Endeavour Mining - In My Opinion, The Last Offering Makes No Sense

A few days ago Endeavour Mining announced that is was going to increase its share count by 6.25 million ordinary shares at a price of C$20 a piece for net proceeds of C$118.75 million, at least (there is an option to increase the issue by another 0.9 million shares). Endeavour intends to use the proceeds as follows:

• C$40 million – funding the two-year drilling program conducted on the premises located in the Ivory Coast, Burkina Faso and Mali
• C$70 million – funding development projects, especially the Ity carbon-in-leach processing facility
• C$8.75 million – general corporate purposes

It looks like Endeavour needs around C$118.8 million (US$92.6 million) to finance its drilling program and the Ity upgrade.

Let me calculate how much cash the company actually has.

At the end of 1Q 2016 it had cash of US$117 million. 

Then the company announced the so-called La Mancha anti-dilution offering of 7.5 million shares, priced at around US$8.5. This offering will bring around US$64.4 million to the company. 

The last offering should add another US$92.6 million in cash.

Summarizing, after these two offerings Endeavour should have around U$S274 million in cash. 

Because the Hounde project (discussed in my last article on Endeavour) was fully funded before these offerings, the company is going to have US$181.4 million in excessive cash (US$274 less total cash needs of US$92.6 million). 

The question is: “Did the last offering of 6.25 million shares make any sense?”. 

In my opinion it did not. What is more, Endeavour is able to deliver significant cash flow from operations. For example, in 2015 it delivered US$54.7 million in free cash flow (defined as cash flow from operations less expenditures on mining interest). Lastly, at the end of 1Q 2016 a ratio of net debt / EBITDA was standing at 0.78, which means that the company carries vey low debt level (no cash is needed to pay debt off).

Summarizing – I perceive the last offering as something harmful for the current shareholders. Further, this offering makes me wondering about the quality of the company's management.