Endeavour Mining : Audited Annual financial statements

CONSOLIDATED FINANCIAL STATEMENTS

For the years ended 31 December 2021 and 31 December 2020

(Expressed in Millions of United States Dollars)

CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

INDEPENDENT AUDITORS' REPORT ..........................................................................................................................	1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ..............................................................................	7
CONSOLIDATED STATEMENT OF CASH FLOWS ......................................................................................................	8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................................	9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.........................................................................................	10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...................................................................................
1	DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS...........................................................................	11
2	BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES ...........................................................	11
3	CRITICAL JUDGEMENTS AND KEY ESTIMATES ..................................................................................................	23
4	CORPORATE COSTS...............................................................................................................................................	25
5	ACQUISITIONS AND DIVESTITURES.....................................................................................................................	26
6	IMPAIRMENT OF MINING INTERESTS ..................................................................................................................	31
7	SHARE CAPITAL ......................................................................................................................................................	33
8	FINANCIAL INSTRUMENTS AND RELATED RISKS ..............................................................................................	37
9	LONG-TERMDEBT ..................................................................................................................................................	41
10	TRADE AND OTHER RECEIVABLES.......................................................................................................................	44
11	INVENTORIES..........................................................................................................................................................	44
12	MINING INTERESTS ...............................................................................................................................................	45
13	GOODWILL...............................................................................................................................................................	46
14	OTHER FINANCIAL ASSETS ...................................................................................................................................	47
15	TRADE AND OTHER PAYABLES.............................................................................................................................	48
16	LEASE LIABILITIES..................................................................................................................................................	48
17	OTHER FINANCIAL LIABILITIES .............................................................................................................................	48
18	ENVIRONMENTAL REHABILITATION PROVISION.................................................................................................	51
19	NON-CONTROLLINGINTERESTS...........................................................................................................................	52
20	SUPPLEMENTARY CASH FLOW INFORMATION...................................................................................................	53
21	INCOME TAXES.......................................................................................................................................................	54
22	RELATED PARTY TRANSACTIONS.........................................................................................................................	56
23	SEGMENTED INFORMATION .................................................................................................................................	63
24	CAPITAL MANAGEMENT.........................................................................................................................................	65
25	COMMITMENTS AND CONTINGENCIES ...............................................................................................................	65
26	SUBSEQUENT EVENTS ..........................................................................................................................................	66

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF ENDEAVOUR MINING PLC

Opinion

In our opinion, the accompanying consolidated financial statements give a true and fair view of the state of the Group's affairs as at December 31, 2021 and December 31, 2020 and of its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

We have audited the consolidated financial statements of Endeavour Mining Plc and its subsidiaries (the "Group") for the years ended December 31, 2021 and December 31, 2020 which comprises the consolidated statements of financial position, consolidated statements of comprehensive earnings/ (loss), consolidated statements of cash flows, consolidated statements of changes in equity and notes to the consolidated financial statements, including a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by IAASB. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements, including the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

	Risk that the Purchase	Risk that the life of	Risk that the goodwill	Risk that provisions in
What we considered to	Price Allocation ("PPA")	mine estimates are	relating to the Teranga	relation to tax claims
for the acquisition of	inappropriate and	and Semafo	are inappropriate.
be a key audit matter
Teranga is incorrectly	mining interests require	acquisitions is impaired.
	accounted for.	impairment.
Why it represented a	Management were required to exercise significant judgement and estimation in these areas. The
key audit matter	appropriate disclosure of such judgements and estimates was also a focus for the audit.
Relevant information in	Note 5	Notes 6 and 12	Note 13	Note 25
Consolidated Financial
Statements

1

Key audit matter	How the scope of our audit addressed the key audit matter
Risk that the Purchase Price	We checked that the PPA was subject to appropriate internal review, including by the Board.
Allocation ("PPA") for the acquisition	We agreed the opening balances to supporting documentation, including obtaining bank
of Teranga is incorrectly accounted
for.	confirmation letters. We specifically focused on the completeness of liabilities and
	existence of assets at the date of acquisition. Our testing approach included onsite mine
As detailed in Note 5, the Group	visits post acquisition to perform stock count and asset verification procedures.
completed the acquisition of Teranga	We obtained Management's analysis of the business combination, including details of all
Mining Inc., effective 10 February 2021.
The consideration paid totalled $1.75	assets and liabilities acquired and their valuation. We have examined all relevant
billion.	agreements, schedules and supporting documentation of the identifiable assets acquired,
	liabilities assumed (principally rehabilitation and provisions for tax claims), any non-
A business combination must be	controlling interests in the acquiree, and the amounts or fair value allocated to the mining
accounted under IFRS 3 by applying the	interests, exploration assets and inventories and agreed amounts to the PPA schedules.
acquisition method. This includes the	We evaluated and critically assessed the work performed by Management and their third
recognition and measurement of assets
and liabilities at fair value, and non-	party experts on the Purchase Price Allocation and challenged their conclusions over key
judgement areas with reference to market data and historic information, namely; recognition
controlling interests at the
of any separate intangibles, valuation of mining interests and exploration assets, inventory
proportionate share of the fair value of
valuation, any contingent liabilities recognised and deferred tax adjustments. As part of our
the net assets.
audit work we assessed the value attributed to the assets and liabilities acquired. In
Given the size of the acquisition and	utilising the work of Management's expert, we evaluated the competence and objectivity of
the professional advisers relied upon by Management.
the high degree of estimate and
judgement applied by Management in	Our assessment of the fair value of mining interests and exploration assets included the
the PPA valuation, the accounting for
following:
the PPA represented a significant audit
risk and a key area of focus for our	• Our internal valuations specialists assessed the valuation methodologies applied to
audit.
check they are in accordance with industry norms and standards and also assessed
	the appropriateness of the discount rates used in the PPA.
	• We assessed the key assumptions used in the valuations with reference to market
	data and historic and forecast information, including gold price, mining costs, capital
	expenditure and discount rates. As part of our testing, we compared the operating cost
	forecasts for Sabodala- Massawa and Wahgnion to the actual operating results since
	acquisition.
	• We corroborated the valuation to the latest reserve and resource data and challenged
	the Group's technical team on the basis for those estimates. We considered the
	competency and capability of the external and internal experts that estimated the
	reserve and resources.
	• In relation to the exploration assets, we cross checked the in-situ valuation of the
	exploration assets performed by the Group's external expert to market data.
	• In performing our review, we specifically considered whether Management had used
	hindsight arising from further developments since the acquisition date to influence the
	provisions recognised on acquisition.
	We have reviewed the allocation of goodwill to the CGU's and have challenged
	Management on the basis of allocation.
	We considered the substance of the transaction and whether it is consistent with the
	entity's disclosure of the primary reasons for the business combination.
	We reviewed the disclosures in the consolidated financial statements to check that all of
	the appropriate information had been included.
	Key observations:
	We found Management's estimates and judgements in respect of its assessment of the
	PPA to be balanced and suitably supported by analysis of the fair value of the assets,
	liabilities and non-controlling interests and independent advice from Management's
	external experts.
	We found the disclosures included in the consolidated financial statements in Note 5 to
	be appropriate.

2

Key audit matter	How the scope of our audit addressed the key audit matter
Risk that the life of mine estimates are	We checked that the impairment models utilised the approved life of mine plans and were
inappropriate and mining interests	subject to appropriate internal review, including by the Board.
require impairment.	We obtained and reviewed Management's impairment indicator review, and detailed
As detailed in Note 12, the Group's	impairment tests in respect of the Karma and Boungou mines as set out below.
mining interests, including property,	In respect of the Karma impairment, we obtained Management's calculation of the asset's
plant and equipment represent its most
significant assets and total $5.0bn at	fair value less cost of disposal and performed the following procedures thereon:
31 December 2021.	• We agreed the cash consideration receivable to the draft sale and purchase agreement.
As detailed in Note 6, Management	• We obtained Management's assessment of the fair value of the contingent
have performed an impairment indicator	consideration and reviewed the inputs and fair value, with reference to the latest
review for each of the operational	consensus analyst forecasts on future gold prices.
assets under IAS 36 Impairment and	• We obtained Management's assessment of the fair value of the royalty receivable and
have not identified any indicators of	agreed the inputs to the calculation. We compared the gold price to market consensus
potential impairment, apart from at its	data, recalculated the discount rate and agreed the production inputs to the underlying
Karma and Boungou mines. In addition,	feasibility study. We reviewed and recalculated the discount rate used in conjunction
Management have performed an	with our internal valuation specialists. We performed sensitivity analysis on the key
impairment assessment of the Mana	inputs and challenged the estimates with the Board.
and Sabodala-Massawa CGU's given
goodwill has been allocated to these	In respect of the Boungou impairment:
CGU's as part of the PPA accounting.
• We evaluated Management's impairment model against the approved LOM plan and our
See details under the key audit matter
understanding of the operation. In respect of the key estimates and assumptions used
'Risk that the goodwill relating to the
by Management, our testing included: comparison of the gold price to market consensus
Teranga and Semafo acquisitions is
data; recalculation of discount rates and evaluation of the appropriateness of risk
impaired' below.
premiums therein in conjunction with our internal valuation specialists; and critical
As a result of the indicators identified,	review of the forecast cost, capital spend and production profiles against the approved
mine plan, resources and reserves reports and historic performance.
Management performed an impairment
• We compared the trading performance against budget/plan for FY 2021 in order to
test for the Karma mining operation as
evaluate the quality of Management's forecasting and where under performance against
at 31 December 2021 to recognise
budget/plan was highlighted, evaluated the impact on the forecasts.
Karma at the lower of its carrying value
• In respect of pricing assumptions, our testing included evaluation of Management's gold
and fair value less costs of disposal
price forecasts against analyst consensus forecasts.
('FVLCD'). As Management were in
• We held meetings with mine Management (mine managers, geologists, mining
discussions to sell the Karma mine,
engineers) to understand and challenge the production, operating cost and Capex
FVLCD was valued using a market-	forecasts.
based valuation approach based on the	• We performed our own sensitivity calculations in respect of gold prices, discount rates,
expected fair value of the consideration	and operational performance, and compared the results of this to Management's
to be received upon closing of the	sensitivity analysis. We also considered the appropriateness of related disclosures given
disposal of $25.0 million, which	in Note 6.
resulted in an impairment of the mining	For the Group's other mines, Management's impairment indicator review indicated that
interests at 31 December 2021 of
$11.7 million.	no impairment charges were required and that each cash generating unit had sufficient
headroom above the CGU carrying value. As part of our impairment indicator review, we:
At Boungou, Management identified	• We evaluated Management's impairment models against approved LOM plans and our
understanding of the operations, and critically challenged the key estimates and
impairment indicators in relation to
assumptions used by Management for each of the mining operations.
lower grades and ounces being
• We compared the trading performance against budget/plan for FY 2021 in order to
recovered as well as the increased
evaluate the quality of Management's forecasting and where under performance against
operating costs of the mine, mainly due
budget/plan was highlighted evaluated the impact on the forecasts.
to increased spend on security. In
• In respect of pricing assumptions, our testing included evaluation of Management's gold
addition, reduced confidence in
price forecasts against analyst consensus forecasts.
previously identified exploration targets
• We held meetings with mine Management (mine managers, geologists, mining
has decreased the estimated
engineers) to understand and challenge the production, operating cost and Capex
exploration potential of the mine from
forecasts.
that which was estimated on
• We performed our own sensitivity calculations in respect of gold prices, discount rates,
acquisition. As a result of the
and operational performance, and used the results of this to challenge Management's
impairment test performed,
sensitivity assessments. We also considered the appropriateness of the related
Management concluded that there was
disclosures given in Note 6.
an impairment at the Boungou CGU at
31 December 2021 and recognised an
impairment charge of $246.3 million, of
which $31.9 million related to the
goodwill.

3