Second-quarter results show improved transparency for Endeavour Financial

Endeavour Financial (TSX:EDV) revealed much of its investment holdings in its latest quarter, something it has not done since it publicly listed in 2002.

The reason: its new gold strategy has concentrated a lot of its cash in a small number of junior gold producers.

Endeavour has traded at or just below book value for much of its eight year life, and one consistent knock against the merchant bank has been that the market was unsure how to value it because it didn't know what stocks were in its investment portfolio.

Endeavour is a merchant bank that specializes in the natural resource sector. It participates in equity financings, mergers and acquisitions and invests in (and consolidates) junior gold mining companies. It also has an advisory service. EDV currently trades at $1.80 - a 47% discount to its Net Asset Value of $3.41.

Over the last year, Endeavour has had a messaging dilemma. Sitting on a bucket of cash, investors have demanded to know exactly what EDV is planning to do with the capital. For competitive reasons, Endeavour has kept quiet over the details of their strategic business development plan.

But when Q2 results were announced, most of the cash had been spent on high profile acquisitions, to the point where now over 70% of Endeavour's investments are in its two major Gold Strategy investments. In October 2009, EDV paid US$58.3 million for 55% ownership (average cost of C$0.33/share) of Etruscan Resources (EET-TSX) - a West African gold miner. They facilitated debt restructuring, reduced gold hedge and provided working capital. Endeavour occupies 4 of 8 Etruscan board seats. The Value of Endeavour's Etruscan investment at quarter end was approx. US$71 million.

Just last week, EDV announced a US$92 million investment in for 38% ownership (average cost approx. CDN $0.12/share) in Crew Gold (CRU-TSX). Crew's primary asset is the LEFA Gold mine in Guinea , West Africa . Large scale open pit and conventional CIP processing plant commercial production commenced in mid 2008. Targeted annual gold production in 2010 is 250,000 ounces of gold with a cash cost of $517/oz.

So the market knows Endeavour's book very well. Its main oil and gas holding, Petroamerica, is also very public.

Endeavour's Gold Strategy is also now transparent. It is acquiring huge blocks of stock in radically undervalued companies that are hamstringed by financial issues. Then Giustra and CEO Neil Woodyer clean up the financial engines of these resource rich companies - making them more attractive to institutional and retail investors, improving their valuations

"Etruscan and Crew were spending a lot of time dealing with corporate financial problems," confirms Endeavour CEO Neil Woodyer, "We've been able to release that energy and expertise to focus on operational objectives."

So far the strategy seems to be working. Over last 9 months, Endeavour's tangible assets have grown from US$165 million to US$263 million,a 60% increase. However the stock has not moved up with the asset base, leading to the current discount.