Q3 2021 Endeavour Silver Corp Earnings Call

Thank you for standing by and this is the conference operator, welcome to the Endeavour Silver Corp, 2021 third quarter financial results Conference call.

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 to join the question queue. You May Press Star then one on your telephone keypad.

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I would now like to turn the conference over to Galina Melichar VP of IR for opening remarks. Please go ahead.

Thank you operator, good morning, everyone and welcome to the endeavor silver 2021 third quarter financial results Conference call.

With me on the line today, we have the company's Chief Executive Officer, Dan Dickson, Our Chief Financial Officer, Christine West and our Chief operating Officer John Great.

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 the applicable securities laws.

These may include statements regarding endeavour's anticipated performance in 'twenty, 'twenty, one and future years, including revenue and cost figures silver and gold production grades and recoveries and the timing and expenditures required to develop new 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.

So with that and on behalf of endeavor silver I'd like to thank you again for joining today's call and I'll now turn it over to our CEO Dan Dickson.

Thank you Galina and welcome everyone.

Has it been a solid year so far in Q3 was no exception quarter.

Quarter over quarter, we saw silver higher silver and gold grades.

And our operating costs improved decreasing to levels that are closer to our 2021 guidance.

Year over year silver production increased by nearly 40% driven by record production at Quanta City and gold production also increased up by 3%.

As anticipated during the quarter, we suspended operations at El Compas.

Will result in minimal impact on our projections for the year as it is a very small asset representing only 5% of our consolidated annual production.

Overall, we are tracking to the upper end of our full year 2021 production guidance, which we revised upwards in October.

Cost, while improving are expected to come in the upper end of their respective ranges.

Yes.

Despite strong production this quarter I want to highlight that our performance is not reflected in our financials. This is due to the fact that we continue to withhold metal sales as precious metal prices softened significantly during the quarter.

Believing that at the time that prices would rebound, which they have and with the benefit of having more than $100 million in cash on the balance sheet. We made the decision not to sell into a falling market.

As a result at the end of September we were carrying a larger than normal finished goods inventory.

Given the inventories held on our balance sheet at less.

A million dollars less than the estimated fair market value. This negatively impacted our third quarter revenue earnings and mine operating cash flow.

Our plan is to sell down most if not all of the inventory in the coming months and finished the year on a high note.

With operations running smoothly, we are laser focused on future growth starting with the development of our next mine Turner.

As our largest and lowest cost mine the high grade Turner, our project will be a game changer for us.

We recently issued an updated feasibility study on the project where reserves grew by 33% we extended the mine life from 10 to 12 years and payable in payable silver in payable gold increased by 32 per.

Percent and 20% respectively.

We also incorporate a third portal into the mine plan to improve sequencing as well as increased long haul mining.

These design changes increase that increase the capital cost of the project. However, they will yield more operational flexibility, resulting in better operational results.

While there may be price pressures on some materials, we have source a number of long lead items and built in our contingency. Our team is focused on keeping the project on schedule. As this is a key driver to staying on budget.

Our intent is to fund the Turner development project through a combination of cash on hand, operating cash flow and debt financing to this and we have been working with commercial banks on an $80 million to $100 million debt facility and we expect to receive committed financing in the coming months once we have clarity on financing the border.

All approved construction and we can commence the 24 month build out.

Key permits required to begin construction of our in place. Although some amendments in normal course extensions have been filed to reflect the current design.

In the meantime, the board approved an additional $13 million to be spent this year on early works and the project is moving relatively quickly.

During the quarter, we advanced initial earthworks front end engineering procurement site clearing and start our temporary camp.

There've been very few silver mines developed in the last five years and very few are being planned. So needless to say we are excited to get going on the construction Turner and get it up and running.

Upon completion of construction currently scheduled for the first half of 2024 Turner is expected to double our production profile and cut our cost profile and have simply put taryn areas of high grade silver asset and it clearly repositions us to a low cost talk mid tier producer.

And we don't plan to stop there as we've stated our five year strategic plan is to become a premier senior silver producer.

To reach this milestone we have a solid growth pipeline, which includes per L, which could be our next development project in Mexico, a number of world class exploration properties in Chile, and our most recent acquisition the Bruner Gold project Bruner.

<unk> is in advanced stage exploration property in Nevada with favorable geology, we paid $10 million in cash for Bruner and based on historical resource estimates, we see a lot of upside potential exploration discoveries and dysart consolidation.

Our team will focus initially on verifying that the historic resource then turn their attention to the many expert exploration targets on this property.

This is truly an exciting time for endeavour silver and we have a great team in place focused on execution for investors. There are several catalysts to look forward to in the coming months receipt of committed project financing for for Turner, followed by a formal constructed construction decision and exploration updates to name a few this includes my comments for this.

Quarter, let us stop there and open the lines for questions operator over to you.

Thank you.

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

Speakerphone, please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

We will pause for a moment as callers join the queue.

Okay.

The first question is from Heiko <unk> from H C. Wainwright. Please go ahead.

Hey, guys, Hey, Marcus Giannini, calling in for Heiko, Thanks for taking my questions.

Good morning.

So you recently acquired the Gruner Gold project for 10 million could you maybe provide some color on your exploration plans at site and if possible maybe a mental timeline on when you plan on beginning some works.

Yeah, I mean, we're excited about bruner it was an opportunity to <unk>.

Acquisition for Us so it was sitting in a junior company that had some financial distress and we saw an opportunity there with a nice historic resource on the on the property and actually historic P. A as well and our plan right now is it will come out with guidance and our exploration plans for 2022, maybe.

Maybe late December or maybe early January likely early January.

So the plan specifically for Bruner will come out then for 2022, but ultimately envision spending about $1 billion $5. There next year, we're building up our geology team.

We'll do some early works are going to prove out the historic resource and focus on other targets that we see and the ability to kind of grow that historic resource once we define it.

So we bought how about a year year and a half worth of exploration work there.

And then see if we can move that along the development line.

So I won't get into specifics of exactly where our drill program will be next year that will come in the new year.

Okay awesome. Thanks for the clarity and then just changing gears here a bit the withheld metals reported a they're getting quite meaningful and you've done well holding back sales in the past, but just thinking out loud do you have an internal plan to sell them before the end of the fiscal year is there a minimum metal price you'd like to.

Sell out or is this a 100% dependent on spot pricing in the market.

Yeah. Our plan is to sell in the coming months and mostly through will get probably a lot of that off depending on prices here over the next two months so before year end.

It's really came down to a function of where our balance sheet was and how strong it is and our ability to be flexible on that and in Q3, we saw silver dropped from $24 and it kind of closed the quarter at $21 50.

We just didn't want to sell into a falling market. We did see a rebound in price coming we've been correct about that we're obviously north of $24 now and we've been selling regularly through this quarter and expect to kind of wrap that up as we see prices continue to improve.

Okay, Great. That's it for me thanks for taking my question.

Thank you for the questions.

As a reminder, it is star one to ask a question.

The next question is from Joseph Reagor from Roth Capital Partners. Please go ahead.

Hey, guys. Thanks for taking the questions.

Hey, Josef just.

Okay.

Just thinking about.

About tearing error and I realize the effort and made the official construction decision there.

What's the spend look like Q4, maybe into Q1, there as you know you guys doing early.

Early Earth works or anything to get ready for construction.

Yeah. So we announced that from September to December 31, we had a $13 million budget to spend this year in 2021. So that's advancing an early procurement sourcing long lead items. So the mobile fleet. For example, so we can have it onsite in December Slash January.

Going into Q1, that's to be determined obviously, it's on a function of the formal construction decision. So our holding costs are basically about $500000 a month slips. The team that we've built we've got about 43 people too and that will be building closer to 50.

In the fourth quarter.

We do expect to have financing in place once we have that financing in place, it's making sure that we have all the municipal permits that were required to get going so the hold cost being about $500000 a month.

It's kind of our baseline for on a monthly basis, so color, one and a half to $2 million in Q1, but if we get that formal construction decision that's going to move rather quickly.

Of the $175 million spend over two years you'd be looking at spending probably 60% of that next year, but again all of that is depending on timeline.

Don't want to get into specifics of Q1 spend our Q2 spend of 2022 until we have that formal construction decision.

Okay fair enough.

And then you know.

Obviously, you guys were able to pick up this asset in Nevada or for a good price.

Hmm.

Do you see any other opportunities out there like that and.

Or do you feel like you have enough and then on that note.

How do you guys feel about.

Mexico at this point that it's been.

Some other interesting sales of assets in Mexico with with some companies don't you know doubling down on Mexico. Other companies deciding to quickly move away you know what are your guys use there with the current political climate.

Yeah, I mean, the two questions other opportunities I think there are other opportunities in Nevada, and I think theres a lot of opportunities in Mexico, and now that we've got a little bit of a footprint in Nevada, we have been looking at some assets that would be earlier earlier projects, some more greenfields projects and stuff in the area that we are now with bruner.

We are building up our geology team there and we want to give them more work beyond bruner. So we're looking and there are a lots of opportunities, but theres still remains a lot of opportunities in Mexico.

We're still feel very strongly about Mexico, we still think it's one of the best jurisdictions in the world.

Obviously over the last five years with the current government regime things have moved a little bit left and there's a lot more rhetoric Canadian companies have kind of been in the news are not necessarily for the wrong reasons just from a perception standpoint, right I've always thought endeavor has done a very good job in Mexico and the <unk>.

Grams that we've put in place for the communities around US as has benefited us. So we haven't been in the news like other companies and for US <unk>, obviously, the future of the company and how does this go in the state of Alaska, We've got great relationships with the communities around us and we think Theres a lot of opportunity to even grow Turner around it so consol.

Consolidated and some of that area and continue to look in Mexico is one of our first priorities. We have a phenomenal competitive advantage there based on the people that we have in Mexico.

Ultimately tax rates are very competitive to the rest of the world and the rest of the Americas.

They've put in.

A special mining duty for for gold and silver mining companies in the environmental tax back in 2013 and.

They've kind of already hit the mining companies with those taxes and we don't expect anything more so we're happy with the environment. We're in we're happy with the permitting we're happy with the work that we've done with the government. So we're happy to continue to grow in Mexico.

Oh.

Okay. Thanks, Dan I'll turn it over.

Thanks, a lot Josef for those questions.

This concludes the question and answer session I would like to turn the conference back over to Dan Dickson CEO of Endeavour silver for any closing remarks.

Thanks, operator, and I want to thank everyone for joining the call. Ultimately I think we had a very good third quarter and fourth quarter will help us finish finished the year strong again.

Quarter end production come out early January and look for 2022 guidance to come out in January as well. So I hope everyone has a good day.

I expect.

Positive things from this company going forward.

This.

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

Okay.

Okay.

Okay.

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