Endeavour Silver Q2 2026 Earnings Call Transcript

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Provided by Quartr
July 30, 2026

Key Takeaways

  • Positive Sentiment: Strong Q2 results: Silver-equivalent production rose 36% year over year to 3 million ounces, while revenue increased 150% to $212 million and mine operating cash flow before taxes tripled to $100 million.
  • Positive Sentiment: The company ended June with $236 million in cash and expects to collect approximately $70 million in Mexican VAT refunds during Q3, strengthening its funding position for growth initiatives.
  • Positive Sentiment: Terronera is expected to deliver incrementally higher silver grades in Q3 and the second half of 2026 as mining reaches higher-grade areas; exploration drilling has also resumed to expand and better define the resource.
  • Negative Sentiment: All-in sustaining costs rose 47% year over year to $37 per silver-equivalent ounce, with management acknowledging that current costs are above guidance due to higher royalties, taxes, purchased ore, sustaining capital, inflation and the stronger Mexican peso.
  • Neutral Sentiment: The 2026 capital budget increased by $18 million, largely to accelerate infrastructure at Kolpa/Cobre, including power, water treatment, tailings and accommodations. Management expects Pitarrilla’s feasibility study by the end of Q3 and estimates eventual construction costs of roughly $500 million-$600 million, which could delay shareholder returns until the project is built.
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Earnings Conference Call
Endeavour Silver Q2 2026
00:00 / 00:00

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Operator

I would now like to turn the conference over to Allison Pettit, Vice President of Investor Relations. Please go ahead.

Allison Pettit
Allison Pettit
VP of Investor Relations at Endeavour Silver

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

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks, Allison, and welcome everyone. Endeavour Silver's second quarter performance reflects the strength of our operations with increased production, record metal sales, and a meaningful improvement in mine operating cash flow. Terronera's ramp up and the higher throughput achieved at Kolpa, together with our strong cash position, gives us a solid base to continue advancing our growth plans throughout the remainder of the year. In Q2, Endeavour produced nearly 2 million ounces of silver and over 10,000 oz of gold, totaling 3 million silver equivalent ounces. This represents a 36% increase compared to Q2 2025. We reported revenue of $212 million, an increase of 150% compared to prior year, with mining operating earnings of $74 million, again higher than the $7 million in Q2 2025, and mine operating cash flow of $100 million before taxes, a 300% increase from Q2 2025.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Our all-in sustaining costs net of by-product credits were $37 this quarter, representing a 47% increase from Q2 2025. Profitability has significantly increased our operating costs with increased royalties, purchase material, profit sharing, and mining taxes. With increased profitability, we continue to invest in sustaining capital costs, especially compared to the prior period. In Q2, Endeavour recognized an adjusted net earnings of $45 million or an adjusted net earnings per share of $0.15. Changes in the metal price have a meaningful impact on our direct cost per ton. For example, for every $1 increase in silver ounce, cost per ton rise by about $0.90 at Terronera, $3.80 at Guanaceví, and $0.50 at Kolpa. Due to the higher royalties, mining duties, third-party purchase or imperatively required profit sharing.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Direct operating costs per ton were 14% higher this quarter compared to Q2 last year, as the Mexican peso has appreciated and put pressure on inputs impacting our costs. During the first quarter, Kolpa installed and commissioned a new three stage pressure ball mill, increasing plant capacity to 2,500 tons per day. Additional expansion expenditures remain, along with capital improvement initiatives, including the expansion of the tailing storage facility to accommodate the increased plant capacity, construction of a new water treatment plant, new power substations required to support current and future operating levels, as well as upgrades to the camp accommodations aimed at attracting and retaining skilled miners in Peru. Management continues to evaluate the long-term capital needs of Kolpa and has increased the 2026 budget by $18 million to bring projects forward and meet company and Peruvian recommendations.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

At Terronera, daily throughput remained consistent as the processing plant focused on metal recoveries. Silver grades were in line with plan for the quarter and are expected to increase during the second half of the year as mining operations access our higher grade areas. Further progress is expected on recoveries as the grinding circuit continues to find efficiencies and to meet the design criteria. With higher grade areas and other ramp-up efficiency initiatives, such as the LNG plant commissioning and the waste dump to development, management expects an incremental decrease in Terronera's cost per ton throughout the second half of the year.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Exploration drilling also restarted at Terronera, making it the first drill program at the mine since 2020, aimed at expanding and better defining mineralization along strike and depth within the Terronera vein and defining the limits of mineralization near historical workings to support mine design and long-term planning outcomes. For more details, we released initial results on June 18th, and you can find them on our website. Guanaceví incurred higher direct cost per ton this quarter, largely due to higher volume and cost of third-party material purchased, which have become more expensive on a per ton basis due to higher prices. The higher metal prices also drove higher royalties, special mining duty payable for the period.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

The higher prices have allowed the operating team to mine lower grade zones, ultimately extending mine life, and we do expect higher grade areas to come in line in the near future, increasing grades from current levels. Drilling continued throughout Q2 at Guanaceví as well, focusing on underground diamond drilling in deeper parts of the areas, and we continued to test down the Cruz vein and look for additional extensions to the north. As of June 30th, 2026, we had a cash position of $236 million, working capital of $214 million, providing a strong and stable foundation to advance our ongoing initiatives. We continue to advance the Pitarrilla feasibility study, which is expected at the end of Q3, with economic information being collected with drafts expected shortly for management.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

In closing, Endeavour delivered a strong second quarter supported by higher production, record metal sales, improved mine operating cash flow and strengthened balance sheet. With the Kolpa expansion now achieving higher throughput, Terronera continued advance through its ramp up and the events of the Pitarrilla feasibility study underway. We are well positioned to build on this momentum through the second half of the year and into next year. Thank you for your continued support and engagement. With that, I'm happy to open for questions. Operator, let's please proceed to the Q&A session.

Operator

Thank you. To join the question queue, you may press Star then One on your cellphone 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 two. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Hey, Dan and team. Thanks for taking my questions.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Hey, Heiko, how are you?

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Not too bad.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Good to hear.

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Terronera environmental. Yes. I went back on the terronera environmental website this morning, that you guys have set up, you know, the terronera.com. Obviously, commissioning of the site began a month ago. You did mention an incremental decrease in costs during the second half. Just a couple of questions based on that. Were there any bottlenecks or costs that you didn't anticipate so far during the commissioning or anything else that had become unanticipated?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

For our LNG plant, we commissioned it in June. I wouldn't say there was anything particularly unexpected. Just going through permitting, it took a longer time. If you recall, we might have talked about this on past calls or past meetings, but there was an LNG spill in Mexico City in November, December of 2025. That impacted us having to put together additional emergency response plans for LNG to be transported to our site, which actually right now is coming out of the state of Chihuahua and eventually will come from Guadalajara. We had to do that, and we also had to increase our permit around storage, again, all related to some of the incidents that have happened around the country. From a commissioning standpoint or actually LNG plant went very smoothly, just took longer than expected just because of the permitting.

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Yep. Okay. To be clear, the LNG plant obviously supplies the plant and the buildings. It also says that it gives loads to four portals of the mine water management system. All those are now connected or what's the timeline to actually finish this off?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

No, that's a very good question, actually. Our lower platform is what we connected first, and that happened early June. End of June, we connected the upper platform. Effectively, the whole plant was connected by the end of the quarter. Here in August, it's coming up by August 15th, we'll have the mine connected to the LNG generation system. Right now the mine remains on its diesel gen sets, and we just have boreholes to go through, and we're actually running the line this week. Hopefully we're connected before mid-month. At this point, it's ongoing.

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Fair enough. Just conceptually, you guys got close to a quarter billion in cash. I remember when this company didn't have a market cap of that size. Probably aging myself here a little bit. Just thinking out loud, where do you think what's the limit or what's the necessary bottom right now in regards to cash balance? Building on that, at what point should one even maybe think out loud and maybe even see a special dividend, especially once you're done with all the CapEx that are coming towards you over the next couple of quarters?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We often get that question, Heiko. It's ultimately a resource allocation and what we do with that. There will be a time that we return money to shareholders either through a dividend share buyback. I think the growth plans that we have as a company over the next five years is still pretty substantial. We obviously have our convertible debt that's long-term, and that's about $350 million that one day will be paid back for a share price of $12.45. That gets converted. That gets converted ultimately to Pitarrilla and the feasibility study that we have coming out, hopefully here by the end of September, and have information publicly for that, dictates what we're going to do with that capital.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

That feasibility study we fully expect to be very positive, and we expect build costs somewhere at $500 million-$600 million range. We don't have that CapEx number yet. Just management's kind of expectation being around that cash flow that we're generating and the cash that we have on our balance sheet, it will ultimately be earmarked for Pitarrilla. Pitarrilla, if we can have that built by 2030, ultimately now you're a company of scale that can look at dividends or share buybacks, and that's when we start talking about returning capital to shareholders.

Heiko Ihle
Heiko Ihle
Analyst at H.C. Wainwright

Perfect. Okay. That's it. I do not want to hold up the question queue too long here. Thanks for taking the question, and I'll get back in line.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the question, Heiko.

Operator

The next question comes from Wayne Lam with TD Securities. Please go ahead.

Wayne Lam
Wayne Lam
Analyst at TD Securities

Hey. Thanks, guys. Maybe first question, just on the grades of Terronera. Just wanted to get a bit more detail. If we look back to the commercial production announcement last October, you guys had guided to a six-month period where you're moving through the lower grade development ore to get to the higher grade zones. I just wanted to know kind of what the expectation is now, with the commentary that you're going to get into higher grades. Is that something We should expect a step change immediately into Q3, or is there still more of a ramp-up? And then just with the mine plan in year one having silver grades north of 200 g per tonne and gold grades at almost 4 g, should we start to model that into the back half of the year?

Wayne Lam
Wayne Lam
Analyst at TD Securities

Just wondering if there's any additional commentary you can provide us in terms of what we should expect going forward and what you've seen so far through the month of July.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yes. I'll answer your second question first, if that's okay, Wayne. As far as you're going back to the feasibility study when you have the 4 g gold that's coming through, and that's related to La Luz. In our feasibility study from an IRR standpoint, some payback periods, your highest grade material starts in day one. From practicality standpoint, we obviously didn't go with that. Obviously, the price is completely different than what we did our feasibility study at, which was at $17 silver. We didn't want to have grade end up in our ounces end up in our tailings storage facility and made the decision mid-year last year that we'd go after lower grade material, and that would happen until about mid-year this year. La Luz came out of that plan last year, and now it's kind of earmarked for our Q1, Q2 of next year.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Ultimately, we spent time drilling that out. We've pushed that resource to depth a little bit. Our one rig that's been on site has been drilling Terronera, and it's going back to La Luz in August to see if we can continue to find the bottom of La Luz. That's all designed around so we can properly mine design La Luz, so we can be most efficient. We've kind of gone back and forth between longwall and cut and fill. The long way to say that ultimately that high-grade gold isn't in our plan for 2026, it's in our plan for 2027. That's why you've seen that gold run around two compared to the feasibility study that's running four. The 200 g silver is really coming from that Terronera chute. There's a chute that goes from southeast to northwest, plunging towards the northwest.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

That is our high-grade material. We put out drill results, as I said, in June 18th. That kind of pushed that plunging chute towards the northwest. We've actually come into that a little bit sooner. We are starting fill development now. We've seen some of our grades come up already in July, but I think it's going to be incremental increases July, August, September. We still do have some grade in the low-grade zones. We have some mineral that we're mining that's outside of our resource, that if we don't take it, we're not going to get it. That's going to slightly impact it, but we should see an increase in silver grade in the second half of the year and ultimately in Q3. Specific timings on July, August, September, it's going to give or take three, four weeks. It's a very small time period.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Ultimately, I would expect to see higher grades, silver grades in Q3 than we saw in Q2, which has always been the plan.

Wayne Lam
Wayne Lam
Analyst at TD Securities

Okay, thanks. That's pretty good detail. Maybe just sticking to the costs. Just wondering on the AISC performance through H1, which you had noted some of the pressures that you've been seeing. Just curious, with the performance through the first half of the year, with the silver price kind of pushing some of those factors higher, how are you thinking about your AISC guidance? How should we be thinking about the improved efficiencies and the decline in sustained capital spend into H2? Just wondering if that guidance is still realistic given the performance to date.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. It's a very difficult thing because of the amount of variables that go into your all-in sustaining costs. When we put out our guidance, we used $38 silver price or $36 silver price, ultimately build everything off that. That actually steps back to when we start our process for planning in basically Q3 of 2025. We're sitting around that, obviously a huge change that's happened. We also provide all those sensitivity in that guidance, it's difficult for whatever price you guys are using or different analysts have different prices, obviously. Right now, with the increased sustaining CapEx that we have at Cobre, it's offset by the by-product credits that we're getting from lead and silver from the efficiencies we're getting. There's a lot going in.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We haven't changed our guidance on all-in sustaining costs, clearly, where we're sitting is much higher than our guidance, that's going to continue because of higher prices.

Wayne Lam
Wayne Lam
Analyst at TD Securities

Okay, great. Maybe just lastly on the hedging strategy, can you give us a bit of detail on the go-forward hedging program on the Mexican Peso? Just with the higher cost at Guanaceví, I know you have the hedging in place currently from the build, but is there any thought to hedging silver price a bit further out to protect the margins at Guanaceví?

Elizabeth Senez
Elizabeth Senez
CFO at Endeavour Silver

Hi, I'll take that one. On the foreign exchange hedging, all of the foreign exchange hedges that we put in as part of those have been unwound. Yes, we are doing foreign exchange hedging for the operating costs that are denominated in Peso for Guanaceví. That also reflects on Terronera as well. With the stronger Peso, we've not put any in in the last three months. That book's sitting pretty healthy for us and our plan generally is to hedge the Peso, a small amount to tolerate any significant shifts in the price of the Peso as it moves around. On the metal hedging, as you know, all the silver collars unwound in June and were paid out July 2nd, the gold hedges stream out to the end of June of next year.

Elizabeth Senez
Elizabeth Senez
CFO at Endeavour Silver

We've got another year of gold hedges to pay out, at this time, we have no plans to do any further metal hedging.

Wayne Lam
Wayne Lam
Analyst at TD Securities

Okay, great. Thanks for taking my questions.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the questions, Wayne.

Operator

The next question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Great. Thanks, Dan and team. Maybe, again, a question on the all-in sustaining cost. Dan, as you said, it's quite complex in terms of forecasting and guiding to all-in sustaining costs. We talked about the different variables in terms of commodity price assumptions. How about inflation? Could you remind us what kind of inflationary assumptions you have made? Are they kind of the realized inflation, is this what you had expected or is it higher? How should we factor that in as we look at all-in sustaining cost?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. Thanks, Cos. It's a good question. Ultimately, the inflation that we looked at obviously is different for a lot of things. Our labor, we had a planned 5% increase in labor, I think that's effectively where we settled, maybe a little bit higher by a point. Our initial plan when we go through our budgeting process, I think last year we had about 3% inflation. Obviously, everything's different with what's happened in the Strait of Hormuz and the impact on diesel prices. Not necessarily specific to us because we're captured a little bit in Mexico where Pemex controls that a little bit. Obviously those prices impact our supplies and that gets passed down the chain. We're seeing a little bit more of that in the second quarter than obviously we saw in the first quarter. How long that continues, is that long-term inflation, short-term inflation?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

I don't think we need to get into that here. Ultimately, kind of expect it.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Okay. As I looked at the individual all-in sustaining cost and the one that's much higher than what you had expected is Guanaceví, I think in large part due to a higher cost of purchasing third-party ore. Could you maybe talk about that strategy? The third-party ore, how much is that actually adding to your all-in sustaining cost? Because your all-in sustaining cost is over $50 an ounce and that's almost touching.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. There's two parts to that, Cos.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Okay.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Ultimately, our all-in sustaining costs at Guanaceví are higher because we're also seeing on a per-ton basis, and I'll come back to the per-ton basis, our grades have been lower than planned out of Guanaceví.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Okay.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

The grades lower than planned mean on a per ounce basis, the cost goes up on a per ounce basis, right? We're getting 8 oz instead of 10 oz out of that ton. That's pretty straightforward. Ultimately, we're going into lower grade areas anywhere in El Curso, back into Progreso and Dos, and then ultimately we're actually moving towards Milache where grades will come up. The idea of going after those lower grade ounces is because we have a two-year mine life right now at Guanaceví, and obviously that extends mine life. The idea of the purchased ore in that area, there's a number of different family-run operations in Guanaceví. It's a quilt system. We control a large part of the claims at Guanaceví, but there's a lot of family claims and a couple small miners and mills in that area as well.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Around us is also Frisco, which we obviously have the NSR, that 16% NSR. With higher prices, we pay higher royalties. That goes into our all-in sustaining costs. The special mining duty, the profits that we're making at Guanaceví go into our all-in sustaining costs, of course, all that. It's a little bit of everything at Guanaceví is why our all-in sustaining costs are higher than what we had guided. Lower grades, higher prices that drive profit sharing, purchased ore. The purchased ore in this quarter I think was 21%, maybe even a bit higher than that. It has been increasing to about 11,000, 12,000 tons came through in the quarter. That's just again, a function of the higher prices mean more family operations can open up areas and they're making more profit and they're delivering more material.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

That material, when you're buying it at $50, increases. Our cost per ton on an all-in basis, so we call it our direct cost, which includes royalties and purchased ore, is $400. $130 of that $400 is purchased ore, right?

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Yeah.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Over 25% of our cost is related to purchased ore. Now, we make about a 30% to 33% margin on that purchased ore. If we buy it for $100 bucks, we make $30 bucks and it extends our mine life. One of the things, the Guanaceví plant was originally built by the Mexican government in 1981 or 1982. Under that plant, when it got sold, 10% of that plant needs to be available for family operations to toll their ore. Some of it's in our control, some of it's out of our control, but ultimately us taking more allows us to continue to extend mine life, gives Luis and his exploration team time to continue to find resources as we move along. Hopefully we're at Guanaceví another three, five, 10 years.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

I wasn't aware of that, or maybe I forgot about the 30% profitability. You're actually making money off of it.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Absolutely.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

I guess it's beyond profitability as well. It sounds like it's part of the agreement that you might have in place in terms of giving access to some of these families here.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. We have to give access, but it also has to be profitable. There are gating items in that agreement protect us as well. Ultimately, there's a number of things when it comes to community relations, et cetera. There's a lot of qualitative aspects to buying that purchase ore, and we do a lot of work around it to make sure those claims are legit claims, et cetera. It is a profitable segment for us, and it extends our mine life.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Great. Maybe one last question, Dan. Talking about unexpected cost, I see that your CapEx has increased now from $157 for the year to $181 million.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

It's going to be $18 million additional CapEx. Would you categorize that as unexpected cost, or is there really a future benefit to it, whereby it might equate to over 2,500 tons per day or lower cost later on in terms of per ton? Could you maybe talk about that?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah, no, that's very fair. In that $18 million, there's about $5 million of overruns from putting that ball mill in place, recommendations from Peruvian authorities on what we have to increase for power consumption, and substations, and then lifts required on the current tailings facility. Similarly, we've been running certain days at 2,600 all the way up to 2,800 tons per day. Obviously, we don't have facility capability to continually run that for the next two or three years. By increasing the power substations, putting in a water treatment plant, and our tailings filter systems, we're going from conventional tailings to dry stack tailings. We're trying to push that forward. That $18 million that we've added in is project expenditures we expect to happen this year, but it could end up getting pushed to the next year.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

If we don't start that work now, we'll be racing come 2030 to get it all finished so we can continue to fill our tailings dam with ore. As far as your question of what's expected, what's unexpected, some of it was unexpected, as I say, overruns, which is about five of the 18, and then $13 million's us bringing things forward from 2027. Inside that, there's $3 million for accommodations. New camp, and that's again, we're losing or having high turnover in Peru because of all the informal miners that have been popping up with high prices. We're building that out sooner than what we had planned to attract and retain talent. It's something that we didn't take very lightly when we started looking at it.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Also we see a lot of potential through our exploration programs that we've done there that, hey, this is a long-term investment. We're going to be there well past the eight years that we thought we had in our effectively model when we purchased it. We're going to be here 15, 20, 25 years, and we're going to make these investments now.

Cosmos Chiu
Cosmos Chiu
Analyst at CIBC

Great. Thanks, Dan, for answering all my questions. Very good answers. Thank you.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the questions, Cos.

Operator

The next question comes from Alex Terentiew with National Bank. Please go ahead.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Hey, guys. A lot of good questions asked here already. Maybe just a few follow-ups to dig into some of those. Starting with Cobre, the additional spending here. This mine, I guess since you guys bought it, has been performing operationally, I think, pretty well. You got your expansion up and production has been looking pretty good. I think the offset has been, there's been a bit more spending, at least than I anticipated. I'm just trying to get a sense of the spending this year. How should I think about longer term spending here? Is this kind of catch-up spending that maybe you kind of didn't anticipate, or is sustaining going to be a little bit higher on this project or this mine forward? Just trying to get a sense of longer term expectations here.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

That's a very fair question. I'd say it's more focused on one-time expenditures with regards to expansion, going from effectively 2,000 tons per day to 2,500 tons per day. When our management team that we inherited came through with their program, there's definitely things they missed from a conceptual standpoint that when you start peeling back the onion, you go, "Well, hold on. There's not enough capacity from a power standpoint here." We're going to run out of tailings dam in 2029, 2030 if we don't start moving on this. As we've taken control, now we've been in control for just over a year. There's things that we have recommendations on, things that they've ultimately missed. Most of that is actually one-time expenditures for the long-term viability of Cobre.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Effectively putting the tailings storage filter presses in, going from wet stack to dry stack, that's a one-time thing. New accommodations, one-time item. New power substations, a new water treatment plant to bring their standards up. Some of these things that from an acquisition standpoint, we felt like we could live with for a while, but at these prices, with these cash flows, it gives us the ability to make that investment now, and it's something we don't have to worry about in year three, year four, year five to push that out. Again, I'd point back to a lot of the work that Luis' team's doing and opening their Cobre exploration team and what we're seeing. I think our enthusiasm to get these investment projects done points to what we think the resource is ultimately going to be.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

That makes sense. Do you have an estimate on when an updated resource and mine plan would be out for Cobre?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We expect it to be out by the end of the year.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

End of year. Okay, good. All right, just going back to Terronera. I know you talked about higher silver grades coming second half this year. Any higher gold grades coming with those as well? Is it just.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

No, we're staying in Terronera. There are some pockets in Terronera, even like I say, the drill results that we put out have 3 g, 4 g in some of that area. Ultimately, gold should hover around two. It's the silver that will pick up.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Okay. Just sticking with this one, you've had some really nice exploration results that you touched on earlier in the call and published, I guess, a couple weeks ago. Are you still thinking of putting out a new updated plan here for Terronera? I mean, obviously the.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Mine plan has changed quite a bit with the silver prices and exploration and.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Yeah.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Okay.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

No. Yeah, it is a very fair question. We are not doing a new technical study, a new mine plan will not be in that. When we come out in 2027, we will have the guidance for the year with expected tons and ultimately grades, but we just put out ounces for expected produce. We will have a new resource for Terronera coming out at the end of this year. Luis right now is continuing to drill Terronera. As I say, we finish that off. We are going back over to Luis, he will bring that rig back to Terronera. It is just a question of when we cut off the Terronera drill results for the year-end resource.

Alex Terentiew
Alex Terentiew
Analyst at National Bank

Okay. Sounds good. Thanks.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the question, Alex.

Operator

The next question comes from Soundarya Iyer with B. Riley Securities. Please go ahead.

Soundarya Iyer
Soundarya Iyer
Analyst at B. Riley Securities

Thanks, team, for taking my question. Again, most of the questions have been answered, but just one on Cobre. Throughput was higher quarter-over-quarter, but I think the grades were slightly lower. Is that a sequencing as you ramp up to that 2,500 tons and achieve steady state? Or how should we think about the grade and unit cost trending from here?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yes. Soundarya, the grades actually quarter-over-quarter are relatively flat. Silver is down just a little bit. I would say that's under 5%, maybe 2% or 3%. Ultimately, our grades going forward for Cobre are pretty flat. There's times where we have, we call it the Yen pit. It's an open pit where it allows us to ultimately feed some lower grade material through if we're ever short on tons. Again, generally I expect rates to be relatively flat for the next six months.

Soundarya Iyer
Soundarya Iyer
Analyst at B. Riley Securities

Thank you. That's helpful. One on Pitarrilla spending. $48 million budgeted and I think roughly $5 million spent. What are the key areas that needs to be funded from here? Is it like back half catch up? Or we can roll some of that into 2027 without affecting the timeline?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. Some of it's going to roll into 2027. We had always had a plan of having that feasibility study done in Q3. Internally, that may mean the front end of Q3, and externally, that means the back end of Q3. Because we're not going to have that feasibility study done until the end of Q3, it pushes back some equipment purchase long lead items, deposits that would be required. Again, the gating item for Pitarrilla isn't necessarily the feasibility study from our standpoint. It's permitting of the Tailings Storage Facility that we're going through that process. Obviously, Mexico has been very difficult to get things through permitting, but we're seeing that kind of unlock over the last six, seven months. We hope that we can get the permitting of that TSF.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We already have a MIA that's in place, and we have our underground permitted, the plant's permitted. It's just that tailing storage facility, which is a dry stack, which is easier to ultimately get approved. It's a timing on all that, and we're definitely behind on what we expected to spend at this point in time.

Soundarya Iyer
Soundarya Iyer
Analyst at B. Riley Securities

Got it. That's helpful, colour. Thank you and bye.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the question.

Operator

Once again, if you have a question, please press star then one. The next question comes from John Tumazos with John Tumazos Independent Research. Please go ahead.

John Tumazos
Analyst at John Tumazos Independent Research

Congratulations on all the progress.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thank you, John.

John Tumazos
Analyst at John Tumazos Independent Research

Should we think of your $70 million of value-added tax refund, like $70 million more cash as though your cash balances are $300 million?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Yeah. It is a very fair way to think about that. We expect to collect that in Q3. It's on track. We feel we've got a very good track record historically in Mexico in collecting our value-added tax back. We really haven't had any issues since 2010 or 2011 when we had to go through courts to receive it. It's been pretty normal course over the last couple of years. There was a big buildup of value-added tax through the build of Terronera. Again, we expect to collect that in Q3.

John Tumazos
Analyst at John Tumazos Independent Research

How much of the cash balances are designated to finish Cobre and finish Terronera? To one significant digit, how much do you think Pitarrilla is going to take?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Ultimately, the cash balance on our balance sheet is not needed for the capital, sustaining capital program at Terronera or the expansion work at Cobre. Cobre's generating cash flow that covers off our capital expenditures. Similarly, at Terronera, we're generating cash flow that covers off some of these commission items with LNG or waste development too, and little jobs that need to get done. Effectively, our warehouse is going to get completed here in the second half. The cash balance should be growing, especially from this point forward, and not earmarked for any of that. What it's ultimately earmarked for in the capital that we're going to generate this year, next year, and hopefully into next year is earmarked for the construction of Pitarrilla.

John Tumazos
Analyst at John Tumazos Independent Research

Do you know the rough magnitude that the capital Pitarrilla requires?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We don't have that yet internally from our external advisors who are putting together the feasibility study on Pitarrilla. We've always said publicly that we expect it to be somewhere between $500 or $600, but that's just a management estimate at this point. At the end of Q3.

John Tumazos
Analyst at John Tumazos Independent Research

How many tons per day does the mine and mill?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

We expect the mill to be somewhere between 3,500 and 4,000 tons. Again, that will come out in our feasibility study.

John Tumazos
Analyst at John Tumazos Independent Research

Is it practical for me to root for you to buy in some stock at $7.5 to hold toward the conversion at $12.45, or to buy some of those bonds now when they might be depressed because your stock is depressed?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Well, that's for you to determine. Ultimately, I can just talk to you about our business. People's investment philosophies are different amongst everybody, they have different wants and needs and criterias, and we'll let you make that assessment, John, as opposed to us giving advice.

John Tumazos
Analyst at John Tumazos Independent Research

I'm sorry, I'm not asking you for investment advice. Do you want to buy in some of those bonds when your stock is down?

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

I believe in our company fullheartedly. Yes, I would always want to buy into our stock, especially with our price compared to our net asset value right now. There's a lot of things that factor into that. Mostly for me, it's my wife and how much she spends. What I want to do is always different based on what's happening in my life.

John Tumazos
Analyst at John Tumazos Independent Research

Thanks, congratulations on your progress.

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks for the questions, John. I hope I dodged that last one well.

Operator

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

Dan Dickson
Dan Dickson
CEO at Endeavour Silver

Thanks, operator, and thanks to our shareholders for listening in today. I think we have a lot to deliver in the second half of the year. We're well positioned to do that, and I look forward to the further growth that we have in Endeavour Silver for this year and next year. Have a good day.

Operator

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

Executives
    • Allison Pettit
      Allison Pettit
      VP of Investor Relations
    • Dan Dickson
      Dan Dickson
      CEO
    • Elizabeth Senez
      Elizabeth Senez
      CFO
Analysts
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