Q2 2020 Endeavour Silver Corp Earnings Call

Thank you for standing by this is the conference operator, welcome to the Endeavour Silver second quarter financial results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation there'll be an opportunity to ask questions to join the question Q You May Press Star then one on your telephone keypad.

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I would now like to turn the conference over to Galena Malaga Director of Investor Relations. Please go ahead.

Thank you operator, good morning, everyone and welcome to be Endeavour silver 2022nd quarter Financial results Conference call with me on the line today, we have the company's Chief Executive Officer, Bradford Cooke, Our Chief Financial Officer, Dan Dickson, and our Chief operating Officer Godfrey Walton.

Before we get started I'm required to remind you that certain statements on today's call will contain forward looking information within the meaning of applicable securities laws. These may include statements regarding.

Regarding endeavour's anticipated performance in 2020 in future years, including revenue and cost fingers, silver and gold production grades and recoveries and the timing and expenditures real.

Required to develop new silver mines in mineralized zones, we do not intend to and do not assume any obligation to update such forward looking information other than as required by applicable law.

On behalf of Endeavour silver I'd like to thank you again for joining our call and I'll now turn it over to our CEO Bradford Cooke great.

Thank you really you know and welcome everybody to this a financial results for the second quarter Conference call.

We don't watch all just thrown at us during the second quarter, not the least of which was the covert 19 pandemic. He government mandated shutdown of mines in Mexico since reopened and.

All the issues related to that.

Hi, I'm pleased to report that notwithstanding all of that endeavor was actually able to deliver a decent quarter.

We reduced our net loss quarter on quarter.

Mine generated positive free cash flow.

Was generally due to the the not only the higher metal precious metal prices, but our improved operating performance across the three mines.

So I'm just gonna go through the highlights of today's news release.

And then well open it up for acuity.

Oh topline revenue was $20.2 million into second quarter.

Chris with reduced production.

That was quite an accomplishment.

Our cash flow came in at $1.9 million before so that's from operations before working capital changes.

Net income was a loss of $3.3 million or two cents per share, but virtually all of that could be found in the care and maintenance costs. During the mine suspension period, when we actually had to send our employees home on their.

Full wages.

And wait out the suspension period and also in the general and administrative costs related to the mark to market of our deferred sure units.

These are the higher share price so balance sheets improved during the quarter.

We finished the quarter with more than 30 million to cash in more than 44 million working capital that was partly due to.

Making use of our ATM equity financing, but also due to the performance of the.

Operations metal production as a reminder, was just shy of 600000 ounces silver and a 6000 ounces called that works out to about 1.1 million ounces of silver equivalent. So they know 80 to one silver gold ratio.

Operating costs improved significantly during the quarter cash costs were down to $2.78 per ounce, none of the gold credit.

And the all in sustaining cost consolidated.

Were 14 91 per ounce of payable silver none of the gold credit.

Both were substantially lower quarter over quarter end year on year again due to the improved operating performance at Guanacevi and the high realized higher realized gold price for the.

Byproduct credits.

Well, let's see continues to perform.

You recall we.

Launched over a year ago completes clean sweep of the operations.

Trading turnaround.

Transitioning from mining deep low grade ore bodies to opening new higher grade ore bodies that transition was completed in January as a result in Q2 gross we continued to generate mine free cash flow from $2.7 million.

We saw higher process tons.

Higher silver and gold grades higher silver and gold recoveries all above plan.

We also had an advantage at Guanacevi when we did the research in May and that we had.

Not only a significant high grade stockpile built up prior to shutdown.

But we had prepared some long haul stopes for blasting prior to shut down and that really expedited both early plants restart and.

On time mine restart.

Well in Itos still turning the corner as forecasted the operating turnaround there was launched.

Not even a year ago.

But it also was able to squeak out of small profit but.

Mine free cash flow basis.

And.

It's restart was slower growth because of a smaller stockpile at a more of a focus on accelerating the mine developments in grade control during the ramp up period, the restart period.

Well Compass was also able to generate free cash.

With mine free cash flow to $1.1 million. It's restart was also slower than gatos fee again due to a smaller stock pile on the focus on mine development and grade control.

Lastly, the at least we did Rev up the exploration drills again in late May.

After a shutdown in early April we did enjoy.

Continued exploration positive exploration drill results from the or sell Christo area quarter City, and the mayor Ditto area, we'll need to us.

We're actually mining ill, Chris So area no and the continued to grow the resources there.

And we're.

Currently developing towards the mayor Ditto area and hope to be in at here in Q3 Q4 for production.

So that's basically a summary of our Q2 operational and financial performance I think no.

As will open this up for acuity.

Thank you we will now begin the question and answer session to join that question Q. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.

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Our first question comes from HEICO ULAE of H.C. Wainwright. Please go ahead.

Hey, guys. This is mark is changing calling in for Mike. Thanks for taking your questions and congrats on a quarter and that's pretty strong news in the silver prices recently.

Yes. Thank you.

So you meaningfully improved operations and quite a city has a line seems to be running quite well and it's nice to see all the progress that's a made.

Currently in August so there is about five months lock in 2020 could you just provide some 2021 and possibly even longer term plans and goals.

For the mine.

Regardless, we in particular.

Quantity in particular.

Okay well. Thanks for your question Mark is so on the financial side, maybe I'll, let Dan answer.

Well, we haven't come out with 2020 guidance, just because of the covance situation in Mexico or covert cases are continuing to rise.

But otherwise if we can continue to operate we earn a central business in Mexico. We've continue to operate close the 1200 ton per day capacity. So we'll be slightly below the 1200 days elevenfifty with similar.

Grades to what we originally guided for the year.

But ultimately we expect that same capacity in similar grades into 2021.

If you're trying to predict that Marcus.

All right. Thanks.

If I could add if I could add to that.

What that is saying is that the everything's based on site is going according to plan or better.

But offsite concerns such as stopping cover that the gates.

Keeping high risk people at home. So we're actually have a depleted workforce, because particularly the contractors can't maintain the level of employment.

We require we're still a little bit concern that we'll be able to outperform on a continued basis. So this is just being careful.

But.

Everything that we control onsite is doing better than planned.

Okay Fair enough and then sort of on that note.

We ask you to guess do you have a dollar figure regarding the impact of Koby 19.

Through today.

Do you have an estimate of sort of projected expenditures related to covered that have not yet been incurred thus far.

Yeah as far as cost, but not yet that occurred I think we've incurred.

Anything from a cobot standpoint, we were shut down remote or all of April on a little bit of May.

Each end up being about $800000, but most of that was standby costs the costs incurred to bring in lost stations increased security yet metal equipment.

We're really incurred.

In April March and April and then ultimately it's the testing kits that we have on site that is the continued cost. So it's actually quite little you're talking about 100, 100 125 Grand on a quarterly basis.

So small impact at each operation going forward, it's just the larger impact of covered that.

As a bigger concern for us there's other things that because of Covance, we've seen a decrease in costs such as travel.

To answer from sites.

So even that increased medical cost speaks probably been offset a little bit by efficiencies just using zoom in teams and reduced work for eventually maybe that will catch up to all mines that are offering that way, but we seem to be managing pretty well.

Hello. Thank you are able to utilize our existing workforce. The security, we havent really had to beef up much.

They are doing more obviously with temperature and questionnaires.

And all of that with every person coming and going at the gates of each mine.

But it didn't require a significant increase in security same thing with sanitation, we've probably hired a few more bodies to do a lot more sanitation.

But it wasn't a big number.

Perfect all right. Thanks for taking my questions guys.

Okay.

Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.

Good morning, guys. Thanks for taking the questions.

Hi, Doug just.

Hi, so.

On the DNA level I looked at the breakdown it looks like.

You know salaries wages and benefits was up quite a bit in the quarter is is that just like a onetime thing because of the shutdown you how to move some GE in a cost from the mine level up to the corporate level.

No actually Joe down here, then GNS movement was actually mark to market on deferred share units a lot of our directors are paid in deferred shares and on dry for us we have to mark to market. So it's a function of our share price going from about $2 or 14 cents Canadian.

Up into the for our on safe almost $5 range at the end of the quarter. So we have a 1.1 million dollar.

Salary charge related just to that mark to market.

Okay, but it's a non cash right. So.

Noncash.

Yeah, Okay, all right. So I guess the way to think about it is is if the stock.

You know as higher again, there might be another one this quarter, but you know just backing out of our cash flow statement.

Exactly.

Okay then on.

Obviously with the ATM you guys raised a good amount of money balance sheets, a lot stronger than was that the into last quarter.

Do you guys. Thank you have enough capital to two now go out and you know.

Karen era via you know debt only in addition to here.

Still think there might be an equity component to that in addition, what you've already raised and any.

You know what is it too in a quarter million on the 18.

Thanks for your question Joel It's Brad.

I don't think we've changed how we plan to finance tear in there, it's still going to be a debt equity mix.

The timing that amounts are saw.

Somewhat up to debate, but.

With the new Capex, Ontario, an era of around $100 million. It does make it a lot more financeable project and ideally it would be like to 35 65 equity debt split. So that's the plan we have launched into commissioning a feasibility study we.

Hope to actually Grantley.

The study to an engineering firm by the end of August early September.

And we less than a year from then to.

To complete that study.

Ghostly the hot markets, we may not need to wait to put the financing in place.

That was the original plateau, but when gold was.

So if prices were beat up in March we were thinking well, we'll just go to feasibility and worry about financing later, but obviously the markets have responded very robustly to the global.

Monetization of.

Coated shall we say.

And as a result, there and the markets are definitely open so.

Timing still to be determined, but 35 65 that equity debt split is still the plant.

Our next question comes from Justin Stevens of Pi Financial. Please go ahead.

Morning, guys.

Most of my questions have been cross software.

A couple or some more sourcing low.

The how's the development of Sonic Chris or go like I know that was running a bit behind schedule.

Are you guys getting close there.

Hi, Thanks, Justin this is great.

We were a bit behind in Q2, but we've actually you managed to add to catch up and the or split right now as.

Third from Rochester from Corso and I've heard from Santa Cruz sure. So we've we've got some.

Very nice grades coming out of Santa Cruz, So at the present time.

And so that's pretty study now but will be the plan I guess going forward for at least the next few quarters. There was about one third one third Lindbergh.

Yes, Thats, that's the plan, but also your buyback.

Great now that that's.

What I'd like to here.

And then just over on the ball and he does side.

I think I think Brad you said that you're you're currently mining from San Miguel, but you're getting into nobody's, though is that what I heard.

Yeah. The plan is to be done when developing towards melito right now and we expect to be in Q4. So we'll have some mast cell development.

Mineral coming from there in Q4.

Great.

Yeah, and then they did I guess I mean, do you sort of touched on it bar, but just sort of the you guys have an idea internally on what youre tippingpoint might be in terms.

I guess silver price.

Or sort of cost of capital that would make you sort of move ahead with the Terry their decision development before we even though they study.

Oh, well I don't think it's going to be price sensitive were way in the money on price that was on the old prices love to today's price I think the determinant factor on timing is simply.

Our the markets.

Sufficient to finance the project and others. Some long lead items that are.

Project Director is happy that he'd be willing to start breaking ground for instance.

For the feasibility study is finished so those are questions. We hope to answer here very quickly in the coming weeks.

And give some clarity on timing.

In the next well hopefully this quarter.

Great.

That's it for me thanks, guys.

Thanks for your questions.

Our next question comes from Bhakti Pavani of Alliance Global Partners. Please go ahead.

Good morning, guys. Thanks for taking my questions on congratulations on the Oregon.

Thank you Lucky.

I just wanted to dig deeper into honestly I love Don previously you did on the big profile.

But please.

Our goal.

Oh quite a bit in second quarter compared to fourth quarter of this year. So from the modeling perspective, what will be the best Oh you know.

No more than likely.

To be going forward.

Hi back to this is Scott free.

Eric grades did come up.

And that was the result of mining from Corso and actually even getting some high grade material from.

Sure.

Where we are up sell timing on the.

But as a great switches, which was lower than what we actually mine in Q2 Pat.

Do you expect.

So.

Continuing with our is great and I may begin moving higher.

Right.

Okay.

And secondly, your line is Oh.

You mentioned about though.

Cases in Mexico.

Greetings and at this point, but Oh.

So in case that in the second shutdown I'd doing anything but becoming.

Hi back to his country again.

We are very diligent.

Checking everybody as they come onto sites and checking everybody on a daily basis. So we.

We've stopped a few cases.

At the at the gate and turn people Bakken and send them for further evaluation at some of the clinics.

So we're just we're just being extra cautious.

So far.

We've had a few cases occur at our operations, but.

We've been very very successful in.

And making sure it doesn't spread fairly quickly.

Got it and any.

Mine planning and mine development has that been any changes.

I know the mine planning and development as has continues we we were able to.

Increase the speed of some of development to follow me dose which was.

Holding us back in Q1 in Q2.

So that's that's catching up.

And our development that quite a service being going very well.

Oh, Thank you very much.

Thanks for your questions.

This concludes the question and answer session I'd like to turn the conference back over to Mr. Cook for any closing remarks.

Well, thank you operator, and thanks, all for listening today.

As we look forward through the rest of the corridor that we've got some pretty significant catalysts.

We have restarted exploration drilling at several sites, specifically bolanitos squamous a V.

Near El Compas.

And we're planning to get started on tour an arrow this quarter as well it will be almost three years Godfrey since we drilled.

To your so theres significant upside to be had through drilling additional veins at terronera and really stopped drilling two years ago because of the desire to go to economic analysis and see if we had enough reserves to to build a mine, which we do.

No that so we've got the final PFS.

Results and they're extremely robust it's time to restart the drills.

So that's a one catalysts for this quarter. Another catalyst obviously is granting the feasibility study to any PC from here in the next month.

And I get that work underway in factor some bridge engineering studies already being.

Conducted under the auspices of our director of project development, we're going to still Lima.

So work is already underway on the feasibility level.

And.

Dan do you want to add anything to that.

No I think.

We're in a good position going forward, especially with there were the silver and gold prices are.

The operations continue to operate at capacity and where we expect go operate especially after putting in significant time and energy into getting them back to what we had historically done, especially at Guanacevi and hopefully coming here soon a bonnie dose we should be integrate position.

To be able to fund a lot of these programs going forward Yep.

Godfrey I think that no.

Continue.

Continue at a steady ship, all right and I'm busy with deal on.

Yes merger and acquisition opportunities small brownfields, one kind of bolt ons to our existing operations, we're always working on those.

Always optimistic and every once in a while we pull the trigger like our deal us hearing on us fee, which really helped to turnaround that operation.

We're looking at to bigger opportunities as well, but they always take time and it takes two to dance.

So lots going on the very catalysts rich quarter for the company and.

Boy, what a tailwind for metal prices I do think we're still early in the the precious metal cycle.

Probably got a little bit too far too fast and so I wouldn't be surprised if there was a minor pullback in the near future, but other than that in the.

Overall overarching direction here is more.

Of monetary intervention globally by central bankers.

And there's only one direction I think that the precious metal prices can go from here.

Anyway, that's it from me operator, thank you.

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

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