO and CFO, is responsible for establishing and maintaining adequate internal controls over financial reporting. Under the supervision of the CFO, the Corporation’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. As at December 31, 2017, management evaluated the effectiveness of the Corporation’s internal control over financial reporting as required by Canadian securities laws. Based on that evaluation of internal control over financial reporting, the CEO and CFO have concluded that, as at December 31, 2017, the internal controls over financial reporting were effective and able to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. There have been no material changes in the Corporation’s internal controls over financial reporting since the year ended December 31, 2017 that have materially affected or are reasonably likely to materially affect the Corporation’s internal controls over financial reporting.

37

9.3. LIMITATIONS OF CONTROLS AND PROCEDURES

The Corporation’s management, including the CEO and CFO believe that any disclosure controls and procedures or internal control over financial reporting, can provide only reasonable, but not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the actions of one individual, by collusion of two or more people, or by unauthorised override of the control. Accordingly, because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

9.4. COMMITMENTS AND CONTINGENCIES

› The Corporation has commitments in place at all five of its mines and other key projects for drill and blasting services, load and haul services, supply of explosives and supply of hydrocarbon services.

› The Corporation is subject to operating and finance lease commitments in connection with the purchase of mining equipment, light duty vehicles and workshop and rented office premises.

› The Corporation is, from time to time, involved in various claims, legal proceedings, tax assessments and complaints arising in the ordinary course of business from third parties. The Corporation cannot reasonably predict the likelihood or outcome of these actions. The Corporation does not believe that adverse decisions in any other pending or threatened proceedings related to any matter, or any amount which may be required to be paid by reason thereof, will have a material effect on the financial condition or future results of operations.

› The Corporation’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Corporation believes its operations are materially in compliance with all applicable laws and regulations. The Corporation has made, and expects to make in the future, expenditures to comply with such laws and regulations.

› The Corporation is obligated to deliver 100,000 ounces of gold (20,000 ounces per year) to Franco-Nevada Corporation and Sandstorm Gold Inc. (the “Syndicate”) over a five period in exchange for 20% of the spot price of gold for each ounce of gold delivered (the “Ongoing Payment”). The amount that was previously advanced for this agreement of $100 million is reduced on each delivery by the excess of the spot price of the gold delivered over the Ongoing Payment. Following the five-year period, which commenced on March 31, 2016, the Corporation is committed to deliver refined gold equal to 6.5% of the gold production at the Karma Mine for the life of the mine in exchange for Ongoing Payments. The Corporation must deliver an additional 7,500 ounces between July 2017 and April 2019 in exchange for the additional deposit of $5 million received in 2017. The Corporation assumed the gold stream when it acquired the Karma Mine on April 26, 2016. Gold ounces sold to the Syndicate under the stream agreement are recognized as revenue only on the actual proceeds received, which per the agreement is 20% of the spot gold price.

› The Corporation was recently served in the Cayman Islands with notice of a claim by a former service provider. The Corporation is taking legal advice on the merits of the claim and the probable outcome but intends to vigorously defend against the claims.

38

10. APPENDIX A: DETAILED RESERVES AND RESOURCES

The following table shows the consolidated reserves and resources as at December 31, 2017.

Table 29: Mineral Reserves and Mineral Resources as at December 31, 2017 ON A 100% BASIS ON AN ATTRIBUTABLE BASIS Resources shown inclusive of Reserves

Tonnage (Mt)

Grade (Au g/t)

Content (Au koz)

Tonnage

(Mt) Grade

(Au g/t) Content (Au koz)

Agbaou Mine (85% owned) Proven Reserves 1.0 1.41 44

0.8 1.41 38

Probable Reserves 7.9 2.45 624

6.7 2.45 530 P&P Reserves 8.9 2.34 668

7.6 2.34 568

Measured Resource (incl. reserves) 1.0 1.43 47

0.9 1.43 40 Indicated Resources (incl. reserves) 9.3 2.54 757

7.9 2.54 643

M&I Resources (incl. reserves) 10.3 2.43 804

8.7 2.43 683 Inferred Resources 1.0 1.74 54

0.8 1.74 46

Tabakoto Mine(80-90% owned) Proven Reserves 2.4 3.32 251

1.9 3.32 201


2.0 3.39 214 P&P Reserves 4.8 3.36 517

3.8 3.36 415


6.0 2.99 572 Indicated Resources (incl. reserves) 12.4 3.03 1,211

10.4 2.99 1,003

M&I Resources (incl. reserves) 19.9 3.01 1,925

16.4 2.99 1,576 Inferred Resources 7.4 3.40 810

6.1 3.37 656

Houndé Mine (90% owned) Proven Reserves 3.6 2.25 263

3.3 2.25 237

Probable Reserves 26.5 1.98 1,693

23.9 1.98 1,524 P&P Reserves 30.2 2.02 1,957

27.2 2.02 1,761



30.3 2.01 1,961



2.9 2.64 248

Ity Mine and CIL Project (80% owned) Proven Reserves 0.3 1.41 14

0.3 1.41 11

Probable Reserves 58.6 1.59 3,001

46.9 1.59 2,401 P&P Reserves 58.9 1.59 3,016

47.1 1.59 2,412



58.5 1.57 2,944



15.0 1.31 628

Karma Mine (90% owned) Proven Reserves 0.7 0.63 15

0.7 0.63 14


30.5 0.89 874 P&P Reserves 34.6 0.89 986

31.1 0.89 887



72.9 1.10 2,571



19.3 1.32 818

Kalana Project (80% owned) Proven Reserves 5.1 3.00 492 4.1 3.00 394 Probable Reserves 16.6 2.76 1,472 13.3 2.76 1,177 P&P Reserves 21.7 2.81 1,964 17.4 2.81 1,571 Measured Resource (incl. reserves) 9.5 4.19 1,280 7.6 4.19 1,024 Indicated Resources (incl. reserves) 14.2 3.96 1,810 11.4 3.96 1,448 M&I Resources (incl. reserves) 23.7 4.06 3,100 19.0 4.06 2,480 Inferred Resources 1.7 4.39 240 1.4 4.39 192 Group Consolidated Total Proven Reserves 13 2.56 1,080

11 2.53 894

Probable Reserves 146 1.71 8,027

123 1.70 6,720 P&P Reserves 159 1.78 9,106

134 1.77 7,614

Measured Resource (incl. reserves) 23 3.17 2,353

19 3.14 1,915 Indicated Resources (incl. reserves) 224 1.74 12,492

191 1.72 10,570

M&I Resources (incl. reserves) 247 1.87 14,855

210 1.85 12,492 Inferred Resources 53 1.79 3,074

45 1.77 2,588

39

The mineral reserves and resources were estimated as at December 31, 2017 in accordance with the provisions adopted by the Canadian Institute of Mining Metallurgy and Petroleum (CIM) and incorporated into the NI 43-101. Mr. Jeremy Langford, FAusIMM, Endeavour Mining's Chief Operating Officer, has reviewed and approved the scientific and technical information contained in this document. Jeremy Langford is a "qualified person" as defined in NI 43-101. The Qualified Persons responsible for the mineral reserve and resource estimates are detailed in the following table. All QP's are independent of Endeavour Mining, except Kevin Harris, Michael Alyoshin and John Barry.

MINERAL RESOURCES

QUALIFIED PERSON POSITION PROPERTY/DEPOSIT

Kevin Harris, CPG V.P. Resources, Endeavour Mining Corp

Agbaou, Tabakoto (except Kofi A, Kofi C, Blanaid deposits), Colline Sud deposit (Ity), North Kao deposit (Karma), Bouere and Dohoum deposits

(Houndé)

Mark Zammit, MAIG Principal, Cube Consulting Pty Ltd

Ity (except Colline Sud deposit), Vindaloo deposits (Houndé)

Eugene Puritch, P.Eng.

President, P&E Mining Consultants Inc

Karma (except North Kao deposit), Kofi A, Kofi C and Blanaid deposits (Tabakoto)

Ivor Jones, FAusIMM Principal Consulant, Denny Jones (Pty) Ltd

Kalana Project

MINERAL RESERVES

QUALIFIED PERSON POSITION PROPERTY/DEPOSIT

Michael Alyoshin, MAusIMM CP (Min)

Chief Mining Engineer - Strategic Projects,

Endeavour Mining Corp

Agbaou, Tabakoto open pits, Bouere and Dohoun deposits (Houndé), North Kao deposit (Karma), Ity (Heap Leach)

John Barry, P.Eng. Technical Services Manager - Tabakoto mine, Endeavour

Mining Corp

Tabakoto underground

Ross Malcolm Cheyne, BE FAusIMM

Director, Orelogy Group Pty Ltd

Vindaloo deposits (Houndé)

Eugene Puritch, P.Eng.

President, P&E Mining Consultants Inc

Karma (except North Kao deposit)

Allan Earl, FAusIMM Executive Consultant, Snowden Mining Industry

Consultants (Pty) Ltd

Kalana Project, Ity (CIL)

1. The mineral resources and reserves have been estimated and reported in accordance with Canadian National Instrument 43-101, 'Standards of Disclosure for Mineral Projects' and the Definition Standards adopted by CIM Council in May 2014.

2. Mineral resources that are not mineral reserves do not have demonstrated economic viability. 3. All Mineral Resources are reported inclusive of Mineral Reserves. 4. Tonnages are rounded to the nearest 100,000 tonnes; gold grades are rounded to two decimal place; ounces are

rounded to the nearest 1,000oz. Rounding may result in apparent summation differences between tonnes, grade and contained metal.

5. Tonnes and grade measurements are in metric units; contained gold is in troy ounces. 6. The reporting of Mineral Reserves and Resources are based on a gold price as detailed below:

1 Cut off grades for all resources open pits are 0.5g/tAu, except at Kalana where the cutoff grade is at 0.9g/tAu and at Karma where the cut-off grade is defined by material type: Oxide=0.2, Transition=0.22 and Sulfide=0.5 2 North Kao resources has a gold price of $1,500/oz

Project1 Agbaou Kalana

Tabakoto Ity Karma2 Houndé

UG Open Pit

Reserves Au price 1,350 1,100 1,250 1,250 1,250 1,300 1,300

Resources Au price 1,500 1,400 1,500 1,500 1,500 1,557 1,500

40

7. At Tabakoto, the breakdown for underground and open pit reserves is as follows:

Underground Reserves Open Pit Reserves

On a 100% basis

Tonnage (kt)

Grade (Au g/t)

Content (Au koz)

Tonnage

(kt) Grade


Proven Reserves 2,237 3.39 244

113 2.02 7 Probable Reserves 2,048 3.50 230

385 2.88 36

P&P Reserves 4,285 3.44 474

497 2.68 43

8. At Ity, the breakdown for Heap Leach and CIL pit reserves is as follows:

The scientific and technical information relating to the Agbaou mine, Ity mine, Tabakoto mine, Karma mine, Houndé mine and Kalana Project contained in this document has been derived from or based on the following technical reports. Copies of the reports are available electronically on SEDAR at www.sedar.com under the Corporation's profile. The Kalana report is available under the Avnel Gold Mining profile on SEDAR.

• Agbaou mine: "Technical Report, Mineral Resource and Reserve Update for the Agbaou Gold Mine, Côte d'Ivoire, West Africa" dated effective December 31, 2014.

• Ity mine: "Ity CIL Project National Instrument 43-101 Technical Report", dated December 9, 2016.

• Ity mine: Reserves and Resources were updated in 2017 after the completion of a Project Optimisation Study. The results were published in the September 20, 2017 press release available on the company's website.

• Tabakoto mine: "Technical Report and Mineral Resource and Reserve Update for the Tabakoto Gold Mine, Mali, West Africa" dated effective December 31, 2015.

• Karma mine: “Technical Report on an updated Feasibility Study and a Preliminary Economic Assessment for the Karma Gold Project, Burkina Faso, West Africa” dated effective August 10, 2014.

• Houndé mine: "Houndé Gold Project, Burkina Faso, Feasibility Study NI 43-101 Technical Report", dated effective October 31, 2013.

• Kalana Project: "NI 43-101 Technical Report on Kalana Main Project", dated effective March 30, 2016. Additional information relating to the Corporation is available on the Corporation’s web site at www.endeavourmining.com and in the Corporation’s most recently fi led Annual Information Form filed on SEDAR at www.sedar.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this MD&A and certain information incorporated herein by reference constitute forward-looking statements. Forward-looking statements include, but are not limited to, statements with respect to the Corporation’s plans or future financial or operating performance, the estimation of mineral reserves and resources, the realisation of mineral reserve estimates, conclusions of economic assessments of projects, the timing and amount of estimated future production, costs of future production, future capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, requirements for additional capital, sources and timing of additional financing, realisation of unused tax benefits and future outcome of legal and tax matters. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, “will continue” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. The material factors or assumptions used to develop material forward-looking statements are disclosed throughout this document. Forward-looking statements, while based on management’s best estimates and assumptions, are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Endeavour Mining to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the successful integration of acquisitions; risks related to

Heap Leach Reserves CIL Reserves

On a 100% basis

Tonnage (kt)

Grade (Au g/t)

Content (Au koz)

Tonnage

(kt) Grade


Proven Reserves 316 1.41 14

- - - Probable Reserves 1,472 2.69 127

57,100 1.57 2,874

P&P Reserves 1,787 2.46 142

57,100 1.57 2,874

http://www.endeavourmining.com/


41

international operations; risks related to joint venture operations; risks related to general economic conditions and credit availability, actual results of current exploration activities, unanticipated reclamation expenses; changes in project parameters as plans continue to be refined; fluctuations in prices of metals including gold; fluctuations in foreign currency exchange rates, increases in market prices of mining consumables, possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes, title disputes, claims and limitations on insurance coverage and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, changes in national and local government regulation of mining operations, tax rules and regulations, and political and economic developments in countries in which the Corporation operates, actual resolutions of legal and tax matters, as well as those factors discussed in the section entitled “Description of the Business – Risk Factors” in Endeavour Mining’s most recent Annual Information Form available on SEDAR at www.sedar.com. Although Endeavour Mining has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Corporation’s management reviews periodically information reflected in forward-looking statements. The Corporation has and continues to disclose in its Management’s Discussion and Analysis and other publicly filed documents, changes to material factors or assumptions underlying the forward-looking statements and to the validity of the statements themselves, in the period the changes occur.

CAUTIONARY NOTE REGARDING RESERVES AND RESOURCES

Readers should refer to the most recent Annual Information Form of Endeavour Mining and other continuous disclosure documents filed by Endeavour Mining available at www.sedar.com, for further information on mineral reserves and resources, which is subject to the qualifications and notes set forth therein. Additional information relating to the Corporation is available on the Corporation’s web site at www.endeavourmining.com and in the Corporation’s most recently fi led Annual Information Form filed on SEDAR at www.sedar.com.



http://www.endeavourmining.com/


ENDEAVOUR MINING CORPORATION Condensed Interim Consolidated Statements of Financial Position (Expressed in Thousands of United States Dollars) (Unaudited)

1

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2018 and 2017

TABLE OF CONTENTS 1 DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS ............................................................ 5

2 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES ............................................. 5

3 ACQUISITION AND RESTRUCTURING ............................................................................................... 8

4 DISPOSALS OF MINING INTERESTS .................................................................................................. 9

5 INVENTORIES ................................................................................................................................. 12

6 PREPAID EXPENSES AND OTHER .................................................................................................... 12

7 MINING INTERESTS ........................................................................................................................ 13

8 OTHER LONG-TERM ASSETS .......................................................................................................... 15

9 TRADE AND OTHER PAYABLES ....................................................................................................... 15

10 FINANCE OBLIGATIONS ................................................................................................................. 16

11 LONG-TERM DEBT ......................................................................................................................... 17

12 OTHER LONG-TERM LIABILITIES .................................................................................................... 20

13 SHARE CAPITAL .............................................................................................................................. 20

14 NON-CONTROLLING INTERESTS .................................................................................................... 24

15 LOSSES ON FINANCIAL INSTRUMENTS .......................................................................................... 24

16 DERIVATIVE FINANCIAL INSTRUMENTS ......................................................................................... 24

17 INCOME TAXES .............................................................................................................................. 25

18 SEGMENTED INFORMATION ......................................................................................................... 26

19 CAPITAL MANAGEMENT ................................................................................................................ 29

20 FINANCIAL INSTRUMENTS ............................................................................................................. 29

21 COMMITMENTS AND CONTINGENCIES ......................................................................................... 33

ENDEAVOUR MINING CORPORATION Condensed Interim Consolidated Statements of Financial Position (Expressed in Thousands of United States Dollars) (Unaudited)

1

In thousands of US$Note

As at

June 30,

2018

As at

December 31,

2017

ASSETS

Current

Cash 78,762 122,702

Cash - restricted 665 1,327

Trade and other receivables 50,444 50,698

Income taxes receivable 378 627

Inventories 5 123,381 134,766

Current portion of derivative financial assets 16 7,762 -

Prepaid expenses and other 6 32,987 44,514

Assets held for sale 4 130,909 -

425,288 354,634

Mining interests 7 1,378,126 1,317,952

Deferred income taxes 4,637 6,267

Other long term assets 8 29,588 14,658

Total assets 1,837,639$ 1,693,511$

LIABILITIESCurrent

Trade and other payables 9 149,891 220,781

Current portion of finance obligations 10 19,452 17,658

Income taxes payable 22,652 2,746

Liabilities held for sale 4 57,714 -

249,709 241,185

Finance obligations 10 49,686 36,744

Long term debt 11 410,204 286,440

Other long-term liabilities 12 38,688 52,615

Deferred income taxes 73,827 75,906

Total liabilities 822,114$ 692,890$

EQUITYShare capital 1,738,131 1,735,074 Equity reserve 13 59,309 56,041 Deficit (808,470) (806,251) Equity attributable to shareholders of the Corporation 988,970 984,864 Non-controlling interests 14 26,555 15,757

Total equity 1,015,525 1,000,621

1,837,639$ 1,693,511$

COMMITMENTS AND CONTINGENCIES (NOTE 21)

Approved by the Board: August 1, 2018

"Sebastien de Montessus" Director "Wayne McManus" Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements

ENDEAVOUR MINING CORPORATION Condensed Interim Consolidated Statements of Comprehensive Earnings/(Loss) (Expressed in Thousands of United States Dollars) (Unaudited)

2

In thousands of US$

Note 2018 2017 2018 2017

RevenuesGold revenue 18 189,515 100,520 388,409 204,701

Cost of salesOperating expenses (92,646) (49,276) (175,922) (105,807)Depreciation and depletion 7 (43,538) (20,202) (83,042) (41,410)Royalties (10,254) (4,666) (22,437) (9,392)

Earnings from mine operations 43,077 26,376 107,008 48,092

Corporate costs (6,130) (6,365) (12,618) (12,295)Acquisition and restructuring costs - (936) - (2,460)Share-based compensation 13 (10,109) (1,808) (12,777) (9,443)Exploration costs (2,284) (1,995) (5,038) (4,236)

Earnings from operations 24,554 15,272 76,575 19,658

Other income (expenses)Gain/(loss) on financial instruments 15 10,922 3,408 (481) (8,478)Finance costs 11 (4,549) (5,328) (12,045) (11,202)Other expenses (818) (847) (983) 2,690-

Earnings from continuing operations before taxes 30,109 12,505 63,066 2,668

Current income tax expense (17,095) (5,418) (27,867) (6,681) Deferred income tax (expense)/recovery 17 (4,432) 6,301 449 8,783

Net and comprehensive earnings from continuing operations 8,582 13,388 35,648 4,770

4 (24,025) 3,881 (23,432) 10,307

Total net and comprehensive (loss)/earnings (15,443) 17,269 12,216 15,077

Net earnings/(loss) from continuing operations attributable to:Shareholders of Endeavour Mining Corporation 4,017 9,572 16,822 (3,936)Non-controlling interests 14 4,565 3,816 18,826 8,706

Net earnings from continuing operations 8,582 13,388 35,648 4,770

Total net (loss)/earnings attributable to:

Shareholders of Endeavour Mining Corporation (15,311) 13,444 (2,219) 5,728

Non-controlling interests 14 (132) 3,825 14,435 9,349

Total net (loss)/earnings (15,443)$ 17,269 12,216$ 15,077$

13 Basic earnings/(loss) per share 0.04$ 0.10$ 0.16$ (0.04)$ Diluted earnings/(loss) per share 0.04$ 0.10$ 0.16$ (0.04)$

Net earnings/(loss) per share 13Basic earnings/(loss) per share (0.14)$ 0.14$ (0.02)$ 0.06$ Diluted earnings/(loss) per share (0.14)$ 0.14$ (0.02)$ 0.06$

Net income from discontinued operations

Net earnings/(loss) per share from continuing operations

THREE MONTHS ENDED

JUNE 30,

SIX MONTHS ENDED

JUNE 30,


ENDEAVOUR MINING CORPORATION Condensed Interim Consolidated Statements of Cash Flows (Expressed in Thousands of United States Dollars) (Unaudited)

3

In thousands of US$ Note 2018 2017 2018 2017

Earnings before taxes1 10,702 23,141 45,075 21,475 Adjustments for:Depreciation and depletion Depreciation and depletion 7 52,135 35,811 96,202 71,903 Financing costsFinancing costs 11 4,767 5,818 12,525 11,742 Share based compensationShare based compensation 13 10,109 1,809 12,777 9,443

Loss on financial instruments(Gain)/loss on financial instruments 15 (12,907) (3,153) (973) 5,911

Cash paid on settlement of share appreciation rights, DSUs and PSUs 13 (1,890) (929) (4,447) (1,101)

Income taxes paid (5,626) (10,173) (7,916) (11,294) Payment of gold collar premium 16 (1,744) (1,829) (2,325) (3,658) Net non-cash inventory adjustments 15,453 (125) 20,246 3,475

Foreign exchange loss (2,421) 4,604 (7,865) (983)

Operating cash flows before non-cash working capital 68,578 54,974 163,299 106,913

Trade and other receivables (3,750) (3,751) (1,331) (4,952) Inventories (2,801) (2,446) (26,006) (8,826) Prepaid expenses and other (3,772) (14,701) (2,966) (12,977) Trade and other payables 1,311 (6,773) (25,127) 3,972 Changes in non-cash working capital (9,012) (27,671) (55,430) (22,783)

Cash generated from operating activities 59,566$ 27,303$ 107,869$ 84,130$

Expenditures and prepayments on mining interests - Mining interests (32,170) (22,995) (73,682) (59,125) Expenditures and prepayments on mining interests - Assets under construction (87,933) (74,826) (162,713) (138,512) Cash paid for additional interest of Ity mine - (53,915) - (53,915) Changes in long-term inventories 8 (7,213) - (10,268) -

Cash used in investing activities (127,316)$ (151,736)$ (246,663)$ (251,552)$

Proceeds received from the issue of common shares 13 (43) 47,019 559 51,806 Payment of financing and other fees 11 (6,744) (1,277) (10,363) (1,277) Interest paid (1,911) (3,598) (2,299) (3,880) Proceeds of long-term debt 11 70,000 80,000 70,000 80,000 Repayment of long-term debt 11 - - (280,000) - Convertible senior bond 11 - - 330,000 -

Repayment of finance lease obligation (5,533) (926) (9,612) (1,830) Deposit/(refund) paid on reclamation liability bond - 1,351 (157) 3,089

Cash generated from financing activities 55,769$ 122,569$ 98,128$ 127,908$

Effect of exchange rate changes on cash 217 (429) 63 82 Decrease in cash (11,764) (2,293) (40,603) (39,432)

Cash, beginning of period 93,863 87,156 122,702 124,294

Cash, end of period 82,099$ 84,863$ 82,099$ 84,862$

Less: Cash relating to assets held for sale 4 (3,337) - (3,337) -

Cash and cash equivalents 78,762$ 84,863$ 78,762$ 84,862$

Investing Activities

Financing Activities

THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,

Operating Activities

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Note 2018 2017 2018 2017

1 Earnings before taxes from continuing operations 30,109 12,505 63,066 2,668

4 (24,025) 3,881 (23,432) 10,307

Deferred and current income taxes on discontinued operations 4 4,618 6,755 5,441 8,500

Earnings before income taxes 10,702 23,141 45,075 21,475

(Loss)/gain from discontinued operations


ENDEAVOUR MINING CORPORATION Condensed Interim Consolidated Statements of Changes in Equity (Expressed in Thousands of United States Dollars) (Unaudited)

4

In thousands of US$

NoteNumber of

Common SharesPar Value

Additional Paid

in Capital

Number of

Exchangeable

Shares

Par

Value

Additional Paid

in Capital

Total Number of

Shares

Total Share

Capital

Equity

ReserveDeficit

Total Attributable

to Shareholders

Non-Controlling

InterestsTotal

At January 1, 2017 93,521,217 9,348 1,474,723 25,132 2 662 93,546,349 1,484,735 39,727 (615,673) 908,789 51,872 960,661

Acquistion of non-controlling interest of the Ity mine - - - - - - - - - (34,241) (34,241) (22,974) (57,215)

Exchangeable shares exchanged into common shares 2,761 - 73 (2,761) - (73) - - - - - - -

Share options, PSU's and DSU's exercised 380,020 38 4,180 - - - 380,020 4,218 (1,466) - 2,752 - 2,752

Amortization of options, PSU's and RSU's - - - - - - - - 200 - 200 - 200

Dividends to non-controlling interests 14 - - - - - - - - - - - (5,767) (5,767)

Shares issued in private placements 2,573,372 257 47,576 - - - 2,573,372 47,576 - - 47,576 - 47,576

Net (loss)/earnings and total comprehensive earnings - - - - - - - - - 5,728 5,728 9,349 15,077

At June 30, 2017 96,477,372 9,643$ 1,526,552$ 22,370 2$ 589$ 96,499,741 1,536,529$ 38,461$ (644,186)$ 930,804$ 32,480$ 963,284$

At January 1, 2018 107,533,007 10,749 1,724,325 - - - 107,533,007 1,735,074 56,041 (806,251) 984,864 15,757 1,000,621

Shares issued on exercise of options and PSU's 194,515 19 3,038 - - - 194,515 3,057 (2,498) - 559 - 559

Reclassification of RSU's to liability - - - - - - - - (3,909) - (3,909) - (3,909)

Share based compensation 13 - - - - - - - - 9,675 - 9,675 - 9,675

Dividends to non-controlling interests 14 - - - - - - - - - - - (3,637) (3,637)

Net and total comprehensive earnings/(loss) - - - - - - - - - (2,219) (2,219) 14,435 12,216

At June 30, 2018 107,727,522 10,768$ 1,727,363$ - -$ -$ 107,727,522 1,738,131$ 59,309$ (808,470)$ 988,970$ 26,555$ 1,015,525$

SHARE CAPITAL


ENDEAVOUR MINING CORPORATION Notes to the Condensed Interim Consolidated Financial Statements (Expressed in Thousands of United States Dollars, except per share amounts) (Unaudited)

5

1 DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

Endeavour Mining Corporation (“Endeavour” or the “Corporation”) is a publicly listed gold mining company that operates five mines in West Africa in addition to having project development and exploration assets. Endeavour is focused on effectively managing its existing assets to maximize cash flows as well as pursuing organic and strategic growth opportunities that benefit from its management and operational expertise. Endeavour’s corporate office is in London, England, and its shares are listed on the Toronto Stock Exchange (“TSX”) (symbol EDV) and quoted in the United States on the OTCQX International under the symbol ‘EDVMF’. The Corporation is incorporated in the Cayman Islands and its registered office is located at 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.

2 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

2.1 STATEMENT OF COMPLIANCE

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, using the accounting policies consistent with International Financial Reporting Standards (‘IFRS’). These condensed interim consolidated financial statements should be read in conjunction with the most recently issued annual consolidated financial statements of the Corporation, which include information necessary or useful to understanding the Corporation’s business and financial statement presentation. In particular, the Corporation’s significant accounting policies were presented as Note 2 to the consolidated financial statements for the year ended December 31, 2017, and have been consistently applied in the preparation of these condensed interim consolidated financial statements, except as noted below.

2.2 BASIS OF PREPARATION

These condensed interim consolidated financial statements have been prepared on the historical cost basis, except certain financial instruments that are measured at fair value at the end of each reporting period as explained in the accounting policies below. The Corporation’s accounting policies have been applied consistently to all periods in the preparation of these condensed interim consolidated financial statements.

i. Accounting Standards Recently Issued

The Corporation has reviewed the impact of revised or new IFRS standards that have been issued effective 1 January 2018. The following evaluates the expected impact of the standards on the Corporation’s accounting policies and financial statements:


6

› IFRS 9, Financial Instruments: (effective January 1, 2018) introduces new requirements for the classification and measurement of financial assets and liabilities. In July 2014, IFRS 9 Financial Instruments was issued as a complete standard, including the requirements previously issued related to classification and measurement of financial assets and liabilities, and additional amendments to introduce a new expected loss impairment model for financial assets including credit losses. The Corporation has adopted this standard on the effective date of January 1, 2018. IFRS 9 replaced the multiple classification and measurement models for financial assets that currently exist under IAS 39 Financial Instruments, and the basis on which financial assets are measured will determine their classification as either, at amortized cost, fair value through profit and loss, or fair value through other comprehensive income. The key requirements of IFRS 9 as they relate to the Corporation include the following:

- Subsequent to initial measurement at fair value, all recognized financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortized cost or fair value. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost in subsequent periods. For those financial assets that have a business model whose objective is achieved by both collecting the contractual cash flows and selling financial assets, are generally measured at fair value through other comprehensive income (“FVTOCI”). All other financial assets are measured at fair value through profit and loss (“FVTPL”). In addition, on initial recognition, an equity investment that is not held for trading, the Corporation may irrevocably elect to present subsequent changes in the investment’s FVTOCI, with only dividend income generally recognized in profit or loss. Transaction costs for financial assets held at FVTPL are expensed, for all other financial assets, they are recognized at fair value at initial measurement less any directly attributable transaction costs.

- Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other financial liabilities. All financial liabilities are classified and subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the balance sheet subsequent to inception and how changes in value are recorded.

- For the impairment of financial assets, IFRS 9 requires an ‘expected credit loss’ model applies which requires a loss allowance to be recognized based on expected credit losses. This applies to financial assets measured at amortized cost. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognized.

The impact of this change in accounting policy:

- None of the Corporation’s classification of financial instruments have changed significantly as a result of the adoption of the new standards. Financial assets previously classified as loans and receivables are now classified as financial assets at amortized cost;

- The Corporation will assess the impairment of its receivables using the expected credit loss model, however, there is no material difference as a result, and no additional impairment has been recognized upon transition and at June 30, 2018; and

- There are no transitional impacts regarding currently classified financial liabilities in regard to classification and measurement. Trade and other payables, finance obligations


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and the revolving credit facility are classified as other financial liabilities and carried on the balance sheet at amortized cost.

› IFRS 15 Revenue: The Corporation has adopted the requirements of IFRS 15 Revenue from Contracts with Customers ("IFRS 15") as of January 1, 2018. The principal of IFRS 15 Revenue principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. Specifically, IFRS 15 introduces a five-step approach to revenue recognition with an entity recognizing revenues when a performance obligation is satisfied, which is when “control” of the goods have transferred to the customer. Upon evaluating the transfer of control, the Corporation concluded there is no material change in the timing of revenue recognized under the new standard. The point of transfer of risks and rewards for goods and services under IAS 18 compared to the transfer of control under IFRS 15 occur at the same time based on contractual terms, the delivery of gold doré. For the purposes of evaluating variable consideration, the Corporation reviewed historical assay results and adjustments, as well as variable consideration with regards to timing of residual precious metal pricing. All these factors were considered insignificant and therefore no changes to revenue were recorded upon the adoption of IFRS 15.

The Corporation has determined that there is no significant impact of the change in the accounting policy in the accounting for revenue at the transition date.

The Corporation has not applied the following standard that has been issued but was not yet effective at June 30, 2018. The Corporation is currently evaluating the impact this standard is expected to have on the Corporation’s accounting policies and financial statements:

› IFRS 16 Leases (effective January 1, 2019), was issued in January 2016 and provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.


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3 ACQUISITION AND RESTRUCTURING

3.1 ACQUISITION OF AVNEL GOLD MINING LIMITED

On September 18, 2017, the Corporation completed the acquisition of Avnel Gold Mining Ltd (“Avnel”). The Corporation acquired 100% of the share capital of Avnel in exchange for an issuance of 7,218,964 common shares. Avnel owns 80% of the Kalana gold project in Mali and the Corporation has initiated pre-development activities to optimize the Kalana gold project. The determination of fair value of assets and liabilities acquired is based on preliminary estimates and has not been finalized as the Corporation finalises the tax filings and outstanding tax positions of Avnel from prior to the acquisition. The Corporation is currently in the process of determining the fair values of the net assets acquired, assessing and measuring the associated deferred income tax assets and liabilities and potential goodwill on the acquisition. Non-controlling interest is measured at its proportionate share of the fair value of net assets. The actual fair values of the assets and liabilities may differ materially from the amounts disclosed in the preliminary fair value below and are subject to change. The consideration and preliminary allocation to the value of assets acquired and liabilities assumed are as follows:

Fair value at acquistion

date

Purchase price:

Fair value of 7,218,964 Endeavour common shares issued 134,016

134,016$

Net assets/(liabilities) acquired

Mining interests 171,996

Cash 7,982

Provision for reclamation (2,104)

Non-controlling interest (522)

Net working capital acquired (excluding cash) (15,201)

Deferred income and mining taxes (28,135)

Net Assets 134,016$


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4 DISPOSALS OF MINING INTERESTS

4.1 RECLASSIFICATION OF THE TABAKOTO MINE

At June 30, 2018, management had committed to a plan to sell the Tabakoto mine cash generating unit (“CGU”). Efforts to sell the mining interest have started and a sale is expected in the next twelve months. Accordingly, the Tabakoto CGU has been classified as an asset held for sale and a discontinued operation. As a result of the reclassification, (loss)/earnings has been restated for the current and comparative periods to reclassify the (loss)/earnings relating to Tabakoto as (loss)/earnings from discontinued operations. All assets and liabilities relating to the Tabakoto CGU have been classified as current assets/liabilities held for sale at June 30, 2018. There is no impact on the presentation of the statement of cash flows. In classifying the Tabakoto CGU as held for sale, an impairment assessment was completed to recognize the CGU at the lower of its carrying value and fair value less costs to sell. The fair value less costs to sell was valued using a market-based valuation approach. The profit and loss for the CGU was as follows:

2018 2017 2018 2017

Gold revenue 37,350 51,975 78,738 105,718

Operating costs (46,478) (30,717) (79,831) (70,699)

Depreciation and depletion (8,598) (11,050) (13,161) (21,284)

Royalties (2,237) (3,139) (4,711) (6,303)

Other gains/(losses) 556 (602) 974 1,497

Income before taxes (19,407)$ 6,467$ (17,991)$ 8,929$

Current income tax expense (4,618) (1,476) (5,441) (2,736)

Deferred income tax recovery (expense) - (5,360) - (5,764)

Net (loss) gain from discontinued operations (24,025)$ (369)$ (23,432)$ 429$

Shareholders of Endeavour Mining Corporation (19,940) (303) (19,041) 352

Non-controlling interest (4,085) (66) (4,391) 77

Total (loss)/earnings from discontinued operations (24,025)$ (369)$ (23,432)$ 429$



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The net assets of the CGU classified as held for sale are as follows:

June 30, 2018

Cash and short-term deposits 3,337

Restricted cash 133

Trade and other recievables 1,093

Prepaid expenses and other 5,587

Inventories 1 18,513

Mining interests 97,213

Other long term assets 5,033

Assets Held for Sale 130,909

Trade and other payables (40,651)

Other liabilities (17,063)

Liabilities Held for Sale (57,714)

Net assets 73,195$ 1 Includes an adjustment to the inventory provision of $13.5 million to adjust spare parts and supplies inventory to net realizable value following an assessment of inventory balances due to equipment acquired in the 2018 financial year. The cash flows of the Tabakoto CGU included in the Corporation’s condensed interim consolidated statement of cash flows are as follows:

2018 2017 2018 2017

Cash generated from operating activities 6,431 9,322 6,149 9,680

Cash used in investing activities (9,444) (10,311) (16,518) (17,412)

Cash used in financing activities (1,149) (1,411) (2,195) (2,321)

Total (4,162)$ (2,400)$ (12,564)$ (10,054)$



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4.2 DISPOSAL OF THE NZEMA MINE

On December 29, 2017, the Corporation completed the sale of its 90% interest in the Nzema Mine to BCM International Ltd (“BCM”) for total cash consideration of $63.5 million. The cash consideration consists of a $38.5 million payment upon completion of the transaction with additional deferred payments of up to $25 million contingent on the future cash flows of the Nzema Mine between January 30, 2018 and December 31, 2019. The prior year comparatives for the condensed interim consolidated statements of the Corporation have been restated to classify Nzema as a discontinued operation which had income of $5.6 million in the period ended June 30, 2017:

THREE MONTHS

ENDED JUNE 30,

SIX MONTHS

ENDED JUNE 30,

2017 2017

Gold revenue 33,002 68,218

Operating costs (21,991) (45,543)

Depreciation and depletion (4,559) (9,209)

Royalties (1,952) (3,930)

Other income (331) 342

Income before taxes 4,169$ 9,878$

Current income tax expense 81 -

Net gain from discontinued operations 4,250$ 9,878$

Shareholders of Endeavour Mining Corporation 4,174 9,312

Non-controlling interest 76 566

Total earnings/(loss) from discontinued operations 4,250$ 9,878$

Net loss per share from discontinued operations

Basic 0.04$ 0.10$

Diluted 0.04$ 0.10$ The net cash flows from discontinued operations for the three and six months ended June 30, 2017 were:

THREE MONTHS

ENDED JUNE 30,

SIX MONTHS

ENDED JUNE 30,

2017 2017

Cash generated from operating activities 3,540 10,224

Cash received (used) in investing activities (1,508) (3,855)

Cash generated from financing activities - -

Total 2,033$ 6,369$


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5 INVENTORIES

June 30,

2018

December 31,

2017

Doré bars 7,961 9,526

Gold in circuit and finished goods 24,495 30,554

Ore stockpiles 42,177 31,212

Spare parts and supplies 48,748 63,474

Total inventory 1 123,381$ 134,766$ 1 Includes a provision of $4.2 million to adjust spare parts and supplies inventory to net realizable value and a provision of $2.2 million to adjust gold in circuit and finished goods at Karma to net realizable value (December 31, 2017 – a charge of $14.8 million). In 2018, the Corporation reclassified $7.1 million spare parts and supplies to long-term inventories at December 31, 2017 following an assessment on the timing of consumption (Note 8). The cost of inventories recognized as expense in the three and six months ended June 30, 2018, was $136.2 million and $258.9 million respectively, and was included in operating expenses (three and six months ended June 30, 2017- $69.5 million and $147.2 million respectively).

6 PREPAID EXPENSES AND OTHER

June 30,

2018

December 31,

2017

Deposits 6,303 1,967

Insurance 404 965

Supplier prepayments - Operations 8,375 13,997

Supplier prepayments - Assets under construction 16,528 25,964

Other 1,377 1,621

Total 32,987$ 44,514$


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7 MINING INTERESTS

In thousands of US$Note Depletable Non depletable

Plant and

equipment

Assets under

constructionNon mining Total

CostBalance as at January 1, 2017 1,001,306 327,279 699,109 212,144 2,578 2,242,416 Acquisition of mining interest 3 - 177,202 - - - 177,202 Additions/expenditures 52,391 37,753 87,312 299,421 6,541 483,418 Transfers related to Hounde construction to/(from) 223,256 - 201,682 (424,938) - - Transfers on declaration of commercial production

to/(from) - - - (16,923) - (16,923) Reclamation liability change in estimate 4,231 - - - - 4,231 Disposal of the Nzema mine 4 (368,335) (176,237) (109,928) - - (654,500)

Balance as at December 31, 2017 912,849 365,997 878,175 69,704 9,119 2,235,844

Additions/expenditures 33,398 26,099 14,185 186,269 - 259,951

Transfers - - 44,925 (44,925) - -

Disposals - - (4,346) - - (4,346)

Transfer to asset held for sale 4 (524,210) (107,994) (174,536) - - (806,740)

Balance as at June 30, 2018 422,037$ 284,102$ 758,403$ 211,048$ 9,119$ 1,684,709$

Accumulated depreciation and impairment

Balance as at January 1, 2017 630,846 222,064 348,315 - 1,661 1,202,886

Depreciation/depletion 84,529 - 63,367 - 1,285 149,181

Depreciation captured in inventory 3,660 - 1,272 - - 4,932

Impairment 82,814 51,848 49,350 - - 184,012

Disposal of the Nzema mine 4 (360,943) (161,001) (101,175) - - (623,119)

Balance as at December 31, 2017 440,906 112,911 361,129 - 2,946 917,892

Depreciation/depletion 42,902 - 52,910 - 390 96,202

Depreciation captured in inventory 2,335 - 1,837 - - 4,172

Disposals - - (2,814) - - (2,814)

Transfer to asset held for sale 4 (450,321) (105,576) (152,972) - - (708,869)

Balance as at June 30, 2018 35,822$ 7,335$ 260,090$ -$ 3,336$ 306,583$

Carrying amounts

At December 31, 2017 471,943$ 253,086$ 517,046$ 69,704$ 6,173$ 1,317,952$

At June 30, 2018 386,215$ 276,767$ 498,313$ 211,048$ 5,783$ 1,378,126$

MINING PROPERTIES

At June 30, 2018, the additions of assets under construction included $28.6 million of long-term financing equipment obligations (December 31, 2017 - $23.2 million). Additions to assets under construction included $6.7 million of capitalized borrowing costs (December 31, 2017 – $10.7 million). The average capitalization rate was 1.76 % (December 31, 2017 – 1.42%) for the period.


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A summary of the carrying values by property is as follows:

In thousands of US$Note

Agbaou

Mine

Ity

Mine

Karma

Mine Houndé Mine Kalana Project

Exploration

Properties Non mining

Total

(Excluding Assets held for sale) Tabakoto Mine Nzema Mine

Total

Cost

Balance as at January 1, 2017 241,598 58,628 275,752 240,633 - 3,169 2,578 822,358 770,788 649,270 2,242,416

Acquisition of mining interest - - - - 171,996 - - 171,996 5,206 - 177,202

Additions/expenditures 15,167 94,328 72,699 253,206 4,203 - 6,537 446,140 32,048 5,230 483,418

Transfers (to) from inventory - - - (16,923) - - - (16,923) - - (16,923)

Reclamation liability change in estimate 315 - - 3,916 - - - 4,231 - - 4,231

Disposal of the Nzema Mine 4 - - - - - - - - - (654,500) (654,500)

Balance as at December 31, 2017 257,080 152,956 348,451 480,832 176,199 3,169 9,115 1,427,802 808,042 - 2,235,844

Additions/expenditures 18,440 154,913 10,942 29,820 11,191 1,697 15,558 242,561 17,390 - 259,951

Transfers - - - - - 18,692 - 18,692 (18,692) - -

Disposals - (4,346) - - - - - (4,346) - - (4,346)

Transfer to asset held for sale 4 - - - - - - - - (806,740) - (806,740)

Balance as at June 30, 2018 275,520$ 303,523$ 359,393$ 510,652$ 187,390$ 23,558$ 24,673$ 1,684,709$ -$ -$ 1,684,709$

Accumulated depreciation and

impairmentBalance as at January 1, 2017 86,279 20,928 5,754 - - 3,169 1,587 117,717 534,945 550,225 1,202,886

Depreciation/depletion 32,536 19,107 24,236 12,517 - - 356 88,752 42,035 18,394 149,181

Depreciation captured in inventory 807 3,933 253 - - - - 4,993 (962) 901 4,932

Impairment - - - - - - - - 130,413 53,599 184,012

Disposal of the Nzema Mine 4 - - - - - - - - - (623,119) (623,119)

Balance as at December 31, 2017 119,622 43,968 30,243 12,517 - 3,169 1,943 211,462 706,431 - 917,892

Depreciation/depletion 16,421 14,887 17,914 33,526 - - 301 83,049 13,153 - 96,202

Depreciation captured in inventory 564 (92) 3,503 979 - - - 4,954 (782) - 4,172

Transfers - - - - - 9,933 - 9,933 (9,933) -

Disposals - (2,814) - - - - - (2,814) - - (2,814)

Transfer to asset held for sale 4 - - - - - - - - (708,869) - (708,869)

Balance as at June 30, 2018 136,607$ 55,949$ 51,660$ 47,022$ -$ 13,102$ 2,244$ 306,584$ -$ -$ 306,583$

Carrying amounts

At December 31, 2017 137,458$ 108,988$ 318,208$ 468,315$ 176,199$ -$ 7,172$ 1,216,340$ 101,611$ -$ 1,317,952$

At June 30, 2018 138,913$ 247,574$ 307,733$ 463,630$ 187,390$ 10,456$ 22,429$ 1,378,125$ -$ -$ 1,378,126$ 1 Additions to mining interests of $259.9 million, net of leased additions and working capital changes, result in $236.4 million of cash outflows, as found on

the condensed interim consolidated statement of cash flows.


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8 OTHER LONG-TERM ASSETS

Other long-term assets are comprised of:

June 30,

2018

December 31,

2017

Working capital loan receivable 1,088 1,062

Long term stockpiles 19,140 6,256

Long term critical spare parts and supplies 9,187 7,132

Long term receivable 173 208

Total 29,588$ 14,658$ Long term stockpiles Certain low-grade stockpiles that are not expected to be processed until the end of mine life are classified as long-term assets. Long term critical spare parts and supplies The Corporation performed an assessment surrounding the timing of the consumption of its critical parts and supplies and has classified these parts as long-term inventories at June 30, 2018 as they are not expected to be used in the next twelve months. In 2018 the Corporation reclassified $7.1 million of inventories at December 31, 2017 from current to long-term inventories based on assessment of the timing of consumption of the inventory.

9 TRADE AND OTHER PAYABLES

Trade and other payables consist of the following:

June 30,

2018

December 31,

2017

Trade accounts payable 99,399 183,340

Trade acccounts payable - assets under construction 24,095 21,791

Royalties payable 1,738 1,934

Taxes - direct and indirect 2,914 4,039

Payroll and social charges 8,411 1,225

Other payables 13,334 8,452

Total 149,891$ 220,781$


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10 FINANCE OBLIGATIONS

The finance leases were composed of the following obligations:

June 30,

2018

December 31,

2017

Finance obligations 69,138 54,402

Less: current portion (19,452) (17,658)

Long-term finance obligations 49,686$ 36,744$ The present value of the Corporation long-term equipment financial obligations is split below. The present value of the minimum lease payments is the lease payments over the life of lease discounted to present value. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability.

June 30,

2018

December 31,

2017

Not later than one year 22,014 18,513

Later than one year and not later than five years 59,160 44,741

81,174 63,254

Less future finance charges (12,036) (8,852)

Present value of minimum finance payments 69,138$ 54,402$

MINIMUM LEASE PAYMENTS

June 30,

2018

December 31,

2017

Hounde Mine (ii) 42,153 48,142

Ity Mine (iii) 26,985 -

Tabakoto Mine (i) - 6,260

Present value of minimum finance payments 69,138$ 54,402$

MINIMUM LEASE PAYMENTS

i. Tabakoto Financing Arrangments

On March 7, 2014, the Corporation’s Malian subsidiary entered a five-year, $18 million equipment lease financing facility. The equipment lease is a finance lease and was used to purchase a portion of the owner-operated mining equipment for the Tabakoto and Segala underground developments. The lease terms have a fixed rate of 9.5% per annum to amortize the principal and there exists a purchase option to buy the equipment outright at the end of the lease life for 0.5% of cost. The facility will mature in 2019. At June 30, 2018 the remaining finance obligation is included in liabilities held for sale.


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ii. Houndé Financing Arrangements

On June 9, 2016, the Corporation entered into a financing arrangement with the Komatsu Group to acquire mining fleet equipment for the Houndé project. The Corporation made an initial down-payment of $7.1 million on July 1, 2016 and the remaining $45.8 million of payments are to be made between the first quarter of 2018 and 2022. On March 13, 2017, Houndé Gold Operation SA, Endeavour’s main operating subsidiary for the Houndé project, entered into an equipment financing facility with Caterpillar Financial Services Corporation. The $10.7 million facility will finance the purchase of backup power gensets for the Houndé project. The facility will mature five years from the date of first drawdown, which occurred October 10, 2017. Availability of the facility is subject to the satisfaction of customary conditions precedent, including the provision of an equipment pledge.

iii. Ity CIL Financing Arrangements

On May 9, 2017, the Corporation entered into a financing arrangement with the Komatsu Group to acquire mining fleet equipment for the Ity CIL project within the Ity mine. The Corporation made an initial down-payment of $4.9 million on May 25, 2017 and the remaining $33.2 million of payments to be made between the first quarter of 2019 and 2022.

11 LONG-TERM DEBT

NoteJune 30,

2018

December 31,

2017

Corporate loan facility 11.1 90,000 300,000

Deferred financing costs (7,958) (13,560)

Revolving credit facility 82,042$ 286,440$

Convertible senior bond 11.2 289,890 -

Conversion option 11.2 38,272 -

Convertible senior bond 328,162$ -$

Total long term debt 410,204$ 286,440$


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The Corporation incurred the following finance costs in the period:

Note 2018 2017 2018 2017

Interest expense 5,049 2,518 9,897 5,742

Amortisation of deferred facility fees 946 1,200 6,312 2,300

Commitment, structuring and other fees 950 1,610 2,539 3,160

Less: Capitalised borrowing costs 7 (2,396) - (6,703) -

Total finance costs 4,549$ 5,328$ 12,045$ 11,202$


i. Corporate Loan Facility

On September 19, 2017, the Corporation signed a $500 million revolving credit facility (“the new RCF”) with a syndicate of leading international banks. On February 10, 2018, the Corporation reduced the principal available of the RCF to $350 million, as result of the Corporation completing a private placement of $330 million convertible senior notes (Note 11 ii). On March 9, 2018, the Corporation made a repayment of $280,000 on the new RCF. To align with the reduction in the amount available under the new RCF, $3.6 million of deferred financing charges were expensed in the quarter ended March 31, 2018. No further reductions have been made. The key terms of the new RCF include:


› Interest accrues on a sliding scale of between LIBOR plus 2.95% to 3.95% based on the Corporation’s leverage ratio

› Commitment fees for the undrawn portion of the new RCF of 1.03%.

› The term of the new RCF is four years, maturing in September 2021.

› The principal outstanding on the new RCF is repayable as a single bullet payment on the maturity date.

› Banking syndicate includes Société Générale, ING, Citibank N.A., Investec Bank Plc, Macquarie Bank Ltd, Barclays Bank Ltd, HSBC and BMO.

› The new RCF can be repaid at any time without penalty.

ii. Convertible Senior Notes

On February 6, 2018, the Corporation completed a private placement of convertible senior notes with a total principal amount of $330 million due in 2023 (the “Notes”). The initial conversion rate is 41.84 of the Corporation’s common shares (“Shares”) per $1,000 Note, or an initial conversion price of approximately $23.90 (CAD$29.47) per share. The Notes bear interest at a coupon rate of 3% payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018. The Notes mature on February 15, 2023, unless earlier redeemed, repurchased or converted in accordance with the terms of the Notes. The


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Corporation may, subject to certain conditions, elect to satisfy the principal amount due at maturity or upon redemption through the payment or delivery of any combination of Shares and cash. The key terms of the Convertible Senior Notes include:


› Coupon rate of 3% payable on a semi-annual basis.

› The term of the notes is 5 years, maturing in February 2023.

› The notes are reimbursable through the payment or delivery of shares or, and cash.

› The initial conversion price is $23.90 (CAD $29.47) per share.

› The reference share price of the notes is $18.04 (CAD $22.24) per share. For accounting purposes, the Corporation measures the Notes at amortized cost, accreted to maturity over the term of the Notes. The conversion option is an embedded derivative and is accounted for as a financial liability measured at fair value through the profit or loss, as the Corporation has the ability to settle the option at fair value in cash, common shares, or a combination of cash and common shares in certain circumstances. At the date of issue, the Notes were measured at fair value:

June 30,

2018

Proceeds from issue 330,000

(287,975)

Conversion option 42,025$

Liability component at date of issue

The liability component for the Notes at June 30, 2018 has an effective interest rate of 6.2% and was as follows:

June 30,

2018

Liability component at issue date 287,975

Less: Deferred finance costs (4,730)

6,645

Balance at June 30, 2018 289,890$

Interest charged in the period


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The conversion option related to the Notes is recorded at fair value, and the value at June 30, 2018 is determined using a valuation model, with the following assumptions; volatility of 26%, risk free rate of 2.6%, term of the conversion option 4.6 years, and a share price of $17.91.

June 30,

2018

Conversion option at issue date 42,025

Fair value adjustment (3,753)

Balance at June 30, 2018 38,272$

12 OTHER LONG-TERM LIABILITIES

Provisions are comprised of:

June 30,

2018

December 31,

2017

Environmental rehabilitation provision 32,688 49,179

5,717 3,153

Net pension obligation 283 283

Total 38,688$ 52,615$

Share based liabilities

13 SHARE CAPITAL

13.1 VOTING SHARES

Authorized

› 200,000,000 voting shares of $0.10 par value

› 100,000,000 undesignated shares

13.2 SHARE CAPITAL

On April 17, 2017, the Corporation announced that its largest shareholder, La Mancha Holding S.A R.L (“La Mancha”) exercised its anti-dilution right to increase its stake from the current 28.1% interest to the initial 29.9% ownership position, by means of a $47.5 million (CAD $63.4 million) private placement for 2,573,372 shares on April 25, 2017. Following the acquisition of Avnel, La Mancha exercised its anti-dilution right to maintain its 30% interest in the Corporation. This resulted in an initial $30.1 million placement (CAD $37.7 million) for 1,666,897 shares, paid on September 29, 2017, and an additional $29.5 million (CAD $37.7 million) for 1,666,898 shares received on November 8, 2017, resulting in La Mancha maintaining its 30% interest in the Corporation.


21

13.3 SHARE-BASED COMPENSATION

The following table summarizes the share-based compensation expense:

2018 2017 2018 2017

Amortization of option grants - 58 19 200

Amortisation and change in fair value of DSUs 29 232 (66) 1,147

Amortisation and change in fair value of PSUs 7,728 176 11,102 5,332

Amortisation and change in fair value of RSUs 2,352 1,342 1,722 2,764

Total share-based expenses 10,109$ 1,808$ 12,777$ 9,443$


i. Options

A summary of the changes in share options is presented below:

Options

outstanding

Weighted average

exercise price

(C$)

At December 31, 2016 1,072,622 14.08

Exercised (630,005) 11.71

Forfeited (83,994) 9.47

Expired (213,746) 26.07

At December 31, 2017 144,877 11.15

Exercised (79,025) 9.11

Forfeited (4,485) 10.94

Expired (699) 233.91

At June 30, 2018 60,668 10.11 The following table summarizes information about the exercisable share options outstanding as at June 30, 2018:

Exercise

Prices (C$)Outstanding Exercisable

Weighted average

exercise price (C$)

Weighted average

remaining

contractual life

$5.20 - $7.99 10,133 10,133 $5.20 2.10 years

$8.00 - $14.99 50,069 50,069 $10.97 2.62 years

$15.00 - $24.99 466 466 $24.68 1.34 years

60,668 60,668 $10.11 2.52 years The Corporation has a share option plan whereby the Corporation’s directors may from time to time grant options to directors, employees or consultants. The maximum term of any option is ten years. The exercise price of an option is set at the higher of (i) the volume weighted average trading


22

price of the shares traded on the exchange for the five trading days immediately preceding the grant date and (ii) the closing trading price on the grant date. At the AGM on June 26, 2018, the Corporation elected not to renew the shareholder approval for the stock option plan; as such no new stock options may be granted unless further shareholder approval is sought and obtained.

13.4 SHARE UNIT PLANS

A summary of the changes in share unit plans is presented below:

DSUs

outstanding

Weighted average

grant price

(C$)

PSUs

outstanding

Weighted average

grant price

(C$)

RSUs

outstanding

Weighted average

grant price

(C$)

At December 31, 2016 173,401 6.82 1,310,056 12.58 398,446 21.12

Granted 31,120 24.75 1,289,094 18.47 52,645 20.06

Exercised (50,444) 9.15 (511,166) 10.56 (254,918) 21.00

Forfeited - - (45,839) 18.91 - -

At December 31, 2017 154,077 6.82 2,042,145 12.58 196,173 21.12

Granted 18,024 25.71 1,304,244 22.40 52,644 20.06

Exercised - - (78,090) 6.30 (64,642) 21.58

Forfeited - - (59,239) 17.99 - -

At June 30, 2018 172,101 8.80 3,209,060 16.62 184,175 20.66

13.5 DEFERRED SHARE UNITS

On January 26, 2013, the Corporation established a deferred share unit plan (“DSU”) for the purposes of strengthening the alignment of interests between non-executive directors of the Corporation and shareholders by linking a portion of the annual director compensation to the future value of the Corporation’s common shares. Upon establishing the DSU plan for non-executive directors, the Corporation no longer grants options to non-executive directors. The DSU plan allows each non-executive director to choose to receive, in the form of DSUs, all or a percentage of their director’s fees, which would otherwise be payable in cash. Compensation for serving on committees must be paid in the form of DSUs. The plan also provides for discretionary grants of additional DSUs by the Board. Each DSU vests upon award but is distributed only when the director has ceased to be a member of the Board. Vested units are settled in cash based on the common share price at the date of settlement. The total fair value of DSUs at June 30, 2018, was $3.1 million (December 31, 2017 – $3.2 million). The total DSU share-based compensation expense recognized in the three and six months ended June 30, 2018 was $nil million and $(0.1) million (June 30, 2017, $0.2 million and $1.1 million respectively).

13.6 PERFORMANCE SHARE UNITS

In March 2014, following a review of its executive compensation programs and pay practices, the Corporation introduced a change in its long-term incentive plan (“LTI Plan”) to include a portion of performance-linked share unit awards (“PSUs”). The PSU program is intended to increase the pay mix in favor of long-term equity-based compensation with three-year cliff-vesting to serve as an employee retention mechanism. The fair value of the PSUs is determined based on Total Shareholder Return (“TSR”) relative to peer companies and achieving certain operational performance measures (key future operational


23

indicators – All in Sustaining Cost “AISC”, resource and project targets). The fair value related to the TSR portion is determined using a multi-asset Monte Carlo simulation model while the fair value related to the achievement of operational performance measures is determined based the probability of reaching the operational targets. The total PSU share-based expense recognized in the consolidated statements of comprehensive loss was $7.7 million and $11.1 million for the three and six months ended June 30, 2018 (June 30, 2017, $0.2 million and $5.3 million respectively).

13.7 RESTRICTED SHARE UNITS

In November 2016, the Corporation introduced a change in its long-term incentive plan (“LTI Plan”) to include a portion of restricted share unit awards (“RSUs”) for certain executives. The RSU program is intended to increase the pay mix in favor of long-term equity-based compensation to serve as an employee retention mechanism. The total RSU share-based expense recognized was $2.4 million and $1.7 million for the three and six months ended June 30, 2018 (June 30, 2017 - $1.3 million and $2.8 million respectively). At June 30, 2018, the Corporation has recognised the RSU as a liability as a result of RSU’s being cash settled during the period. The fair value of the RSU at June 30, 2018 is $2.6 million (December 31, 2017 - $2.2 million)

13.8 BASIC AND DILUTED EARNINGS PER SHARE

Diluted net earnings per share was calculated based on the following:

2018 2017 2018 2017

107,727,522 95,807,936 107,681,174 94,757,477

Effect of dilutive securities1

Stock options, RSU's and PSU's 260,309 189,564 289,985 244,802

Diluted weighted average number of

shares outstanding 107,987,831 95,997,500 107,971,159 95,002,279

Total common shares outstanding at June 30, 2018 107,727,522 96,499,741 107,727,522 96,499,741

Total potential diluted common shares at June 30, 2018 112,238,898 99,506,327 112,238,898 99,506,327


Basic weighted average number of shares outstanding

1 Diluted income per share was determined using the basic weighted average shares outstanding rather than the diluted weighted average shares outstanding as the effects would have been anti-dilutive.


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14 NON-CONTROLLING INTERESTS

The composition of the non-controlling interests (“NCI”) is as follows:

Note

Agbaou Gold

Operations SA

(Agbaou Mine)

15%

Societe des Mines

d'Ity

(Ity Mine)

20%

Riverstone Karma

SA (Karma Mine)

10%

Hounde Gold

Operations

10%

Societe des Mines

d'Or de Kalana

(Kalana Project)

20%

Total

(before discontinued

operations)

Segala Mining Co

SA/Kofi Mining S.à

r.l.

(Tabakoto Mine)

20%/10%

Adamus

Resources

Limited

(Nzema Mine)

10%

Total

At December 31, 2016 38,339 40,614 10,641 - - 89,594 (22,045) (15,677) 51,872

Acquistion of NCI - (22,975) - - 522 (22,453) - - (22,453)

Net earnings (loss) 14,125 (208) 213 (3,441) - 10,689 (34,381) 2,961 (20,731)

Dividend distribution (5,177) - - - - (5,177) (470) - (5,647)

Disposal of the Nzema Mine - - - - - - - 12,716 12,716

At December 31, 2017 47,287 17,431 10,854 (3,441) 522 72,653 (56,896) - 15,757

Net earnings attributable 3,558 799 657 13,387 - 18,401 (3,966) - 14,435

Dividend distribution (3,452) - - - - (3,452) (185) - (3,637)

At June 30, 2018 47,393$ 18,230$ 11,511$ 9,946$ 522$ 87,602$ (61,047)$ -$ 26,555$ For summarized information related to these subsidiaries, refer to Note 18, Segmented Information.

15 LOSSES ON FINANCIAL INSTRUMENTS

Note 2018 2017 2018 2017

134 (120) 272 554 Loss/(gain) on gold revenue protection

program 16 10,197 348 5,455 (10,281)

Unrealised loss on convertible

senior bond 11 5,576 - 3,753 -

(Loss)/gain on foreign exchange (4,985) 3,180 (9,961) 1,249

Total 10,922$ 3,408$ (481)$ (8,478)$

Other gains/(losses) on other financial instruments


16 DERIVATIVE FINANCIAL INSTRUMENTS

The following table summarizes the derivative financial assets:

June 30, 2018December 31,

2017

Gold revenue protection strategy 7,762 -

Derivative financial assets, current portion 7,762$ -$


25

The following table summarizes the loss on derivative financial assets (liabilities) that have been recognized through the consolidated statements of comprehensive loss:

2018 2017 2018 2017

Realized loss on gold revenue protection strategy premium (1,744) (1,829) (2,325) (3,658)

Unrealized gain (loss) on gold and fuel price protection strategy 11,941 2,177 7,780 (6,623)

Loss on derivative financial instruments 10,197$ 348$ 5,455$ (10,281)$

THREE MONTHS ENDED

JUNE 30,

SIX MONTHS ENDED

JUNE 30,

16.1 GOLD REVENUE PROTECTION STRATEGY

In the six months ended June 30, 2018, the Corporation implemented a deferred premium collar strategy (“Collar”) using written call options and bought put options for the 15-month period from February 2018 to April 2019. The program covers a total of 400,000 ounces, representing approximately 50% of Endeavour’s total estimated gold production for the period, with a floor price of $1,300 per ounce and ceiling price of $1,500 per ounce. The Collar was not designated as a hedge by the Corporation and was recorded at its fair value at the end of each reporting period with changes in fair value recorded in the consolidated statement of comprehensive loss. As at June 30, 2018, 293,329 ounces remain outstanding under the Collar derivative liability. An unrealized gain of $11.9 million and $7.8 million was recognized in the three and six months ended June 30, 2018. The total premium payable for entering into the Collar of $8.7 million is included as part of the Collar fair value and will be cash-settled on a net basis as monthly contracts mature. In the three and six months ended June 30, 2018, the Corporation incurred $1.7 million and $2.3 million in premium costs, included in realized losses on derivative financial instruments.

17 INCOME TAXES

The Corporation operates in numerous countries and, accordingly, it is subject to, and pays annual income taxes under, the various income tax regimes in the countries in which it operates. From time to time the Corporation is subject to a review of its income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Corporation’s business conducted within the country involved. If the Corporation is unable to resolve any of these matters favorably, there may be a material adverse impact on the Corporation’s financial performance, cash flows or results of operations. In the event that management’s estimate of the future resolution of these matters changes, the Corporation will recognize the effects of the changes in its consolidated financial statements in the period that such changes occur.


26

18 SEGMENTED INFORMATION

The Corporation operates in three principal geographical areas, Burkina Faso (Karma and Hounde mine), Côte d’Ivoire (Agbaou and Ity mines), and Mali (Tabakoto Mine and Kalana Project). The following table provides the Corporation’s revenue and results by reportable segment.

Agbaou

Mine

Côte d’Ivoire

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Hounde Mine

Burkina Faso

Kalana Project

MaliExploration Non-Mining Total

Revenue Gold revenue 44,703 34,207 21,879 88,726 - - - 189,515

Cost of sales Operating expenses (24,825) (17,198) (19,143) (32,236) - - 756 (92,646)

Depreciation and depletion (8,806) (7,470) (9,840) (17,773) - - 351 (43,538)

Royalties (1,638) (1,165) (1,703) (5,748) - - - (10,254)

Earnings (loss) from mine operations 9,434 8,374 (8,807) 32,969 - - 1,107 43,079

Corporate costs - - - - - - (6,130) (6,130)

Share-based payments - - - - - - (10,109) (10,109)

Exploration - (36) (1,695) - - (553) - (2,284)

Earnings (loss) from operations 9,434 8,338 (10,502) 32,969 - (553) (15,132) 24,556

Other (expenses) income

(Loss) gain on financial instruments (1,395) (1,827) (324) (531) (936) (150) 16,085 10,922

Finance costs (97) 283 (67) (832) - - (3,826) (4,549)

Other expense - - - 6 - - (824) (818)

(1,492) (1,544) (391) (1,357) (936) (150) 11,435 5,555

Earnings (loss) before taxes 7,942 6,794 (10,893) 31,612 (936) (703) (3,697) 30,111

Deferred income tax (expense)/recovery (4,768) (5,467) (1,000) (7,423) (2,269) - (1,050) (21,977)

Net earnings (loss) from continuing operations 3,174 1,327 (11,893) 24,189 (3,205) (703) (4,747) 8,134

THREE MONTHS ENDED JUNE 30, 2018

In thousands of US$

Agbaou

Mine

Côte d’Ivoire

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Hounde Project

Burkina FasoExploration Non-Mining Total

Revenue Gold revenue 58,888 16,684 24,948 - - - 100,520

Cost of sales Operating expenses (24,691) (8,777) (15,808) - - - (49,276)

Depreciation and depletion (8,814) (5,716) (5,459) - - (213) (20,202)

Royalties (2,107) (643) (1,916) - - - (4,666)

Earnings (loss) from mine operations 23,276 1,548 1,765 - - (213) 26,376

Corporate costs - - - - - (6,365) (6,365)

Acquisition costs - - - - - (936) (936)

Share-based payments - - - - - (1,808) (1,808)

Exploration - 426 (1,349) - (1,072) - (1,995)

Earnings (loss) from operations 23,276 1,974 416 - (1,072) (9,322) 15,272

Other (expenses)/income

(Loss) gain on financial instruments (22) (801) (821) 1,960 119 2,973 3,408

Finance costs (115) 355 (67) - - (5,501) (5,328)

Other income - - - - - (847) (847)

(137) (446) (888) 1,960 119 (3,375) (2,767)

Earnings (loss) before taxes 23,139 1,528 (472) 1,960 (953) (12,697) 12,505

Deferred and income tax recovery (expense) 202 (499) 1,392 - - (212) 883

Net earnings (loss) from continuing operations 23,341$ 1,029$ 920$ 1,960$ (953)$ (12,909)$ 13,388$

THREE MONTHS ENDED 30 JUNE 2017


27

In thousands of US$

Agbaou

Mine

Côte d’Ivoire

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Hounde Mine

Burkina Faso

Kalana Project

MaliExploration Non-Mining Total

Revenue Gold revenue 89,265 57,684 53,604 187,856 - - - 388,409

Cost of sales Operating expenses (47,237) (31,689) (39,495) (57,437) - - (64) (175,922)

Depreciation and depletion (16,421) (14,887) (17,914) (33,518) - - (302) (83,042)

Royalties (3,472) (2,084) (4,214) (12,667) - - - (22,437)

Earnings (loss) from mine operations 22,135 9,024 (8,019) 84,234 - - (366) 107,010 -

Corporate costs - - - - - - (12,618) (12,618)

Share-based payments - - - - - - (12,777) (12,777)

Exploration - (87) (2,912) - (13) (2,026) - (5,038)

Earnings (loss) from operations 22,135 8,937 (10,931) 84,234 (13) (2,026) (25,761) 76,577

Other (expenses) income

(Loss) gain on financial instruments (1,710) - (1,545) (5,985) 36 (288) 9,011 (481)

Finance costs (188) 273 (133) (1,194) - - (10,803) (12,045)

Other expense - - - - - - (983) (983)

(1,898) 273 (1,678) (7,179) 36 (288) (2,775) (13,509)

Earnings (loss) before taxes 20,237 9,210 (12,609) 77,055 23 (2,314) (28,536) 63,068

Deferred income tax (expense)/recovery (2,934) (6,160) (862) (16,862) - - (1,050) (27,868)

Net earnings (loss) from continuing operations 17,303 3,050 (13,471) 60,193 23 (2,314) (29,586) 35,200

SIX MONTHS ENDED JUNE 30 2018

In thousands of US$

Agbaou

Mine

Côte d’Ivoire

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Hounde Project

Burkina FasoExploration Non-Mining Total

Revenue Gold revenue 107,476 39,151 58,074 - - - 204,701

Cost of sales Operating expenses (46,665) (22,437) (36,705) - - - (105,807)

Depreciation and depletion (16,175) (11,110) (13,719) - - (406) (41,410)

Royalties (3,814) (1,413) (4,165) - - - (9,392)

Earnings (loss) from mine operations 40,822 4,191 3,485 - - (406) 48,092

Corporate costs - - - - - (12,295) (12,295)

Acquisition costs - - - - - (2,460) (2,460)

Share-based payments - - - - - (9,443) (9,443)

Exploration - (750) (1,349) - (2,137) - (4,236)

Earnings (loss) from operations 40,822 3,441 2,136 - (2,137) (24,604) 19,658

Other income (expenses)

Losses (Gains) on financial instruments (272) (655) (41) 2,486 99 (10,095) (8,478)

Finance costs (205) 336 (125) - - (11,208) (11,202)

Other (expense) income - - - - - 2,690 2,690

(477) (319) (166) 2,486 99 (18,613) (16,990)

Earnings (loss) before taxes 40,345 3,122 1,970 2,486 (2,038) (43,217) 2,668

Deferred and income tax recovery (expense) 1,675 (1,639) 2,857 - 30 (821) 2,102

Net earnings (loss) from continuing operations 42,020 1,483 4,827 2,486 (2,008) (44,038) 4,770

SIX MONTHS ENDED 30 JUNE 2017

Segment revenue reported represents revenue generated from external customers. There were no inter-segment sales during the periods ended June 30, 2018 or the year ended December 31, 2017. The Corporation is not economically dependent on a limited number of customers for the sale of gold because gold can be sold through numerous commodity market traders worldwide.


28

The Corporation’s non-current assets and liabilities, including geographic location of assets are

detailed below:

Agbaou

Mine

Côte d’Ivoire

Tabakoto

Mine

Mali

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Houndé Mine

Burkina Faso

Kalana

Project

Mali

Exploration

Other

Non-Mining

Other

Total

Mining interests 138,913 - 247,574 307,733 463,630 187,390 10,456 22,430 1,378,126

Current Assets 44,508 - 60,994 64,608 58,904 1,880 5,246 58,239 294,379

Long-term assets 151 - 13,234 12,482 3,721 - - - 29,588

Deferred income taxes 1,458 - 3,179 - - - - - 4,637

Assets held for sale 130,909 130,909

Total assets 185,030 130,909 324,981 384,823 526,255 189,270 15,702 80,669 1,837,639

Current Liabilities 28,518 639 23,517 32,749 67,429 10,777 3,203 25,163 191,995

Long-term Liabilities 8,786 - 3,917 4,452 42,592 30,387 - 408,444 498,578

Deferred Tax Liabilites 39 - - 27,902 17,602 28,284 - - 73,827

Liabilities held for sale - 57,714 - - - - - - 57,714

Total liabilities 37,343 57,714 27,434 65,103 127,623 69,448 3,203 433,607 822,114

SIX MONTHS ENDED JUNE 30 2018

Agbaou

Mine

Côte d’Ivoire

Tabakoto

Mine

Mali

Ity

Mine

Côte d’Ivoire

Karma

Mine

Burkina Faso

Houndé Project

Burkina Faso

Kalana

Project

Mali

Exploration

Other

Non-Mining

Other

Total

Mineral Property 137,457 101,611 108,988 318,208 468,315 176,199 - 7,174 1,317,952

Current Assets 57,200 40,576 62,900 64,279 59,235 2,202 1,561 66,681 354,634

Long-term assets - 4,402 4,829 4,304 1,123 - - - 14,658

Deferred Tax Asset - - 6,267 - - - - - 6,267

Total assets 194,657 146,589 182,984 386,791 528,673 178,401 1,561 73,855 1,693,511

Current Liabilities 36,623 35,509 48,375 37,918 35,327 12,747 1,300 33,386 241,185

Long-term Liabilities 8,841 18,875 9,108 4,319 48,163 31,921 - 254,572 375,799

Deferred Tax Liability 3,100 - - 24,789 18,200 29,817 - - 75,906

Total liabilities 48,564 54,384 57,483 67,026 101,690 74,485 1,300 287,958 692,890

YEAR ENDED 31 DECEMBER 2017


29

19 CAPITAL MANAGEMENT

The Corporation’s objectives of capital management are to safeguard the entity’s ability to support the Corporation’s normal operating requirements on an ongoing basis, continue the development and exploration of its mineral properties and support any expansionary plans. In the management of capital, the Corporation includes the components of equity, short-term borrowings and long-term debt, net of cash and cash equivalents, restricted cash and marketable securities. Capital, as defined above, is summarized in the following table:

June 30, 2018December 31,

2017

Equity 1,015,525 1,000,621

Current and long-term debt 410,204 286,440

1,425,729 1,287,061

Less:

Cash (78,762) (122,702)

Cash - restricted (665) (1,327)

Derivative financial assets (7,762) -

Marketable securities (1,132) (981)

Total 1,337,408$ 1,162,051$ The Corporation manages its capital structure and makes adjustments to it in light of changes in its economic environment and the risk characteristics of the Corporation’s assets. To effectively manage the entity’s capital requirements, the Corporation has in place a planning, budgeting and forecasting process to help determine the funds required to ensure the Corporation has the appropriate liquidity to meet its operating and growth objectives.

20 FINANCIAL INSTRUMENTS

20.1 FINANCIAL ASSETS AND LIABILITIES

The Corporation’s financial instruments consist of cash, restricted cash, marketable securities, trade and other receivables, working capital loan, long term receivable, trade and other payables, derivative financial liabilities, finance obligations and current and long-term debt. The fair value of these financial instruments approximates their carrying value, unless otherwise noted below, with the exception of the convertible note, which has a fair value of approximately $301.1 million.


30

The Corporation has certain financial assets and liabilities that are held at fair value. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques to measure fair value: Classification of financial assets and liabilities Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). As at each of June 30, 2018 and December 31, 2017, the levels in the fair value hierarchy into which the Corporation’s financial assets and liabilities measured and recognized in the statement of financial position at fair value are categorized are as follows:

NoteLevel 1

Input

Level 2

Input

Level 3

Input

Aggregate

Fair Value

Assets: Cash 78,762 - - 78,762

Cash - restricted 665 - - 665

Gold revenue protection 16 - 7,762 - 7,762

Marketable securities 1,132 - - 1,132

Total 80,559$ 7,762$ -$ 88,321$

Liabilities:

Conversion option on Notes 11 - (38,272) - (38,272)

Total -$ (38,272)$ -$ (38,272)$

NoteLevel 1

Input

Level 2

Input

Level 3

Input

Aggregate

Fair Value

Assets: Cash 122,702 - - 122,702

Cash - restricted 1,327 - - 1,327

Marketable securities 981 - - 981

Total 125,010$ -$ -$ 125,010$

JUNE 30, 2018

DECEMBER 31, 2017

There were no transfers between level 1 and 2 during the year.


31

20.2 FINANCIAL INSTRUMENT RISK EXPOSURE

The Corporation’s activities expose it to a variety of risks that may include credit risk, liquidity risk, currency risk, interest rate risk and other price risks, including equity price risk. The Corporation examines the various financial instrument risks to which it is exposed and assesses any impact and likelihood of those risks.

i. Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Corporation by failing to discharge its obligations. Credit risk arises from cash, cash-restricted, marketable securities, trade and other receivables, long-term receivable and other assets. The Corporation closely monitors its financial assets and does not have any significant concentration of credit risk other than receivable balances owed from the governments in the countries the Corporation operates in. Other receivables include $19.6 million related to the disposal of Nzema (Note 4) on December 29, 2017 which remains outstanding at June 30, 2018. This receivable is held with a private company and at this time there have been no significant events or financial difficulty which would raise the level of credit risk. The Corporation sells its gold to large international organizations with strong credit ratings, but the historical level of customer defaults is minimal and, as a result, the credit risk associated with gold trade receivables at June 30, 2018 is considered to be negligible. The Corporation does not rely on ratings issued by credit rating agencies in evaluating counterparties’ related credit risk. The Corporation’s maximum exposure to credit risk is as follows:

June 30, 2018 December 31, 2017

Cash 78,762 122,702

Cash - restricted 665 1,327

Trade and other receivables 50,444 50,698

Working capital loan 1,088 1,062

Derivative financial assets 7,762 -

Marketable securities 1,132 981

Long-term receivable 173 208

Total 140,026$ 176,978$

ii. Liquidity Risk

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash, physical gold or another financial asset. The Corporation has a planning and budgeting process in place to help determine the funds required to support the Corporation’s normal operating requirements.


32

The following table summarizes the Corporation’s liabilities that have contractual maturities as at June 30, 2018:

Within 1

year

2 to 3

years

4 to 5

years

Over 5

yearsTotal

Trade and other payables 149,891 - - - 149,891

Corporate loan facility - - 90,000 - 90,000

Convertible senior bond 9,900 19,800 349,800 - 379,500

Finance obligations 22,014 39,989 19,171 - 81,174

Minimum operating lease payments 4,353 115 - 4,468

Total 186,158$ 59,904$ 458,971$ -$ 705,033$

20.3 MARKET RISKS

i. Currency Risk

Currency risk relates to the risk that the fair values or future cash flows of the Corporation’s financial instruments will fluctuate because of changes in foreign exchange rates. Exchange rate fluctuations may affect the costs that the Corporation incurs in its operations. There has been no change in the Corporation’s objectives and policies for managing this risk during the period ended June 30, 2018. The Corporation has not hedged its exposure to foreign currency exchange risk. The table below highlights the net assets (liabilities) held in foreign currencies, presented in US dollars:

June 30, 2018 December 31,

2017

Canadian dollar 163 107

CFA Francs 30,601 (696)

Euro 95 -

Other currencies 3,010 2,843

Total 33,869$ 2,254$ The effect on earnings before taxes as at June 30, 2018, of a 10% appreciation or depreciation in the foreign currencies against the US dollar on the above mentioned financial and non-financial assets and liabilities of the Corporation is estimated to be $3.4 million (December 31, 2017, $0.2 million), assuming that all other variables remained constant. The calculation is based on the Corporation’s statement of financial position as at June 30, 2018.

ii. Interest Rate Risk

Interest rate risk is the risk that future cash flows from, or the fair values of, the Corporation’s financial instruments will fluctuate because of changes in market interest rates. The Corporation is exposed to interest rate risk primarily on its long-term debt. Since marketable securities and government treasury securities held as loans are short term in nature and are usually held to maturity, there is minimal fair value sensitivity to changes in interest rates. The Corporation continually monitors its exposure to


33

interest rates and is comfortable with its exposure given the relatively low short-term US interest rates and LIBOR. The effect on earnings and other comprehensive loss before tax as at June 30, 2018, of a 10% change in the LIBOR rate on the RCF is estimated to be $0.1 million (December 31, 2017 - $0.1 million).

iii. Price Risk

Price risk is the risk that the fair value or future cash flows of the Corporation’s financial instruments will fluctuate because of changes in market prices. There has been no change in the Corporation’s objectives and policies for managing this risk and no significant changes to the Corporation’s exposure to price risk during the period ended June 30, 2018.

21 COMMITMENTS AND CONTINGENCIES

› The Corporation has commitments in place at all five of its mines and other key projects for drill and blasting services, load and haul services, supply of explosives and supply of hydrocarbon services.

› The Corporation is subject to operating and finance lease commitments in connection with the purchase of mining equipment, light duty vehicles and workshop and rented office premises.

› The Corporation is, from time to time, involved in various claims, legal proceedings, tax assessments and complaints arising in the ordinary course of business from third parties. The Corporation cannot reasonably predict the likelihood or outcome of these actions. The Corporation does not believe that adverse decisions in any other pending or threatened proceedings related to any matter, or any amount which may be required to be paid by reason thereof, will have a material effect on the financial condition or future results of operations.

› The Corporation was recently served in the Cayman Islands with notice of a claim by a former service provider. The Corporation is taking legal advice on the merits of the claim and the probable outcome but intends to vigorously defend against the claims.

› The Corporation’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Corporation believes its operations are materially in compliance with all applicable laws and regulations. The Corporation has made, and expects to make in the future, expenditures to comply with such laws and regulations.

› The Corporation is obligated to deliver 100,000 ounces of gold (20,000 ounces per year) to Franco-Nevada Corporation and Sandstorm Gold Inc. (the “Syndicate”) over a five period in exchange for 20% of the spot price of gold for each ounce of gold delivered (the “Ongoing Payment”). The amount that was previously advanced for this agreement of $100 million is reduced on each delivery by the excess of the spot price of the gold delivered over the Ongoing Payment. Following the five-year period, which commenced on March 31, 2016, the Corporation is committed to deliver refined gold equal to 6.5% of the gold production at the Karma Mine for the life of the mine in exchange for Ongoing Payments. The Corporation must deliver an additional 7,500 ounces between July 2017 and April 2019 in exchange for the additional deposit of $5 million received in 2017. The Corporation assumed the gold stream when it acquired the Karma Mine on April 26, 2016. Gold ounces sold to the Syndicate under the stream agreement are recognized as revenue only on the actual proceeds received, which per the agreement is 20% of the spot gold price.

Management Discussion & Analysis...1.BUSINESS OVERVIEW ... › Basic earnings per share of $0.04 in...

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