Endeavour Silver Q1 2025 Earnings Call Transcript

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May 13, 2025

There are 3 speakers on the call.

Operator

you for standing by. This is the conference operator. Welcome to the Endeavor Silver First Quarter twenty twenty five Financial Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Operator

I would now like to turn the conference over to Alison Pettit, Director of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD and A, precautionary language regarding forward looking statements and the risk factors pertaining to these statements. Our MD and A and financial statements are available on our website at edrsilver.com. On today's call, we have Dan Dixon, Endeavor Silver's CEO Elizabeth Senez, our CFO and Don Gray, Endeavor's COO. Following Dan's formal remarks, we will open the call for questions.

Speaker 1

And now over to Dan.

Speaker 2

Thank you, Allison, and welcome, everyone. Q1 marked a strong start to the year for Endeavor Silver with solid production figures and continued progress on key developments. With Guanacevi and Bolanitos performing in line with plan and Terronera now producing concentrate as it approaches the final stages stages of construction, we're quickly approaching a major milestone. The addition of this transformational asset will soon become a key contributor to our production profile marking a significant step forward in our growth strategy. In Q1, Endeavor produced 1,200,000 ounces of silver and 8,300 ounces of gold, totaling 1,900,000 silver equivalent ounces.

Speaker 2

We reported revenue of $64,000,000 in line with the prior year, benefiting from the higher precious metal prices. Direct operating cost per ton increased by 6% compared to Q1 twenty twenty four caused by 6% lower throughput, while total direct operating costs remained relatively flat. The company reported a net loss of $32,900,000 for the period, primarily due to the unrealized noncash impact of gold hedging and forward swap contracts entered into March 2024. These contracts, which relates to a portion of the forecasted gold production from the Terronera project, were implemented as part of the senior debt facility used to finance its construction. As gold rose from 2,600 to $3,100 in the quarter, the loss reflects a mark to market accounting adjustment and does not represent cash outflow.

Speaker 2

Excluding mark to market adjustments, the company reported a small adjusted loss of $200,000 compared to income of $300,000 in Q1 twenty twenty four. Cash costs were $15.89 per ounce of silver, and all in sustaining costs were $24.48 net of gold credits, both slightly below annual guidance, primarily driven by the higher byproduct gold credits. As of 03/31/2025, the company's cash position was $65,000,000 and working capital was 15,000,000 Cash and working capital decreased from 12/31/2024, as the company continued investment in development activities at Terronera. Terronera is in its final stages of construction and started producing its first batch of concrete at the end of Q1. And as of our latest news release on May 6, commissioning is currently underway.

Speaker 2

Terronera represents a game changing opportunity for Endeavor Silver and is poised to redefine the trajectory of our company. As we move closer to commercial production, we remain excited about the transformational impact this asset will have on our business. With the projected mine life span in well over a decade, Terronera will serve as a long term cornerstone asset in our portfolio, underpinning our growth strategy and reinforcing our position as a leading mid tier silver producer. As the commissioning phase progresses, attention will be given to increasing feed and run time and ramping up to full throughput. The company will provide operational guidance as ramp up advances.

Speaker 2

On April 1, we announced the acquisition of the Copa mine in Peru. And on May 1, we closed that transaction. We're excited about the addition of Copa to Endeavor's operating and growth pipeline as it significantly enhances our current production profile with significant exploration upside and existing infrastructures for a long mine life. Colba represents a compelling opportunity where we can leverage our proven technical expertise and development capabilities. The project aligns with our existing operations and supports our strategy of building a scalable silver dominant asset base.

Speaker 2

The company is working towards validating and updating historical resource estimate prepared by the previous owners. In the meantime, using Culpa's twenty twenty four annual production of 5,000,000 silver equivalent ounces as a guide and with Terronera expected to come online in the near term, we are well positioned for a significant step change in production. When combined with our two producing assets, Guanacevi and Bolanos, Endeavor is on track to achieve annualized production of approaching 20,000,000 silver equivalent ounces. With that, I'm happy to open up to questions. Operator, please proceed to our Q and A session.

Operator

On your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. The first question comes from Nick Giles with B.

Operator

Riley Securities. Please go ahead. Thank you, operator, and good afternoon, everyone. Dan and team, congrats on all the progress this quarter. Really good to see.

Operator

And my first one is just on Teranera. I think you said you'll provide guidance as the ramp up advances. So what my question is, what do you ultimately need to see in the ramp to have confidence to come out with something more formal, specifically on the cost side?

Speaker 2

Yeah. I mean, first and foremost, it's gonna come down to production and throughput, and we wanna see that we have maintained consistent throughput through the mill and all the way to the filter press. That way we have confidence on timelines of that ramp up. Ultimately, we have a very short planned ramp up of about ninety days, and and that obviously could be plus or minus the ninety days. And because of that uncertainty, we don't wanna give production guidance until we know at a higher probability of how many months we'll be offering at Terronera.

Speaker 2

It doesn't make a lot of sense to give to the market six months if we're only gonna be offering for five months. For for six months, we're gonna be seven months. So that's the first and foremost is the production guidance. And then behind that comes the cost and the impact of the cost. Obviously, in the first three to six months of of commercial production, we'll be running lower grade ore than what would be deemed in our long term mine plan just to make sure we're getting through all the bugs.

Speaker 2

And we just wanna go through that when we understand grades and and ultimately the timeline that we'll be offering for 2025 and then provide guidance around costs with that. Obviously, for 2026, we'll come up with operational guidance and costs with the other mines.

Operator

Yes. That all makes sense. I appreciate those comments. Maybe just as a follow-up. It seems like what commissioning has gone well to date, but what are kind of the most near term priorities and just ensuring that, you know, the ramp kind of stays stays on path specifically at the plant?

Speaker 2

Yeah. I'm gonna defer that to Don. I mean, it it but before I give it to Don, ultimately, I'd say wet commissioning, it's it's hard to say how well it's going to date because it's a start and stop process. Ultimately, some days, you feel like you're making steps forward. Other days, you take a break, and I think that's just part of the nature of commissioning.

Speaker 2

You've got punch list items that you need to do. But as far as particulars of what's required, I'll defer to Dawn on them.

Operator

Yeah. So, Nick, thanks for your question. To to stay on path, you know, our our our team there is really focused on on on, you know, going system by system, and, you know, you start at the at the upper end of the plant and work through the through to the lower end of the plant. And that's what we've been doing now. We've been we've been, you know, running the mills been running the mills and and and checking systems out, making sure, you know, bearings and clearances and things like that are running well.

Operator

And then we've just just started to feed just started to feed water and shortly the the tailing down into the tailing filter area. That that'll really get things rolling. So it's just a process of a a process of working down through the system. Got it. Done.

Operator

That's that's all very helpful. Guys, one more if I could. Just then can you remind me what's what's ultimately the capital intensity? This is at Copa. What's the capital intensity of the throughput expansion from 1,800 tons per day to to the 2,500 level?

Speaker 2

Yeah. At this point in time, this early estimate work that was previously done by the front of house rate is anywhere from 12 to $16,000,000 to open 4,500 tons per day capacity.

Operator

Got it. Okay. Very clear. Well, guys, again, congrats on the progress, and keep up the good work.

Speaker 2

Thanks for the questions, Nick.

Operator

The next question comes from Wayne Lam with TD Securities. Please go ahead. Yeah. Thanks, guys. Sorry.

Operator

Maybe just one follow-up question on on the previous ramp up period. Can you just clarify on that ninety day ramp up? Is that ninety days from when you started what commissioning? Or if you can just clarify what what specific time line period you're kinda referring to?

Speaker 2

Yeah. It'd be May from May 1. May sixth, we put that out just to keep it easy, May 1.

Operator

Okay. Great. And then just just on the cost of completion on the March at Teranera, looks like you guys have about $7,000,000 remaining in guide spend. Is that inclusive of all the costs through the commissioning and the ramp up phase? Or just wondering if perhaps we should be baking in modest increase in the funding requirement as you guys kinda continue to ramp up.

Speaker 1

Hi, Wayne. This is Libby Dennis. To answer your question on how much to complete, the build cost, yeah, you're right. We're we're about 10,000,000 off from the guided total, and we're not anticipating many more costs to go into that build cost during the operating phase or during the ramp up phase. All those costs are operating costs and going to cost of the inventory, not into the build cost of the project.

Operator

Okay. Great. Thanks. And then maybe just last one on the balance sheet. How comfortable are you guys in terms of the cash balance and and working capital requirements need to fund the the Terronera through the ramp up?

Operator

And just curious, you know, how you're thinking about the flexibility here on the balance sheet and if there's potential to quickly refinance once you've declared commercial production?

Speaker 2

Yeah. There's a handful in there. I mean, anytime with ramp up and going through commission, there's a lot of uncertainty. Obviously, our cash balance being at 65,000,000 at March 31 feels healthy. In the day, working capital is about $15,000,000.

Speaker 2

We're at that phase of the project where it's high stress, high anxiety, pushing to get it there, make sure we don't run too low. In cash, it's something that we're gonna be monitoring very closely over the next kind of two, three months to see how ramp up is going, see where cash balances are. As far as, again, commercial production and what we do with the project loan facility, and again, that's the the overnight rate plus 4.25 right now as well as the 3.75%. Always looking to lower our cost of capital. Obviously, it completely changes the project because it's it's now derisked and in operation.

Speaker 2

As a management team, our it's our job to find the best cost of capital and and also with that to make sure that we have sufficient liquidity to get through what we need to get through. Obviously, Guanacevi and Bolanitos right now are creating cash flow for us. But like I say, we're at the stress point of the build, and we're coming down to the end. And the sooner we can get into commercial production, obviously, the better for for Terronera and ultimately the company.

Operator

Okay. Perfect. Thanks for taking my questions, and best of luck with the ramp up in the month end.

Speaker 2

Thanks, Wayne. I appreciate the questions.

Operator

Again, if you have a question, please press The next question comes from Heiko Ihle with H. C. Wainwright.

Speaker 2

Just building on your prepared remarks from earlier and the first question that was asked in the q and a portion earlier. Are there still meaningful cash flows going into Terronera in q two? And if so, you would give us a best guess estimate how much is getting shipped here in q two and what is being spent on? Yeah. We are still put spending money in April.

Speaker 2

We were spending money down there to get everything completed, get into the commissioning process. Let me touch on a little bit too. What's changed in the accounting world is ultimately revenues are recognized in the income statement and cost of sales are recognized in the income statement. Obviously, from going from zero tons, hopefully, up to 2,000 tons, they'll be making a loss here in q two as we're commissioning. But we don't capitalize that anymore, and there is cash out for.

Speaker 2

Unfortunately, we don't have April data ready and complete, so I don't wanna comment exactly how much cash we sent down in April. But we did continue to fund in April. But now with kind of the full plant being done, tailings prep in in there, It's about instrumentation and going through commissioning. There's still costs incurred with that. Obviously, there's gonna be costs incurred with finishing up various little things, but the big spend has been done.

Speaker 2

Hopefully, it slowed down, and now it's just about commissioning going into operations. That's a good answer. And, obviously, I wrote these questions before I joined the question queue, so I have to adjust a little bit. Shifting gears completely on Copa and Curio Curiosity. There's a huge operation on 25,000 hectares of claims.

Speaker 2

And in your press release announcing the deal, there was a little note in there that only 10% of the claims have seen work thus far. Can you walk us through some of the higher priority targets that you have for this year and even beyond that now that the deal was formally closed? Yeah. I mean, we actually have a significant budget at Copa. Again, it was from predecessors of what they had worked on.

Speaker 2

From October to December, they had made a new discovery on a vein they called Porta Rosa. That wasn't in our historical resource estimate. We have just got our boots on the ground with regards to our exploration team and and trying to help the Copa team out with their exploration plans. I think they've done a phenomenal job mining the Copa asset. They've done a phenomenal job growing that asset.

Speaker 2

We think where we can help them out is exploration, the work that we can do on it. There is a main structure that supports about half the production at Copa. We think there's opportunities for additional structures like that, and perhaps this Porta Rosa is one of those. And we have effectively a 12,000,000 drill for $12,000,000 exploration program for the next twenty four months or from when we acquired it in twenty four months. Then there's also tension veins coming off the main structure that were recently discovered again by the predecessors, and we're working on that.

Speaker 2

So right now on near term, we're gonna continue to focus on some of these veins that they were previously working on, and we're gonna take a step back with our exploration team, look at some brownfields opportunities, and that and and look for markers on surface through geochem work, trenching work, geophysics to try to identify some of the more significant structures. There's a lot of veins. There's a lot of workings over over the history. So it's very similar to almost only those quantities that we went to twenty years ago where we can bring in exploration techniques and expertise and hopefully uncover more resources. I would point that there is a historical resource of about a 18,000,000 ounces.

Speaker 2

We are working to validate that and ultimately, eventually grow from there. So we have some time. They have a mine plan in place. And before we get too much comment, we just wanna get more into the data and validate a lot of the historical work they've done. Just to our standards, we're more comfortable talking about a typo.

Speaker 2

That's extremely helpful. I'm gonna get back in queue, and and thanks again for the answer, and good quarter. Thank you, Heiko.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Dan Dixon for any closing remarks.

Speaker 2

Thank you, operator, and thanks for everybody attending our Q1 session. As everyone likely knows, Q2 is going to be a very important quarter for us. Obviously, we're really focused to get Terronera ramped up and into commercial production as soon as possible and look forward to our Q2 earnings call in July or August. Thank you.

Operator

This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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Endeavour Silver Q1 2025
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