Having watched several mining companies with large cash positions sit dormant for months on end, it is a breath of fresh air to see a company like Endeavour move forward aggressively with their available resources. It is fairly clear that the acquisition spree isn’t finished yet, and we’re very excited to see what Endeavour pursues next in its strategy to consolidate junior gold producers into a more formidable mid-tier gold company.

However, we are a bit concerned about the company’s high level of overhead expenses. For a company with a market cap of under $250 million, it seems somewhat irresponsible to shareholders to award over $28 million in performance bonuses, in addition to employee salaries and stock-based compensation of over $8.5 million, over the 9 month period ended March 31, 2010. Throw in consulting fees, general and administrative, and other miscellaneous expenses we’re talking about a burn rate of almost $5 million per month! In our opinion Endeavour needs to reconsider how these performance bonuses are determined, especially in relation to its “gold strategy”. Positively it appears that the performance bonuses based on the company’s gold strategy are merely accruing and will not pay out until gains are actually realized, at which point the fee will be equal to 2% annualized asset value and 10% of gains.

The claim raised by Gold Reserve (AMEX: GRZ; TSX: GRZ) about an alleged wrongful sharing of confidential information is also a potential concern for shareholders and does not reflect particularly well on the company. Gold Reserve is seeking $200 million in damages. Endeavour is also currently undergoing an audit by the Canada Revenue Agency for its 2006, 2007, and 2008 taxation years. Considering that our model only gives a base case value of about C$3.00/share, the risks arguably outweigh the potential reward here for the time being. But this is certainly one to keep a close eye on given its aggressive approach.