Q1 2024 Endeavour Silver Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the Endeavour Silver Corp, first quarter 'twenty 'twenty four national results Conference call.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp first quarter 2024 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. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to Galina Meleger, Vice President of Investor Relations. Please go ahead.
Operator: Reminder, to all participants are in listen only mode and the conference is being recorded.
Galina Meleger: After the presentation, there will be an opportunity to ask questions.
Galina Meleger: Join the question queue, you May Press Star then one on your telephone keypad.
Operator: Need assistance during the conference call you may see operators by pressing Star then zero.
Speaker Change: I'd now like to turn it over to <unk>, Vice President of Investor Relations. Please go ahead.
Galina Meleger: Thank you operator, and good morning, everyone.
Galina Meleger: Thank you, operator, and good morning, everyone. Before we get started, I ask that you read our MD&A Precautionary Language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and the financial statements are available on our website at www.edrsilver.com. With us on today's call is Dan Dickson, Endeavour Silver's CEO; Libby Senez, our Chief Financial Officer; and Don Gray, our Chief Operating Officer. Following Dan's formal remarks, we will open the call for questions.
Galina Meleger: Before we get started I ask that you view, our MD&A for cautionary language regarding forward looking statements and the risk factors pertaining to these statements.
Galina Meleger: Our MD&A and financial statements are available on our website Www Dot E. D are so varied dotcom.
Galina Meleger: With us on today's call is Dan Dickson Endeavour Silver's CEO.
Galina Meleger: Would be finished.
Galina Meleger: Our Chief Financial Officer.
Donald P. Gray: And Don Great Art.
Galina Meleger: He's operating pressure.
Galina Meleger: Following Dan's formal remarks, we will open the call for questions now over it again.
Dan Dickson: Thank you, Galina, and welcome, everyone. In 2024, we've hit the ground running with a solid start. Market sentiment has heated up as gold's reached new all-time highs and silver is starting to fall. Our cash flow will benefit from these higher prices, and our share price has outperformed our peer set thus far in 2024. From an operating standpoint, our operations are hitting their targets. Moreover, we made remarkable progress in the construction of our next Cornerstone 9 Terran Era, solidifying a bright future for the company. It's exciting to think that this time next year, Terranera will be contributing production to our profile.
Speaker Change: Thank you Galina and welcome everyone.
Dan Dickson: 'twenty 'twenty four we've hit the ground running.
Dan Dickson: Market sentiment.
Dan Dickson: This growth reached new all time highs.
Speaker Change: So we're starting to see.
Dan Dickson: Our cash flow will benefit from these higher prices in our share price.
Dan Dickson: Thus far in 2024.
Dan Dickson: From an operating standpoint, our operations are hitting their target. Moreover, we made remarkable progress in the construction of our next cornerstone mine area.
Dan Dickson: You will find a bright future for the company.
Dan Dickson: So I need to think that this time next year churn there will be contributing production to our profile.
Dan Dickson: Consolidated Q1 silver equivalent production totaled 2.3 million silver equivalent ounces, or 1.5 million ounces of silver and 10,000 ounces of gold. This puts us in great shape to achieve 2024's production guidance of between 8.1 to 8.8 million silver equivalent ounces. The performance of both operating mines, Guanus V and Bolonidos, remains steady, and for lack of a better word, gold grades at both operations were slightly ahead of plan, offset by silver grades that were slightly below plan. Silver equivalents are flat, and we expect a similar grade profile throughout 2024.
Dan Dickson: Consolidated Q1, silver equivalent production totaled $2 3 million silver equivalent ounces or one 5 million ounces of silver and 10000 ounces.
Dan Dickson: This puts us in great shape to achieve 2024 production guidance between eight one to $8 8 million silver equivalent ounces.
Dan Dickson: The performance of both operating mines <unk> remained steady for lack of a better one.
Dan Dickson: Gold grades at both operations were slightly ahead of plan offset by silver grades that were slightly below plan.
Dan Dickson: Dr equivalents are flat and we expect similar grateful profile throughout 2024.
Dan Dickson: Moving to our financials, we reported topline revenue was $64 million up 15% year over year due to higher volumes sold and higher realized gold price compared to Q1 2023.
Dan Dickson: Moving to our financials, we reported top line revenue of $64 million, up 15% year over year due to higher volume sold and their higher realized gold price compared to Q1 2023. Cost of sales totaled $52 million, also up 32% from Q1 2023, due to a combination of increased ounces sold, higher direct costs, and depreciation. Direct costs have stabilized and aligned well with our 2024 plan costs. Mine operating earnings total $12 million. After expiration, G&A and income tax expense will report a net loss of $1.2 million, or one cent per share.
Dan Dickson: Cost of sales totaled $52 million also up 32% from Q1 2023.
Dan Dickson: Due to a combination of increased ounces sold higher direct costs and depreciation direct costs have stabilized and aligned well with our 2024 planned costs.
Dan Dickson: Mine operating earnings totaled $12 million after exploration G&A and income tax expense, we reported a net loss of $1 $2 million for one cents per share.
Dan Dickson: At the site level, Guanasli delivered mine-free cash flow pre-tax of $6.5 million, and Bolonidos contributed $4.5 million. The higher gold price has significantly benefited our Bolonidos operation. The full effect of the 2023 cost escalations and appreciation of the Mexican peso impacted direct operating costs compared to Q1 2023. As a result, our direct operating costs per unit were significantly higher compared to last year. However, compared to the 2024 budget, our direct operating costs aligned well with the budget.
Dan Dickson: The state level want us to lead delivered mind free cash flow pre tax of $6 $5 million embolden, the dose contributed $4 $5 million the higher gold price has significantly benefited our following year's operation.
Dan Dickson: The full effect of the 'twenty two 'twenty three cost escalations and appreciation of the Mexican peso impacted direct operating costs compared to Q1 2023.
Dan Dickson: As a result, our direct operating costs per ton were significantly higher compared to last year, however, compared to 2020 for budget, our direct operating costs aligned well with budget.
Dan Dickson: To be clear for our listeners, our direct offering costs are defined as mining, processing, and indirect costs. Royalty, special mining duty, and purchase store are included in our direct cost metrics and are all impacted by the higher metal prices. These costs, again, including our direct cost per ton, have all exceeded budget due to the higher metal price.
Dan Dickson: So a year for our listeners our direct operating costs are defined as mining processing and indirect crops royalties special mining duty and purchased or are included in our direct cost metrics and are all impacted by the higher metal prices.
Dan Dickson: These costs again included in our direct cost per tonne have all exceeded budget the higher metal prices.
Dan Dickson: These account for roughly $50 per ton on our direct cost per ton. On a net basis, we did benefit from the higher byproduct gold credit, resulting in our cash costs and our all-in sustaining costs reporting below guidance. At March 31st, we had cash on hand of $35 million and working capital of roughly $56 million. During Q1, we raised gross proceeds of $39 million via our ATM.
Dan Dickson: These account for roughly $50 per ton on our direct cost per tonne.
Dan Dickson: On a net basis, we did benefit from the higher byproduct gold credit, resulting in our cash cost and all in sustaining cost reporting below guidance.
Dan Dickson: At March 31, we had cash on hand of $35 million in working capital roughly $56 million during.
Dan Dickson: During Q1, we raised gross proceeds of $39 million via our ATM.
Dan Dickson: As a reminder, it's essential to highlight that, in adherence to our agreement for drawdown on the Senior Secure Debt, we were committed to self-fund development for up to $150 million before gaining access to the $120 million credit facility. After the quarter ended, we satisfied this condition, which in turn enabled us to draw on the first installment of the $60 million with $120 million committed. In connection with the drawdown, we also executed the final hedge contract terms to reduce the financial risk on the project.
Dan Dickson: As a reminder, it's essential to highlight.
Dan Dickson: Charter agreement for draw down on our senior secured debt, we were committed to self fund development for up to $150 million before gaining access to $20 million credit facility.
Dan Dickson: After quarter end, we set a satisfied this condition, which in turn enabled us to draw on the first installment of the $60 million with $120 million.
Dan Dickson: In connection with the draw we also excuse the final hedge contract terms to reduce financial risks on the project first.
Dan Dickson: First, capitalizing on the strong gold price environment, we executed forward sale contracts for 68,000 ounces of gold at $2,325 per ounce. This represents 55% of the planned gold byproduct production during Terranera's initial three years of operation. Second, we secured the cost of the pesos by entering four purchases of $45 million of U.S. equivalent Mexican pesos, which covers the remaining construction period at a fixed rate of $16.56 per U.S. dollar.
Dan Dickson: First capitalizing on the strong gold price environment, we executed forward sales contracts for 68000 ounces of gold at 2000 and $325 per ounce. This represents 55% of the planned gold byproduct production during <unk> initial three years of operations.
Dan Dickson: Second we secured the costs of the pesos Braintree and forward purchases of $45 million U S equivalent Mexican pesos, which covers the remaining construction period at a fixed rate of 16 five six per U S. Dollar overall, we're pleased with the terms of the debt package is our finance team dedicated significant effort to secure favorable.
Dan Dickson: Overall, we're pleased with the terms of the debt package as our finance team dedicated significant effort to secure favorable terms while safeguarding the upside for our shareholders. We anticipate completing the remaining draw of $60 million in Q3, aligning with the completion of the Terranera build completed in Q4. Let me give you a quick update on construction progress at Terranera. By the end of Q1, we achieved a significant milestone by surpassing the halfway point of construction, achieving 53% completion, and we can see progress on both surface construction and underground mine development. As I mentioned earlier, we spent $38 million on development, bringing our total expenditure to $158 million.
Dan Dickson: <unk> will safeguarding the upside for our shareholders we.
Dan Dickson: We anticipate completing the remaining draw of $60 million in Q3 aligning with the completion of the turn narrow built completed in Q4.
Dan Dickson: Let me give you a quick update on construction progress at Turner by the end of Q1, we achieved a significant milestone by surpassing the halfway point of construction.
Dan Dickson: You mean, 53% completion and haven't seen progress at both surface construction.
Dan Dickson: Mine development as.
Dan Dickson: As I mentioned earlier, we spent $38 million towards development, bringing our total expenditure.
Dan Dickson: Ryan.
Dan Dickson: Our project commitment now stands at $225 million, representing 83% of the $271 million capital budget. With site activities advancing rapidly, we are concentrating our effort on structural steel installation, which is 80% complete, and major equipment installation for our upper mill platform. As our quarterly reporting is very comprehensive, I'll provide a few recent highlights of progress. Over the past year, we've emphasized the importance of accelerating our mine development rates to 4 meters per day per critical heading, a goal we are steadily achieving to meet our production timeline.
Dan Dickson: Our project commitments now stand at $225 million, representing 83% of the $271 million.
Dan Dickson: With site activities advancing rapidly we concentrate our effort on structural steel installation, which is 80% complete and major equipment installation on our for our upper mill platform.
Dan Dickson: As our quarterly reporting it's very comprehensive I'll provide a few recent highlights the progress over the past year, we've emphasized the importance of accelerated mine development rates.
Dan Dickson: Four meters per day critical heading Google we are steadily achieving to meet our production timeline.
Dan Dickson: In this quarter alone we completed over 1000 meters of underground mine development, bringing our total to over 3200 meters keeping us on track for initial or access in Q2.
Dan Dickson: In this quarter alone, we completed over 1000 meters of underground mine development, bringing our total to over 3200 meters, keeping us on track for initial ore access in Q2. The majority of construction activities have progressed well at the upper plant site. Currently, surface construction stands at 56% complete. On the procurement front, our bulk materials purchasing is on track with the construction schedule, allowing us to install many components upon their immediate arrival to site while making use of the project's lean footprint.
Dan Dickson: The majority of construction activities are progressing well at the upper plant site currently surface construction stands at <unk>, 6%.
Dan Dickson: On the procurement front, our bulk materials purchasing is on track with the construction schedule, allowing us to install many components. Upon immediate arrival to site, we're making use of the project lean footprint. Our C. O O us optimize a just in time delivery framework, which has proven highly effective all while maintaining a steadfast.
Dan Dickson: Our COO has optimized a just-in-time delivery framework, which has proven highly effective, all while maintaining a steadfast focus on continuous safety measures. Thanks to a growing workforce at the site, which now totals 550 employees and contractors, this quarter saw the achievement of other significant milestones. This includes the successful setting of both the sag and ball mills, placement of the re-grind mill and flotation cells, and the commencement of installation for the crusher belt conveyors and apron feeders.
Dan Dickson: Focus on continuous safety measures.
Dan Dickson: Thanks to a growing workforce at site, which now totals 550 employees and contractors this quarter saw the achievement.
Dan Dickson: Other significant milestones. This includes successful setting in both the Sag and ball mills.
Dan Dickson: Some of the re grind mill and flotation cells and the commencement of installation.
Dan Dickson: Sure belt Conveyors and April Peters.
Dan Dickson: Additionally, during Q1, we initiated excavation of the TSF embankment, the key trench, and the lower platform area, which are 60% and 45% complete, respectively. Concrete work is anticipated to start in Q2 on the lower platform. And lastly, on the community relations side, a new mini-trainer program for local community members was established to provide training and employment.
Dan Dickson: Additionally, during Q1, we initiated excavation that psf embankment key trends in the lower platform area, which are 60% and 45%.
Dan Dickson: Please respectively concrete work is anticipated to start in Q2 on the lower platform.
Dan Dickson: And lastly on the community relations side, a new mine minor trainer program for local community members was established to provide training and employment.
Dan Dickson: If you're interested in viewing photos and video footage of the construction in progress, I encourage you to visit our website. You'll find our quarterly photo gallery showcasing the latest developments, as well as a video filmed in mid-March. Before we move to Q&A, I'd like to highlight that our long-term success goes beyond achieving financial metrics. Next week, we will publish our 2023 sustainability report that speaks to our ongoing actions to mine responsibly and help shape a more inclusive sustainable future for our business and our stakeholders.
Dan Dickson: If you're interested in viewing photos and video footage of the construction during progress I encourage you to visit our website. You'll find are currently photo gallery showcases the latest developments as well as the video filmed in mid March.
Dan Dickson: Before we move to Q&A I'd like to highlight that we recognize that our long term success and achieving financial metrics next week, we'll publish our 2023 sustainability report, which speaks to our ongoing actions to mine responsibly and help shape, a more inclusive sustainable future for our business and our stakeholders.
Dan Dickson: 2023 marked the second year implementing our three year sustainability strategy.
Dan Dickson: 2023 marked the second year of implementing our three-year sustainability strategy, and we will be reporting on our progress to date. I recommend you take time to view our new report after it's published online. Additionally, we're pleased to announce the nomination of a new board member, Angela Johnson, at our 2024 Annual Meeting of Shareholders to be held on May 28. Her technical background and ESG experience are an exceptional fit for our existing board members and helps us achieve succession planning objectives to ensure core board competencies and expertise. That wraps up my formal comments for today. Together with the other members of our management team, we would be happy to take questions. Operator, please open the line.
Dan Dickson: We will be reporting on our progress to date.
Dan Dickson: We recommend you take time to view, our new report after it's published online.
Dan Dickson: Additionally, we are pleased to announce the nomination of a new Board member Angela Johnson at our 2024 annual meeting of shareholders to be held on May 28.
Dan Dickson: Technical background and ESG experience is an exceptional fit for our existing board members and helps us achieve succession planning objectives core board competencies expertise.
Dan Dickson: That wraps my formal comments for today together with the other members of our management team, we would be happy to take questions. Operator, Please open the lines.
Dan Dickson: We will now begin the question 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.
Operator: We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then T. We'll pause for a moment as scholars join the queue. The first question comes from Lucas Pipes to B. Reilly. Please go ahead.
Operator: If youre using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Operator: Foster a woman as college joined the queue.
Lucas Pipes: The first question comes from Lucas pipes B Riley. Please go ahead.
Lucas Pipes: Thank you very much, Operator, and good afternoon, everyone. Dan, I wanted to ask a little bit about the exchange rate in Latin America and how you would expect that to impact your operating cost expectations as well as any impact on the capital cost side. Thank you very much.
Lucas Pipes: Thank you very much operator, and good afternoon, everyone.
Lucas Pipes: Dan I wanted to ask a little bit about.
Lucas Pipes: The exchange rate in.
Lucas Pipes: Kind of Latin American and how you would expect that to both impact.
Lucas Pipes: You're kind of operating cost expectations sauce at any impact on the cost side. Thank you very much.
Dan Dickson: Yeah Lucas that's a good question, we did use a 17 to one ratio in our assumptions and our guidance for 2024 through Q1, we were effectively rate close to 17 to one.
Dan Dickson: Yeah, Lucas, that's a good question. We did use a 17 to one ratio in our assumptions and our guidance for 2024 through 21. We were effectively very close to 17 to one. Our expectation is the Mexican pay, so we'll hover right here around 17 to 1. So, from an operating standpoint, we stick with where our guidance is, which is ultimately $14 to $15 cash costs; all in sustaining costs, we expect to be $22 to $23.
Dan Dickson: Our expectation as the Mexican peso will hover right year around 17 to one.
Dan Dickson: So from an operating standpoint, we stick with where our guidance is which is ultimately $14 $15 cash costs. All in sustaining costs were <unk> 22 to 'twenty three.
Dan Dickson: Obviously, in Q1, we're below that guidance, and I think that's a function of the gold price. But if you look at our costs, our direct operating costs per ton, they're in line with where our plan was. From a construction standpoint, we entered into $45 million worth of FX contracts. So we've effectively locked that in at 16.6. So the impact of tear and error going forward would be muted because of that. But of course, as I say, I think the pace was going to It seems to stabilize here at 17 to one, and I expect that to stay there for the year.
Dan Dickson: Obviously in Q1 were both below that guidance and I think that's a function of the gold price. If you look at our cost.
Dan Dickson: Our direct operating costs per ton they are in line with where our plan was.
Dan Dickson: From a construction standpoint, we entered into a $45 million worth of FX contracts. So we have effectively locked that in at $16 six.
Dan Dickson: So the impact for <unk> going forward would be muted because of that.
Dan Dickson: But of course.
Dan Dickson: Like I say I think the peso's kind of it seems to have stabilized here at 17 to one I expect that to stay there for the year.
Speaker Change: Thank you. Thank you Dan and then.
Lucas Pipes: Thank you. Thank you, Dan and Ben.
Lucas Pipes: Hi.
Lucas Pipes: Good, good job at Guana, and you noted that the silver grates were slightly below plan. And so my question is when you would expect those to be maybe more kind of on plan or above plan. And with the plant there, you exceeded the 1,200 tons per day level. There's more to do on that. Thank you very much.
Speaker Change: Good good job.
Lucas Pipes: Japan and.
Lucas Pipes: Noticed that Suffolk rates were slightly below plan. So my question is when you would expect.
Lucas Pipes: Does that mean, maybe more kind of.
Lucas Pipes: On plan or above plan and.
Lucas Pipes: With the plant there you exceeded the 1200 tonnes per day level Im curious.
Lucas Pipes: If there are more to do on that thank you very much.
Speaker Change: Yeah from a grade standpoint, we actually exceeded plan this quarter from a golf standpoint and slightly under plan.
Dan Dickson: Yeah, from a grade standpoint, we actually exceeded plan this quarter from a gold standpoint and slightly under plan from a silver standpoint on grades at Guanaciti. That's normal variation in the ore body, and we expect it to be similar for the next three quarters as well. So we're just over 400 grams of silver and about 1.2 or just under 1.2 grams of gold. I think those are very favorable grades and that's our expectation for the year.
Dan Dickson: Silver standpoint aren't grades that want us to be.
Dan Dickson: That's normal variations in the ore body and we expect to be something similar for the next three quarters as well. So we are just over 400 grams of silver and about one point you were just under one two grams. A goal I think those are very favorable favorable grades and that's our expectation for the year as far as running 200 tonnes per day.
Dan Dickson: As far as running 1,200 tonnes per day through the Guanaciti plant or exceeding our capacity of 1,200 tonnes per day, our hope is that will continue. Obviously, we put guidance out with the estimation of 1,200 tonnes per day, but we did a lot of work in the plant in 2023 of refurbishing things, and obviously, we have the ability to push beyond that 1,200 tonnes per day. Now it's all predicated on the mine keeping up to speed. We don't want to get too far ahead of ourselves, at the same time. Like I said in my comments, the quantity has been very steady, and the expectation is we'll easily meet that 1200 tons going forward.
Dan Dickson: Through the go onto speed plans are exceeding our capacity of 200 tonnes per day. Our hope is that we'll continue obviously, we put guidance out with the estimation of 1200 tons per day, but we did a lot of work in the plants in 2023 of refurbishing things and obviously, we have the ability to push it beyond that 1200 tonnes per day now all predicated.
Dan Dickson: The mind, keeping up to speed, we don't want to get too far ahead of ourselves.
Dan Dickson: Same time like.
Dan Dickson: Like I said in my comments Cornetcy, it's been very steady.
Dan Dickson: Expectation is we'll easily meet that 400 tons going forward.
Lucas Pipes: And maybe a quick one, just with the backup of much stronger precious metal prices. What's your take on M&A in the space, either kind of as a buyer yourself or more broadly in the ecosystem? Thank you very much.
Speaker Change: Thank you very much and maybe a quick one.
Lucas Pipes: With the backdrop of.
Lucas Pipes: Much stronger precious metal prices.
Lucas Pipes: What what's your take on on M&A in the space, either kind of as a as a buyer yourself four or more broadly.
Lucas Pipes: And the ecosystem. Thank you very much.
Speaker Change: Yeah, I mean from ourselves our standpoint, as we need to execute on turn Aaron Turner.
Dan Dickson: Yeah, I mean, from ourselves, our standpoint is we need to execute on Terranera and get Terranera into production. I think at the end of this year, if we can execute on Terranera, and get commissioning in Q4 for commercial production for 2025, we're going to see that reflected in our share price. I think that's percolated its way through the industry. For example, I think cash is important. Obviously, there hasn't been a lot of capital available in our industry, and there needs to be investment from an exploration standpoint and a development standpoint, which will create more opportunity for prices to increase, especially from a silver standpoint. But I can't speak for the entire industry.
Dan Dickson: I think at the end of this year, if we can execute on <unk>, Eric commissioning in Q4 and for commercial production for 2025, we're going to see that reflected in our share price.
Dan Dickson: Now you never say never Theres always opportunities out in the marketplace from our standpoint, we want to see something that's accretive, but I don't think the full value of <unk> built into our share price yet again, I think that needs to be executed this year for that to be reflected there.
Dan Dickson: From a broader standpoint, yeah, we're seeing higher prices, obviously last year, we saw margins get constrained just because of the higher costs.
Dan Dickson: I think that percolate its way through the industry.
Dan Dickson: I think cash is important obviously, there hasn't been a lot of capital available in our industry and there needs to be investment.
Dan Dickson: From an exploration standpoint, and a development standpoint.
Dan Dickson: Which will create more opportunity for prices to increase especially from a silver standpoint.
Dan Dickson: I can't speak for the entire industry I know as endeavor, we Wanna be here 10 years from now we continue to look for development projects, we look for exploration projects, but right now our resources are dedicated towards Sharon's Arab mainly from a cash standpoint, and also from from a labor standpoint, theres only so much time and energy that we have that.
Lucas Pipes: I know that as Endeavour, we want to be here 10 years from now. We continue to look for development projects. We look for exploration projects, but right now, our resources are dedicated to Terranera, mainly from a cash standpoint and also from a labor standpoint. There's only so much time and energy that we can put into certain projects, and we really like our pizzeria project that's coming in behind Terranera. So again, for us, I think we want to get through 2024 and look at that landscape. From a broader standpoint, I think people are always going to be inquisitive, and you always try to build a bigger, better company.
Lucas Pipes: We can put into certain projects and we really like our Korea project, that's coming in behind <unk>. So again for US I think we want to get through 2024 and look at that landscape and then.
Lucas Pipes: From a broader standpoint, I think people are always going to be inquisitive and you always try to build a bigger better company.
Speaker Change: Dan I appreciate the thoughts keep up the good work. Thank you.
Dan Dickson: Dan, I appreciate your thoughts. Keep up the good work. Thank you.
Speaker Change: Thanks, Lucas and thanks for the questions.
Dan Dickson: Thanks, Lucas, and thanks for the questions.
Dan Dickson: The next question comes from Heiko Ely of H C Wainwright.
Heiko Ihle: The next question comes from Heiko Ihle of HC Wainwright. Please go ahead.
Heiko Ihle: Please go ahead.
Heiko Ihle: Hey, there Dan and team thanks for taking my questions and I assume you can hear me okay.
Dan Dickson: Hey there, Dan and team. Thanks for taking my questions, and I assume you can hear me okay?
Dan Dickson: We can hear you well, Heiko.
Heiko Ihle: We can hear you well heiko.
Dan Dickson: Got it.
Heiko Ihle: Just scratching at the Gulf with silver ratio during the quarter, obviously gold production increased quite markedly in fact, kohl's. So strongly they make quite a measurable impact on cash costs given a whole byproduct credits at this point, we're halfway through Q2 and Gulf still at 23 30.
Heiko Ihle: Separately can you provide a bit of guidance. If you expect to see this through the remainder of the year and the impact of cash cost and if you anticipate this fully offsetting the impact of the higher Mexican peso.
Heiko Ihle: is fully upsetting the impact of the higher Mexican peso.
Heiko Ihle: Yeah.
Dan Dickson: Yeah, the higher Mexican peso is all built into our guidance to start with at 17 to 1. So of course, if we see the appreciation in the Mexican peso, a higher gold price offsets that. Again, I think the Mexican peso stabilizes here. So hopefully, it stays where it's at.
Heiko Ihle: Higher Mexican peso is all built into our guidance to start with 17 to one so of course, if we see the appreciation of the Mexican peso, a higher gold price offsets that again I think the Mexican peso stabilized here.
Speaker Change: So hopefully.
Dan Dickson: It stays where it's at because it is a significant portion of our costs from a labor standpoint, it's about 30% of our operating costs, which is obviously tied to the Mexican peso.
Dan Dickson: It is a significant portion of our costs. From a labor standpoint, it's about 30% of our operating costs, which is obviously tied to the Mexican peso. For gold, like I said in my comments, initially, our gold grades were slightly ahead of plan. And that's just normal variations in the body.
Dan Dickson: For gold.
Dan Dickson: Like I said in my comments initially our gold grades were slightly ahead of plan and that's just normal variations in body, where I think there is opportunity as Bowen. He does obviously ball and he knows as more gold production on a proportional basis compared to want us to me and it allows us to potentially get into some other areas of millennials, but we haven't been in.
Dan Dickson: Where I think there is an opportunity is Bolognitos. Obviously, Bolognitos has more gold production on a proportional basis compared to Guanasavie and allows us to potentially get into some other areas of Bolognitos that we haven't been in because of the low gold price. So if we have higher gold production, of course, that means a bigger gold credit. I think Heiko, what we look at as a management team is our direct operating costs per tonne.
Dan Dickson: Because of the lower gold price. So we have higher gold production of course that means a bigger gold credit I think HEICO, what we look at it as a management team as our direct operating costs per ton and so the things that we can manage finding costs processing costs direct costs, while our G&A on site.
Dan Dickson: So the things that we can manage, mining costs, processing costs, and indirect costs. So all our G&A is on site. Our goal is to meet plan on that, and we end up in a higher gold price environment. Of course, that byproduct credit lowers our all-in sustaining costs and our cash costs. But we're, like I say; we try to control what we can control, and that's the inputs that are going into our operating costs.
Dan Dickson: Our goals to meet plan on that and we ended up in a higher gold price environment of course that byproduct credit lowers our all in sustaining costs and our cash cost.
Dan Dickson: But we're like I say, we try to control what we can control.
Dan Dickson: And that's the inputs that are going into our operating costs.
Speaker Change: Fair enough and then just a longer term question your direct operating costs in the quarter increased by about 10%.
Unknown Attendee: Unknown Attendee, Cosmos Chiu, Daniel Dickson, Lucas Pipes, Craig Hutchison, Daniel Dickson, Unknown Attendee, Cosmos Chiu, Daniel Dickson, Lucas Pipes, Craig Hutchison, Daniel Dickson
Unknown Attendee: In your release you state. This was based on ongoing ventilation and Waterman chilled water management challenges that affected productivity, obviously, none of this translates to terra in there at all.
Speaker Change: And I just looked at some of the pictures here on your website. It looks like this thing is really coming together, but then you also state in the release that you're encountering ongoing inflationary pressures and costs that I assume may ultimately be seen that's here and they are a bit I mean commissioning at this point you know Q4 is not that far out.
Speaker Change: Should the analyst community start thinking a bit of inflationary costs for the side or should the current numbers that we have stay as a good baseline for what we should be at.
Speaker Change: Yes, that's a very good question Heiko and we haven't provided guidance from an operational standpoint procuring era since April of 2023, when we announced construction decision.
Dan Dickson: Yeah, that's a very good question, Heiko, and we haven't provided guidance from an operational standpoint for Terranera since April of 2023, when we announced the construction decision. And at that time, we put out an optimized plan that highlighted an $81 cost per tonne. And that cost per tonne had come down from the feasibility study of $87 to $81 because the economy is on a scale going from 1,700 tonnes per day to 2,000 tonnes per day.
Dan Dickson: And we at that time, we put out an optimized mine highlighted an $81 cost per ton and that cost per ton had come down from the feasibility study of $87 81, because of the economies of scale.
Dan Dickson: 800 tonnes per day in 2000.
Dan Dickson: That estimate was done effectively December of 2020 to January of 2023.
Dan Dickson: That estimate was done effectively in December of 2022 and January of 2023. Since the start of 2023, across the industry and specifically in Mexico, we've had an appreciation in the Mexican peso by 15%. You've had inflationary pressures specifically on steel, reagents, power costs, all in Mexico. So it would be very fair to assume that you've had escalations from an operating standpoint at Terranera going from $81, maybe getting into the $95 or $100 range.
Dan Dickson: Since the start of 2023 across the industry and specifically.
Dan Dickson: In Mexico, <unk> had the appreciation in the Mexican peso by 15% you'd had inflationary pressures specifically on steel reagents power costs all in Mexico. So it would be very fair to assume that you've had escalations from operating standpoint of turning around going from $81, maybe you get into the 95.
Dan Dickson: $100 range, we haven't gone through and rebuilds.
Dan Dickson: We haven't gone through and rebuilt those estimates from an operational standpoint. As we go into production, hopefully later this year, like I say, commissioning for Q4, management will update those costs and will provide guidance in the marketplace going into 2025. But again, if you just look at what's happened across the industry, what's happened in Mexico, it's fair to say that those operational costs are higher than what we put out when we initially did that optimized plan.
Dan Dickson: From an operational standpoint, as we go into production hopefully later this year like I say commissioning for Q4 management will update those costs, we will provide guidance in the marketplace going into 2025, but again, if you just look what's happening across the industry what happened in Mexico, It's fair to say that with the operational costs are higher than what we put out.
Dan Dickson: When we initially did that off price plan.
Speaker Change: Fair enough great answer great quarter, obviously, the stock's reacting quite favorably and I'll get back in queue. Thank you.
Heiko Ihle: Fair enough. Great answer, great quarter, obviously, the stock's reacting quite favorably, and I'll get back to you. Thank you.
Speaker Change: Thanks, Tycho thanks for the questions.
Dan Dickson: Thanks, Heiko. Thanks for the question.
Dan Dickson: The next question comes from Craig Hutchison of TD Securities. Please go ahead.
Craig Hutchison: The next question comes from Craig Hutchison of TD Securities. Please go ahead.
Craig Hutchison: Hi, guys.
Craig Hutchison: Can you talk about the cadence of the remaining spend at Terranera? I think you said 53% in March, commissioning maybe six to nine months away.
Craig Hutchison: And can you talk about the vacated hey, Dan can you guys talk about the cadence of the remaining spend at Turner I think you said, 53% in March.
Craig Hutchison: Commissioning, maybe six to nine months away I would imagine.
Craig Hutchison: And the spend that you guys reported last time of about 2% to 3% a month will accelerate but if you can just sort of talk to how that expandable accelerate between now and when the commissioning.
Craig Hutchison: Yeah.
Craig Hutchison: It's a good question Craig and the fact that we are reaching our peak construction.
Craig Hutchison: With within well really this month next month through August the key components being the upper platform as I said, 80% of steels complete there. So now we're going into piping and electrical.
Craig Hutchison: That's been going very well with our contractor mine development remains the critical path into production, we are hitting or in Q2.
Craig Hutchison: So this quarter, we expect to start having or come out of the mine we have crossed the vein everything looks really good from that standpoint.
Craig Hutchison: So there is additional spend permitted mine development standpoint, and then the key other critical path is our tailings facility our tailings facility, we call. It the lower platform, that's where our dry stack tailings facility will be our concentrator will be and ultimately our LNG plants are LNG plant remains.
Craig Hutchison: Delayed.
Craig Hutchison: It is expected to start commencing putting in the current creek this quarter.
Craig Hutchison: And then obviously bertel construction after that our expectation is that LNG plant won't be complete which is about 10% of the production of 100%.
Craig Hutchison: That won't be completed until 2025, we will be on diesel Gen sets. When we go into commissioning in Q4.
Craig Hutchison: But ultimately from the 2% to 3% that's going to pick up significantly and we're going to hit.
Craig Hutchison: As I said I think we said we have $225 million committed a lot of that is going to be pushed through in this quarter and then early Q3, so lots going on but we have really no more procure minutes now it's just about executing as we execute the embankment from the tailings facility, which has been going relatively well will.
Craig Hutchison: We will be on track for commissioning in Q4.
Craig Hutchison: Okay, Great and just maybe as a follow up on that.
Craig Hutchison: Understatement, LNG getting commissioned and beginning in 2035.
Craig Hutchison: What's the throughput you can run the plant add on diesel alone.
Craig Hutchison: Yes.
Craig Hutchison: Our diesel Gen sets will have the same output as our LNG plant, which is just shy of 13 megawatts.
Craig Hutchison: So the plan is everything should be up and going on these diesel Gen sets with the diesel Gen sets will do is increase our operating costs.
Craig Hutchison: Compared to the LNG plant.
Craig Hutchison: Okay great.
Craig Hutchison: And then.
Craig Hutchison: Once you guys are sort of reach commissioning what sort of timeframe to reach commercial production like what type of what is the definition for you guys for commercial production and how long do you guys think it will take to get there.
Craig Hutchison: Yeah.
Craig Hutchison: Have the specific definition, it's a multitude of factors of getting into commercial production or qualifying for commercial production. We initially estimated three to four months I think we think we can do that a lot quicker than three to four months.
Craig Hutchison: But as we approach and understand where bottlenecks are and if we can pre commission some of the upper platform before Q4 that would be ideal.
Craig Hutchison: But we will give guidance to the marketplace as we approach approach Q4 on that.
Craig Hutchison: Okay, Great and one last question for you just on the second tranche drawdown can you remind me what the milestone is to access that additional money.
Craig Hutchison: Yep.
Craig Hutchison: Right now we like to say it in April we pulled off $60 million and in that we had a cash requirement of sitting in their accounts to be ultimately cost overrun facility of $24 million were required to build that up to $28 million in the independent engineers are doing that is it for the lenders late may just came out.
Craig Hutchison: To make sure what's happening in our reports.
Craig Hutchison: What's happening on site network.
Craig Hutchison: The terms and then other one minor.
Craig Hutchison: Minor terms that need to be executed ongoing into that.
Craig Hutchison: Yeah.
Speaker Change: Okay, great. Thanks, guys.
Craig Hutchison: Thanks, Greg for the questions.
Craig Hutchison: The next question comes from Robert Carlson Janney Montgomery Scott. Please go ahead.
Craig Hutchison: Congratulations on the quarter and quick one.
Craig Hutchison: Made so far but do you guys utilized.
Craig Hutchison: Yeah.
Craig Hutchison: Yeah, Robert while we entered into a gold hedge which is a requirement under our lending facility. We entered into 68000 ounces of gold that will be delivered through 2025, and 2026, a little bit into 2027 and that was priced out of 2000 and $325 per ounce of gold.
Speaker Change: Otherwise, we don't hedge silver.
Speaker Change: One of our mandate is to make sure that for our shareholders who are investing in endeavour silver.
Craig Hutchison: The upside that we expect to come on a silver price standpoint.
Craig Hutchison: Inter quarter standpoint will enter into things very short term so under 90 days.
Speaker Change: But thats, just generally try and take advantage of spikes in the silver price.
Craig Hutchison: So whichever coming on board.
Craig Hutchison: There's no plans to.
Craig Hutchison: Just what's your hedging program for silver.
Speaker Change: No. There is no plan to establish a hedging program.
Speaker Change: What we're seeing right now in the silver market is.
Craig Hutchison: In an environment, that's going to be very favorable to the silver price I mean from an industrial standpoint, we've seen significant demand increase.
Craig Hutchison: The solar panels, the electrification of the world, obviously trying to reduce carbon but the monetary story for silver has been lagging for the last kind of two three years and we've seen gold really take off and ultimately make new all time highs silver still well off its all time highs of $50.
Craig Hutchison: Today, obviously, we're sitting just above 28.
Craig Hutchison: So I think theres a lot of runway there for silver over the next kind of a year a couple of years.
Craig Hutchison: We want to leave that upwards movement in silver price for our shareholders.
Speaker Change: Great. Thank you.
Craig Hutchison: Thanks Robert.
Speaker Change: Once again, if you have a question. Please press Star then one.
Craig Hutchison: The next question comes from Jake Zukowski of Alliance Global Partners. Please go ahead.
Craig Hutchison: Hey, Dan and team thanks for taking my questions.
Speaker Change: So just thanks.
Craig Hutchison: Building on that last question.
Craig Hutchison: Hmm.
Craig Hutchison: Going back to the tailwind from stronger gold byproduct credits this quarter and more so.
Craig Hutchison: Current levels.
Craig Hutchison: I'm wondering if there was a level and goldberg you'd look at hedging out some additional gold production outside of the requirements for the <unk> facility.
Craig Hutchison: Yeah, I mean, that's a fair question I think.
Craig Hutchison: There's a lot of runway left in the precious metal space.
Craig Hutchison: We'd really entertain.
Craig Hutchison: For this year, obviously, we wanted to make sure we protected the downside of the company with having so much investment going into turn narrow, but we think the 68000 ounces of gold that we've already hedged out for when we get into operations.
Speaker Change: <unk> provides that.
Craig Hutchison: For the remaining operation the ball on Windows and want us to be reproducible 30 to 35000 ounces of gold I think we're comfortable that gold plants way upwards, obviously, there's always downside potential but.
Speaker Change: But we use 18 40.
Craig Hutchison: Our guidance forecast.
Craig Hutchison: And from a cash flow standpoint.
Craig Hutchison: Again, maybe we get into Q3, and we felt some gold forward a little bit.
Craig Hutchison: But we won't get beyond the 90 days.
Speaker Change: Okay, that's fair.
Speaker Change: And then just uncertain Erik can you can you just touch on the.
Craig Hutchison: Labor outlook, there as we head towards commissioning later this year.
Craig Hutchison: Yeah, I mean from a labor standpoint.
Craig Hutchison: We handle all the mine development internally, so from our mining team, which will transition from development into our operations will be consistent.
Craig Hutchison: And be fully.
Craig Hutchison: Up on labor from our operational readiness standpoint for the plant.
Craig Hutchison: We've already started that process, we've made hires for plant operations.
Craig Hutchison: And obviously from an indirect standpoint.
Speaker Change: We're relatively staffed up there as well.
Craig Hutchison: So there shouldn't be a significant change or a huge hiring process between now and Q4 or we have people that we need to add but we've already been working on operational readiness plans.
Craig Hutchison: So we can execute well in Q4.
Craig Hutchison: Again from a labor cost standpoint, everything we've done this year from an operational standpoint is done at 17 to one Mexico.
Craig Hutchison: Mexico.
Craig Hutchison: The peso to U S dollar.
Craig Hutchison: When we go into operations for Taro narrow that would be a similar effort.
Craig Hutchison: FX rate that we would use.
Craig Hutchison: At.
Craig Hutchison: Paul any dosing to want us to be 30% of our cost is related to labor and that's similar for <unk>.
Craig Hutchison: Again, when we go back and look at 2020 twos optimized plan that would have been done at 21 to one ratio of CLSA.
Craig Hutchison: 17 to one ratio would seem to have higher labor costs from an operational standpoint, just because of the FX move.
Craig Hutchison: Again, when we go into 2025 will provide additional detail for the market.
Craig Hutchison: Got it okay. That's all for me thanks again.
Craig Hutchison: Thanks for the question Sheikh much appreciate it.
Craig Hutchison: This concludes the question and answer session I would like to turn the conference back over to Dan Dickson for any closing remarks.
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Speaker Change: Thanks, operator, and thanks to everyone is tuned in today for our Q1 2024 earnings release.
Dan Dickson: Yeah, that's, that's a good question, Craig. And the fact that we are reaching our peak construction within, well, this month, next month, through August, the key components being the upper platform, as I said, 80% of the steel is complete there. So now we're going into piping and electrical, the dry stack tailings facility will be, our concentrator will be, and ultimately our LNG plant. Our LNG plant remains delayed.
Dan Dickson: It's expected to start putting in the concrete this quarter, and then obviously vertical construction after that. Our expectation is that the LNG plant won't be complete, which is about 10% of the production of 100%. That won't be completed until 2025, so we will be on diesel gem sets when we go into commissioning in Q4. But ultimately, from the 2% to 3%, that's going to pick up significantly. Like I said, I think we said we had $225 million committed.
Dan Dickson: Again, I think we've done an extremely good job of just executing our plan from an operational standpoint, our job to execute on <unk>. This year, we can execute on terra narrow over the next two quarters, we should be commissioning for Q4, 2024, and it will be nice to see that production profile come into.
Dan Dickson: A lot of that's going to be pushed through in this quarter and then early Q3. So, lots going on, but we have really no more procurement. It's now just about executing. And as we execute the embankment for the tailings facility, which has been going relatively well, we'll be on track for commissioning.
Craig Hutchison: Okay, great. And just to follow up on that understatement of the LMG getting commissioned again in 2025, what's the throughput you can run the plant at on diesel alone? Yeah, our diesel gen sets will have the same output as our LNG plant, which is just shy of 13 megawatts. So the plan is, everything should be up and running on these diesel gen sets. What the diesel gen sets will do is increase our operating costs.
Dan Dickson: Great. And then once you guys reach commissioning, what sort of timeframe do you have to reach commercial production? Like what type of definition do you guys have for commercial production? How long do you guys think it's? Yeah, I don't have a specific definition; there are a multitude of factors for getting into commercial production or qualifying for commercial production. We initially estimated it would take three to four months; I think we can do that a lot quicker than three to four months.
Dan Dickson: But as we approach and understand where the bottlenecks are, and if we can pre-commission some of the upper platform before Q4, that would be ideal. But we'll give guidance to the marketplace as we approach Q4. Great, one last question for you, just on the...
Craig Hutchison: Please remind me what the milestone is to access that additional money.
Dan Dickson: Yep. In that right now, we like to say in April, we pulled off $60 million. And in that, we had a cash requirement sitting in an account, which we ultimately call an overrun facility of $24 million. We're required to build that up to $28 million. And then independent engineers are doing a visit for the lenders in late May just to get an update to make sure what's happening in our reports is what's happening on site. And that's one of the terms, and then other minor terms that need to be executed on going into that. Okay, great. Thanks, guys. Thanks, Craig, for the questions.
Craig Hutchison: The next question comes from Robert Carlson of Janie Montgomery Scott. Please go ahead.
Dan Dickson: Congratulations on the quarter and progress made so far, but do you guys utilize hedges?
Dan Dickson: Yeah, Robert. Well, we entered into a gold hedge, which is a requirement under our lending facility. We entered into 68,000 ounces of gold that will be delivered through 2025 and 2026, and a little bit into 2027. And that was priced out at $2,325 per ounce of gold. Otherwise, we don't hedge silver. One of our mandates is to make sure that for our shareholders who are investing in Endeavour Silver, we provide that upside that we expect to come from a silver price standpoint. From an inter-quarter standpoint, we'll enter into things very short term, so under 90 days, but that's just generally trying to take advantage of spikes in the silver price.
Dan Dickson: So with Tenera coming on board early next year, there are no plans to establish a hedging program for silver. No, there is no plan.
Dan Dickson: No, there is no plan to establish a hedging program for silver. I think what we're seeing right now in the silver market is an environment that's going to be very favorable to the silver price. I mean, from an industrial standpoint, we've seen significant demand increase because of solar panels, the electrification of the world, obviously trying to reduce carbon, but the monetary story for silver has been lagging for the last kind of two, three years.
Dan Dickson: And we've seen gold really take off and ultimately make new all-time highs. Silver is still well off its all-time highs of $50. Today, obviously, we're sitting just above $28. And so I think there's a lot of runway there for silver over the next kind of year, couple of years. And we want to leave that upward movement in the silver price for our shareholders.
Dan Dickson: Hey Dan and team, thanks for taking my questions. So just building on that.
Jacob Sekelsky: Once again, if you have a question, please press star then 1. The next question comes from Jake Sekulski of Alliance Global Partners. Please go ahead.
Jacob Sekelsky: Yeah, I mean, that's a fair question. I think there's a lot of runway left in the precious metal space, but it's not something that we'd really entertain. Again, maybe we get into Q3 and we sell some gold forward a little bit, but we wouldn't get beyond the 90 days.
Jacob Sekelsky: Okay, that's fair. And then just on Saranara, can you just touch on the labor outlook there as we head towards commissioning later this year?
Dan Dickson: Yeah, I mean, from a labor standpoint, we handle all the mine development internally. So our mining team, which will transition from development into operations, will be consistent and be fully up to speed on labor from an operational readiness standpoint for the plant. We've already started that process.
Dan Dickson: We've made hires for plant operations and, obviously, from an indirect standpoint, are relatively staffed up there as well. So there shouldn't be a significant change or a huge hiring process between now and Q4. We have people that we need to add, but we've already been working on operational readiness plans so we can execute well in Q4.
Dan Dickson: Again, from a labor cost standpoint, everything we've done this year from an operational standpoint was done at 17 to 1 Mexico peso to US dollar. When we go into operations for Terranera, that would be a similar FX rate that we would use. For Polonitos and Guanacivi, 30% of our cost is related to labor, and that's similar for Terranera. Again, when we go back and look at 2022's optimized plan, that would have been done at a 21 to 1 ratio, so now that's a 17 to 1 ratio, so you'd have a higher labor cost from an operational standpoint, just because we'd have X move. Again, when we go into 2025, we'll provide that additional detail for the market.
Jacob Sekelsky: Got it. Okay, that's all for me. Thanks again.
Dan Dickson: Thanks for the questions, Jake. It is much appreciated.
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 Change: Endeavour production profile for 2025, thanks, everyone and have a good day.
Dan Dickson: Thanks, Operator. And thanks to everyone who's tuned in today for our Q1 2024 earnings release. Again, I think we've done an extremely good job of just executing our plan from an operational standpoint. It's our job to execute on Terranera this year. We can execute on Terranera over the next two quarters; we should be in commissioning for Q4 2024. And it'll be nice to see that production profile come into the Endeavour production profile for 2025. Thanks, everyone. Have a good day.
Dan Dickson: Okay.
Speaker Change: This brings to end today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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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