Q2 2024 Endeavour Silver Corp Earnings Call
♪♪ ♪♪ ♪♪ ♪♪ That's it, yeah. ♪♪
Operator: Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. second 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 Alison Patek, Director of Investor Relations. Please go ahead.
Speaker Change: Thank you for standing by. This is the conference operator. Welcome to the Endeavor SilverCorps second 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.
Speaker Change: To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Alison Pettit, Director of Investor Relations. Please go ahead.
Alison Patek: 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 financial statements are available on our website at edrsilver.com. On today's call, we have Dan Dickson, Endeavour Silver's CEO, Elizabeth Senez, our Chief Financial Officer, and Don Gray, Endeavour's COO. Following Dan's formal remarks, we will open the call for questions. And now, over to Dan. Thank you.
Alison Pettit: Thank you, Operator, and good morning, everyone. Before we get started, I ask that you view our MD&A, Precautionary Language, regarding forward-looking statements and the risk factors pertaining to these statements.
Speaker Change: Our MD&A and financial statements are available on our website at edrsilver.com
Speaker Change: On today's call, we have Dan Dickson, Endeavor Silver's CEO, Elizabeth Senez, our Chief Financial Officer, and Dawn Gray, Endeavor's COO.
Speaker Change: Following Dan's formal remarks, we will open the call for questions. And now, over to Dan.
Dan Dickson: Thank you, Allison, and welcome, everyone. It's been a productive second quarter at Endeavour Silver. Gold has reached new all-time highs and with silver starting to follow, companies' cash flow and financial positions should continue to benefit from these higher prices. At Terranera, there was a significant advance of the upper platform surface infrastructure, and the overall project progress reached 65% on June 30th. Terranera is on track for commissioning in Q4 2024, and we are excited for it to contribute to our production profile next year and become a cornerstone asset.
Dan Dickson: Thank you, Allison, and welcome, everyone.
Speaker Change: It's been a productive second quarter at Endeavor Silver. Has gold reached new all-time highs? And with silver starting to follow, companies' cash flow and financial positions should continue to benefit from these higher prices.
Speaker Change: At Terranera, there was significant advance of the upper platform surface infrastructure and the overall project progress reached 65% at June 30th.
Speaker Change: Terranera is on track for commissioning Q4 2024 and we are excited for it to contribute to our production profile next year and become a cornerstone asset.
Dan Dickson: Q2 Silver equivalent production totaled 22.2 million ounces, for 1.3 million ounces of silver and 10,500 ounces of gold. We are in a great position to meet the upper range of our 2024 production guidance. Silver equivalent grades have been in line with expectations, with gold grades slightly higher and silver grades slightly lower.
Speaker Change: Q2 silver equivalent production totaled 22.2 million ounces or 1.3 million ounces of silver and 10,500 ounces of gold. We are in great position to meet the upper range of our 2024 production guidance.
Speaker Change: Silver equivalent grades have been in line with expectations, with gold grades slightly higher and silver grades slightly lower. This is expected to be similar going forward and therefore we expect a similar production profile for the second half of the year.
Dan Dickson: This is expected to be similar going forward, and therefore we expect a similar production profile for the second half of the year. We report a top line revenue of $58 million, up 17% year over year due to higher metal prices compared to Q2 2023. Cost of sales totaled $48 million, up 28% from Q2 2023 due to the strengthened Mexican peso contributing to higher labor, power, and consumable costs and continued inflationary effects from 2023 that flowed into 2024.
Speaker Change: We reported top-line revenue of $58 million, up 17% year-over-year, due to higher metal prices compared to Q2 2023.
Speaker Change: Cost of sales totaled $48 million, up 28% from Q2 2023, due to the strengthened Mexican peso contributing to higher labor, power, and consumable costs, and continued inflationary effects from 2023 that flowed into 2024.
Dan Dickson: At Guanasavi, purchased material from local miners increased to 18% of throughput and accounted for $5 million of our cost of sales. In Q2 2023, purchased material was $1.5 million. With higher precious metal prices, the availability and costs of the purchased material have both increased. There are a number of benefits to purchasing local material, and management expects the purchase of material to remain elevated for the foreseeable future. The higher prices also mean higher royalty expense, and we are generating mining profits, increasing our special mining duty, which is impacting our cost metric.
Speaker Change: At Gwana Sibi, purchased material from local miners increased to 18% of throughput and accounted for $5 million of our cost of sales. In Q2 2023, purchased material was $1.5 million.
Speaker Change: With higher precious metal prices, the availability and costs of the purchased material have both increased. There are a number of benefits of purchasing the local material and management expects the purchase of material to remain elevated for the foreseeable future.
Speaker Change: The higher prices also means higher royalty expense and we are generating mining profits, increasing our special mining duty, which are impacting our cost metrics.
Dan Dickson: Direct Offering Costs: Our mining, processing, and site administrative costs are within management's expectations. Cash costs and all unsustaining costs benefit from the higher gold credit than estimated at the beginning of the year, offsetting the higher royalties, special mining duty, and increased purchase material. The company reported a net loss of $14 million for the three-month period ended June 30, 2024, compared to a $1 million loss in Q2 2023, excluding certain non-cash and unusual items and items that are subject to volatility, which are unrelated to the company's operations. The adjusted loss was $1.0 million compared to the adjusted earnings of $1.6 million in Q2 2023.
Speaker Change: direct offering costs
Speaker Change: Our mining, processing, and site administrative costs are within management's expectations. Cash costs and all unsustaining costs benefit from the higher gold credit than estimated at the beginning of the year, offsetting the higher royalties, special mining duty, and increased purchase material.
Speaker Change: The company reported a net loss of $14 million for the three-month period ended June 30, 2024, compared to a $1 million loss in Q2 of 2023.
Speaker Change: excluding certain non-cash and unusual items and items that are subject to volatility which are unrelated to the company's operations. The adjusted loss was 1.0 million dollars compared to the adjusted earnings of 1.6 in Q2 2023.
Dan Dickson: With production results and construction results previously released, today's substantial share price action was unexpected, and still the magnitude is somewhat puzzling. With higher precious metals prices, clearly, there is an expectation for better earnings. I believe this is one data point that, over time, we will deliver on those. As of June 30, 2024, the company's capital position was $68 million, and working capital was $65 million. The company raised $14.7 million through share issuances, primarily to fund Terranera.
Speaker Change: With production results and construction results previously released, today's substantial share price action was unexpected and still the magnitude is somewhat puzzling.
Speaker Change: With higher precious metals prices, clearly there's an expectation for better earnings. I believe this is one data point over time we will deliver on those expectations.
Speaker Change: As of June 30, 2024, the company's cash position was $68 million and working capital was $65 million.
Speaker Change: The company raised $14.7 million through share issuances, primarily to fund Terranera. And during the quarter, the company completed its first drawdown of the Terranera Senior Secure Debt Facility, drawing $60 million.
Dan Dickson: During the quarter, the company completed its first drawdown of the Terranera Senior Secured Debt Facility, drawing $60 million. Subsequent to the reporting end, the company completed a second draw of $15 million and has an additional $45 million committed and available for future drawdowns expected in the third or fourth quarter.
Speaker Change: Subsequent to the reporting end, the company completed a second draw of $15 million and has an additional $45 million committed and available for future drawdowns expected in the third or fourth quarter.
Dan Dickson: As I mentioned earlier, the Terranera project reached 65% completion with more than $204 million in the project budget spent to date. Project commitments total $260 million, which is 96% of our $271 million capital budget and remains on track for commissioning in Q4 2024 as we continue to advance on schedule. Over 1,250 meters of underground mine development were completed in Q2, for a cumulative total of 4.5 kilometers, and our mine crews continue working in portals 1, 2, and 4.
Speaker Change: As I mentioned earlier, the Terranera project reached 65% completion with more than $204 million in the project budget spent to date.
Speaker Change: Project commitments total $260 million, which is 96% of our $271 million capital budget and remains on track for commission in Q4 2024 as we continue to advance on schedule.
Speaker Change: Over 1,250 meters of underground mine development were completed in Q2 for cumulative total of 4.5 kilometers and our mine crews continue working in portals 1, 2, and 4 declines. Development has cut through the Terranera vein and we've started to develop test stopes.
Dan Dickson: Development has cut through the Terranera vein, and we've started to develop test stokes. On the upper platform, surface mill and infrastructure construction is 88% complete, with concrete and structural steel erection being fully complete, and mechanical piping and electrical installation is well underway. The excavation of the Kaling Storage Facility Embankment Key Trench is about 95% complete, and the lower platform is nearly 50% complete. Concrete work on the lower platform is scheduled to start early Q3 and remains the critical path for commissioning in Q4, through June 30th, 87 and 95.
Speaker Change: On the upper platform, surface mill and infrastructure construction is 88% complete, with concrete and structural steel erection being fully complete, and mechanical, piping, and electrical installation is well underway.
Speaker Change: The excavation of the tailing storage facility abatement key trench is about 95% complete and the lower platform is nearly 50% complete. Concrete work on the lower platform is scheduled to start early Q3 and remains the critical path for commissioning in Q4.
Dan Dickson: The securement packages are now complete, and it's now really an exercise in execution and productivity over the next six months. The company anticipates commissioning using temporary power, with the LNG and power generation to be operational subsequent to commissioning. The temporary power has been planned and is expected to be available for Q4. Similarly, there'll be other minor structures under construction during commissioning. And lastly, from a community relations standpoint, with local community support continuing to be a major commitment, a plant operator training program was established, and comprehensive training and support service plans are being prepared for groups and individuals seeking to form businesses that can provide local goods and services within the community.
Speaker Change: through June 30th, 87 of 95.
Speaker Change: procurement packages are now complete and it's now really an exercise in execution and productivity over the next six months.
Speaker Change: The company anticipates commissioning using temporary power with the LNG and power generation to be operational subsequent to commissioning. The temporary power has been planned and is expected to be available for Q4.
Speaker Change: Similarly, there will be other minor structures under construction during commissioning.
Speaker Change: And lastly, from a community relations standpoint...
Speaker Change: With the local community support continuing to be a major commitment, a plant operator training program was established, a comprehensive training and support service plan is being prepared for groups and individuals seeking to form businesses that can provide local goods and services within the community.
Dan Dickson: Again, for a fulsome construction update at Terranera, I would encourage you to visit our website, where you'll find our curly photo gallery showcasing the latest developments, progress, and information on Terranera. Before we move to the Q&A part of the call, I would also like to highlight that we published our 2023 Sustainability Report, titled Transformation in Motion, in May that provides a deep dive into Endeavour's sustainability commitments, performance, and ongoing approach to responsible mining. You can view the full report and the company's strategy on our website under the Sustainability tab. With that, Operator, I'm happy to open this up to questions. Let's please proceed to that session, Operator.
Speaker Change: Again, for a fulsome construction update at Terranera, I would encourage you to visit our website where you'll find our Curly photo gallery showcasing the latest developments, progress, and information on Terranera.
Speaker Change: Before we move to the Q&A part of the call, I would also like to highlight that we published our 2023 Sustainability Report titled Transformation in Motion in May that provides a deep dive into Endeavour's sustainability commitments, performance and ongoing approach to responsible mining.
Speaker Change: You can view the full report and the company strategy on our website under the Sustainability tab.
Speaker Change: With that, Operator, I'm happy to open this up to questions. Please proceed to that session, Operator.
Operator: Thank you. 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 2. The first question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.
Speaker Change: Thank you. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.
Speaker Change: The first question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.
Jake Sekelsky: Hey Dan and team, thanks for taking my questions.
Dan Dickson: No problem, Jake. I'm happy to take it.
Jake Sekelsky: Hey, Dan and team. Thanks for taking my questions.
Jake Sekelsky: So, just starting with the finished goods billed during the quarter, I'm just curious: were ounces withheld for higher prices this quarter, or is this just a function of timing?
Dan Dickson: No problem, Jake. Happy to take them.
Jake Sekelsky: So, just starting with the finished goods billed during the quarter, I'm just curious, were ounces withheld for higher prices this quarter, or is this just a function of timing?
Dan Dickson: Just the timing function. I believe our last shipments kind of went out about the 28th. We didn't sell anything in advance. So, and obviously, because of where we are in the position of building TerraNow, we're not holding back sales and don't expect to hold back sales.
Speaker Change: Just the timing, function. I believe our last shipments kind of went out about the 28th. We didn't sell anything in advance so and we obviously because of where we are in the position of building Terranova, we're not holding back sales and don't expect to hold back sales at this time.
Jake Sekelsky: Okay, that's helpful. Um, and then on foreign exchange, I'm just curious, do you think the peso is weakened to a level where, you know, you might start putting in broader company hedges in place? Or do you want to see a bit more weakness there?
Speaker Change: Okay, that's helpful. And then just on foreign exchange, I'm just curious, do you think the peso's weakened to a level where, you know, you might start putting in broader company hedges in place, or do you want to see a bit more weakness there?
Dan Dickson: I do think there's a little bit more weakness coming in the Mexican peso, just based on the policy of the government, but it's always difficult to determine when that weakness will show up and how long it will persist for. At this time, we have no plans to enter into any more FX hedges. We were required to enter into FX hedges under our build, under the debt facility, and we are required to enter into operational FX hedges when we go into operations. We haven't made a determination when we'll put that in place. Again, I think we'll see some more weakness in the Mexican peso.
Speaker Change: I do think there's a little bit more weakness coming in the Mexican peso, just based on policy of government, but it's always difficult to determine when that weakness will show up and how long it will persist for. At this time, we have no plans to enter into any more FX hedges. We were required to enter into FX hedges under our build.
Speaker Change: under the debt facility and we are required to enter into when we go into operations some operational FX hedges. We haven't made a determination when we'll put that in place. Again, I think we'll see some more weakness in the Mexican peso.
Jake Sekelsky: Got it. Okay, that's all for me. Thanks again.
Speaker Change: but we'll see.
Dan Dickson: Thanks for the questions, Jake.
Speaker Change: Got it. Okay, that's all for me. Thanks again.
Operator: The next question comes from Lucas Pipes with B. Reilly. Please go ahead.
Speaker Change: Thanks for the questions, Jake.
Speaker Change: The next question comes from Lucas Pipes with B. Reilly. Please go ahead.
Lucas Pipes: Thank you very much, Operator. Good afternoon, everyone.
Lucas Pipes: My first question is kind of higher level on the operating environment in Mexico. Obviously, there was an election. The administration has yet to take office, but I wondered if maybe, with the election in the rearview mirror, there's a bit more clarity as to the priorities from a regulatory standpoint of the incoming administration. Thank you very much.
Lucas Pipes: Thank you very much, operator. Good afternoon, everyone. Dan, my first question is kind of higher level on the operating environment in Mexico. Obviously, there was an election. The administration has yet to...
Lucas Pipes: take office, but I wondered if maybe
Speaker Change: with the election in the rearview mirror, there's a bit more clarity as to the priorities from a regulatory standpoint on the incoming administration. Thank you very much.
Dan Dickson: Yeah, I mean, you're correct. On June 2, there was an election. The Moreno party won in probably what was expected to be even better results for them than originally expected. The new president, Claudia Scheinbaum, is a successor to AMLO and will be interesting over her first couple of years in office, how closely she follows the platform, which is expected to be relatively closely. She has privately said and now kind of percolated out into the press that she'll be more pro-mining than AMLO. She's definitely more pro-business.
Speaker Change: Yeah, I mean you're correct on June 2nd. There is an election the Moreno party won and probably what was expected to be even better than Better results for them than was originally expected. The new president called a shine bomb
Speaker Change: She is a successor to effectively AMLO and will be interesting over her first couple years in office and how closely she follows the platform which is expected to be relatively closely.
Speaker Change: She has privately, and now kind of percolating out into the press, that mining will
Speaker Change: She'll be more pro-money necessarily than AMLO. She's definitely more pro-business But the the reforms that were put in place that have been lost through a bunch of amparos We're still waiting on the Supreme Court decision. There's been some chatter that those will be repealed
Dan Dickson: But the reforms that were put in place that have been lost through a bunch of amparos, we're still waiting on the Supreme Court decision. There's been some chatter that those will be repealed, but re-put in front of the legislature in the fall. So there is still some uncertainty coming through the current government. How this changes, we'll probably be able to see that better in the next six months. I think when it comes to Mexico, there's been a lot of rhetoric coming out of AMLO.
Speaker Change: but re-put in front of the legislature in the fall. So there is still some uncertainty coming through the current government. How this changes, we'll probably be able to see that better in the next six months.
Dan Dickson: I think that's going to dissipate. But ultimately, it's still one of the best jurisdictions in the world to operate from a mining standpoint. Again, I don't think some of the compliance requirements that are being put in or ultimately in those mining requirements will impact Endeavour significantly just because we have departments that can handle that. But again, until that comes through and actually gets properly approved or properly put through legislation, it's difficult to comment on.
Speaker Change: I think when it comes to Mexico there's been a lot of rhetoric coming out of AMLO. I think that's going to dissipate.
Speaker Change: But ultimately it's still one of the best jurisdictions in the world to operate from a mining standpoint again I don't think some of the
Speaker Change: compliance requirements that are being put in or
Speaker Change: or ultimately in those mining reforms will impact Endeavor significantly just because we have
Speaker Change: departments that can handle that, but again until that comes through and actually gets properly approved or properly put through legislation, it's difficult to comment on.
Lucas Pipes: I really appreciate your perspective. That's helpful. You note the additional $45 million available at Terranera in the second half of 2024, and I wondered if there are any specific project milestones attached to that release, and if so, if you could maybe comment and elaborate on those. Thank you.
Speaker Change: Really appreciate your perspective. That's helpful.
Speaker Change: You note the additional 45 million available at Terranera in the second half of 2024, and I wondered if there are any specific project milestones attached to that release, and if so, if you could maybe comment and elaborate on those. Thank you.
Dan Dickson: No, there are no specific milestones required for it. The independent engineers...
Speaker Change: No, there is no specific milestones required to it. The independent engineers that represent the banks, they do do reports and they look at our monthly reports and they'll go through that and we have necessitations to do but everything remains on track and we think that will be available over the next, I could say, six months.
Dan Dickson: represent the banks. They do do reports, and they look at our monthly reports, and they'll go through that, and we have some work to do, but everything remains on track and we think that will be available over the next, I could say, six months.
Lucas Pipes: Terrific. Dan, I really appreciate your comments to you and the team. All the best of luck. Thanks.
Speaker Change: Terrific. Dan, really appreciate your comments to you and the team. All the best of luck.
Dan Dickson: Thanks for the questions, Lucas. It's good to hear from you.
Speaker Change: Thanks for the questions, Lucas. Good to hear from you.
Operator: The next question comes from Craig Hutchison with T.D. Cohen. Please go ahead.
Speaker Change: The next question comes from Craig Hutchinson with D.D. Cohen. Please go ahead.
Craig Hutchison: I just wanted to know, on the underground development rates, what's
Craig Hutchinson: Hi, guys.
Craig Hutchinson: I just wanted to know, on the underground development rates, it looks like they did pick up nicely in the second quarter. You know, in the past, initially, you had some underground geotechnical issues, but
Speaker Change: Can you just provide a comment in terms of how that's going? Are you tracking the plan, how to plan behind plans, any kind of sense in terms of how the underground development work is going?
Dan Dickson: [inaudible] Yeah, no, it's a really good observation, Craig. Ultimately, we are tracking the plan now, initially, with any initial outset when you started. There's a little bit of a learning curve, just understanding ground conditions and water conditions. I think the ground conditions are within line, if not a bit better than expectations.
Speaker Change: Yeah, no it's a really good observation Craig. Ultimately we are tracking the plan now initially with any outset when you started at it.
Speaker Change: There's a little bit of a learning curve, just understanding ground conditions and water conditions. I think the ground conditions are within line, if not a bit better than expectations in our technical reports.
Craig Hutchison: What's in our technical reports, water and water management are right in line with expectations, if not a little bit less so, things have been going relatively well. We have good days, we have bad days, but we're hitting our marks and expect to have the mine development complete by 2025. So we can kind of hit our tonnage expectations for 2025. Okay, and just in terms of the overall progress, you know, 65% complete year to date.
Speaker Change: Water, and water management is right in line with expectations, if not a little bit less. So things have been going relatively well. We have good days, we have bad days, but we're hitting our marks and expect to have the mine development complete so we can kind of hit our tonnage expectations for 2025.
Craig Hutchison: Can you give us some kind of sense of how you guys arrived at that number? I imagine it's a combination of dollars spent versus your budget and kind of the milestones. But just, you know, with sort of three or four months. You know, ahead of commissioning here, I just want to get a sense that, you know, achieving the remaining 35% is achievable really in the last, you know, three, four months. Yeah, and it's a very fair question.
Speaker Change: Okay, and just in terms of the overall progress, you know, 65% complete year-to-date, but...
Speaker Change: You can give us some kind of sense of how you guys arrive at that number. I imagine it's a combination of dollars spent versus your budget and kind of the milestones. But just, you know, with sort of three or four months...
Speaker Change: you know, ahead of commissioning here. I just want to get a sense that, you know, achieving the remaining 35-odd percent is achievable really in the last, you know, three, four months stretch here.
Dan Dickson: And just from a layman's standpoint, if you look at we were 53% at the end of the first quarter, now we're effectively 65%. It's always a delta of 12%. If you apply that over the next two quarters, that takes you to 77, or from 65 to 77, and short of 90%.
Speaker Change: Yeah, and it's a very fair question, and just from a layman's standpoint, if you look at we were 53% at the end of the first quarter, now we're effectively 65%, it's always a delta of 12%.
Speaker Change: if you apply that over the next two quarters.
Dan Dickson: One of the items that's going to be not complete for while we're in commissioning but probably complete slightly after, ultimately, will be our LNG and power generation plan. We have some delays in getting permits there. We are going to be on diesel generators for the start of commissioning and possibly into commercial production. So ultimately, we're not tracking to 100% for commissioning. As I say, there are some minor structures.
Speaker Change: That's takes you to 77, or from 65 to 77, and short 90%.
Speaker Change: One of the items that's going to be not complete for while we're in commissioning, but probably complete slightly after.
Speaker Change: ultimately will be our LNG and power generation plant.
Speaker Change: We have some delays of getting permits there. We are going to be on diesel generators.
Speaker Change: for the start of commissioning and possibly into commercial production.
Speaker Change: So ultimately we're not tracking to 100% for commissioning and as I say there's some minor structures. One that comes to mind is a maintenance shop that will be still being built while we're in commissioning and our expectations is it will still be being built while we're in there.
Dan Dickson: One that comes to mind is a maintenance shop that will still be being built while we're in commissioning. Our expectation is that it will still be being built while we're in commissioning. Thinking of it as we're going to get to 100% complete prior to commissioning isn't the way to think about it. It's probably more between 85% and 90% when we're there. And even as we go into commercial production, it's not necessarily that we'll be 100% complete either.
Speaker Change: thinking of it as we're going to get to 100% complete prior to commissioning isn't the way to think about it. It's probably more between 85% and 90% when we're there and even as we go into commercial production it's not necessarily that we'll be 100% complete either.
Craig Hutchison: Okay, that's great. Thanks for that context. May I have the last question from you? Just with regard to the commissioning by URN, you know, do you
Speaker Change: Okay, that's great. Thanks for the context. May, last question for me, just with regards to the commissioning by U.N., you know, do you anticipate
Dan Dickson: Do you anticipate producing the first concentrate at that point, or is that more pushed out to early Q1 next year? Yeah, I mean, that's getting into quite specifics. I think probably everybody would hope to hear that we expect to have some concentrate by the end of the year. And that's kind of our expectation, obviously, from commissioning to commercial production, it comes down to capacity and making sure we're hitting our capacity numbers to declare commercial production, but there'd be some concentrate that's produced during commissioning, of course. It's just a matter of how much and exactly when that timing hits.
Speaker Change: producing sort of first concentrate at that point or is that more pushed out to sort of early Q1 next year? Thanks.
Speaker Change: Yeah, I mean it
Speaker Change: That's getting into quite specifics. I think probably everybody would hope to hear that we expect to have some concentrate by the end of the year, and that's kind of our expectation, obviously, from commissioning to commercial production, it comes down to capacity.
Speaker Change: and making sure we're hitting our capacity numbers to declare commercial production, but there'd be some con that's produced during commissioning, of course. It's just a matter of how much and exactly when that timing hits.
Craig Hutchison: Great. Well, thanks guys, and good luck. Thanks for the questions, Craig.
Speaker Change: Okay, great. Well, thanks guys and good luck.
Speaker Change: Thanks for the questions, Greg.
Operator: The next question comes from Heiko Ihle with AC Language. Please go ahead.
Speaker Change: The next question comes from Heiko Ibe with HC Linguage. Please go ahead.
Heiko Ihle: Hi Dan, this is Case from H2 Wainwright. Heiko is traveling right now and can't make it into the question line, but thank you for taking our question. Happy to. For the Terranera drawdown of the remaining 45 million, would you be able to give us some insight to when you expect to take the remainder? I assume you, at least some of it, will be needed this quarter.
Speaker Change: Hi Dan, this is Case from H2 Wainwright. Heiko is traveling right now and can't make it into the question line, but thank you for taking our questions.
Dan Dickson: Happy to.
Speaker Change: For the Terranera drawdown of the remaining 45 million, would you be able to give us some insight to when you expect to take the remainder? I assume you at least some of it will be needed this quarter.
Elizabeth Senez: Hi, this is Elizabeth Senez. Yes, we do plan to draw down this quarter.
Speaker Change: Hi, this is Elizabeth Ennis. Yes, we do plan to draw down this quarter.
Heiko Ihle: Any idea how much, or is it just me?
Elizabeth Senez: Yeah, we'll see how the spend goes, but the majority of the construction spend will be incurred this quarter as it's remaining, so yes, that would be expected.
Speaker Change: Any idea how much or is it just played all year?
Speaker Change: Yeah, we'll see how the spend goes, but the majority of the construction spend will be incurred this quarter as it's remaining, so yes, that would be the expectation.
Heiko Ihle: Okay, thank you very much. Just a second question, last one Dan, maybe a little bit of a philosophical question, but you guys have completed a good part of Terranera as of today, obviously. Would you be able to maybe give us some color on things that went better, maybe some things that went worse during the construction process, maybe any line items that made the team change anything related to construction in the middle of the process?
Speaker Change: Okay, thank you very much. Just second question, last one, Dan. Maybe a little bit of a philosophic question, but you guys have completed a good part of Terranera as of today, obviously. Would you be able to maybe give us some color on things that went better, maybe some things that went worse?
Speaker Change: during the construction process? Maybe any line items that made the team change anything related to construction in the middle of the process?
Dan Dickson: Yeah, I mean, that's a big question. I mean, every day, there are things that feel like they go better, and there are days that things feel like they go worse. And I think our operational team or our construction team has done a phenomenal job of always kind of finding Plan Bs, if needed to, or even Plan Cs and looking at alternatives. Because, obviously, nothing's linear; nothing goes exactly as planned. Nothing specifically comes to mind with regard to big changes.
Dan Dickson: Yeah, I mean that's a big question. I mean every day there's things that feel like they go better and there's days that things feel like they go worse.
Speaker Change: I think our operational team or our construction team has done a phenomenal job of always kind of finding Plan Bs, if needed to, or even Plan Cs and looking at alternatives.
Speaker Change: because obviously nothing is linear, nothing goes exactly as planned. Nothing specifically comes to mind with regards to big changes, it's just timing of different things where we make adjustments either from a concrete standpoint. Obviously, the footprint that Terran Arizona is on is very small and it takes a lot of planning with regards to when we bring equipment up because ultimately we have a lay-down yard down in Puerto Vallarta.
Dan Dickson: It's just timing of different things where we make adjustments from a concrete standpoint. Obviously, the footprint that Terran Arizona is on is very small, and it takes a lot of planning with regard to when we bring equipment up. Because, ultimately, we have a laydown yard down in Puerto Vallarta, and I have to commend Don Gray and his team on how well that's gone.
Speaker Change: And things are typically don't lay down up at Terranera for longer than 48 hours, so
Speaker Change: We call it just-in-time building, and some of that stuff, some of the great engineering that we've done. Obviously, timing, we got some releases down in the tailings facility, was later expected just through some archeological work that had to be done.
Dan Dickson: I even think about the mine plan and different iterations of the mine plan, how we could be more efficient in that. We've come up with seven different distinct mine plans, and that will continue to change because even as we get into the Terranera, we're getting into what's our reserve for the 96Moz, and the plumb of that reserve at the base, which is where we're trying to target, and that's about 20
Speaker Change: Geotechnical work. I think every day there's things that guys make decisions on that are slightly different than what plan is. I got to commend Don Gray and his team on and how well that's gone. I even think about the mine plan and different iterations of the mine plan, how we could be more efficient on that.
Speaker Change: Come up with seven different distinct mind plans and that will continue to change because even as we get into
Speaker Change: the Terranera, we're getting into what's our reserve for the 96 million.
Speaker Change: ounces and the plumb of that reserve at the base, which is where we're trying to target, and that's about 20 meters thick. It's not that the ore body ends there, it's just that's where our estimates end based on our confidence.
Dan Dickson: It's not that the ore body ends there; it's just that's where our estimates end based on our confidence in drilling. As we get into that, we're going to hopefully drill out when we find more depth, and that will change our mine plans again. I think our team has done a phenomenal job being flexible and making adjustments on the run, but it all lines up, and again, we're tracking for commissioning in the fourth quarter. Thank you very much; that was great.
Speaker Change: [inaudible]
Heiko Ihle: Thank you very much. That was a great answer. I appreciate it.
Speaker Change: Thank you very much. That was a great answer. Appreciate it. No problem. Thanks, Casey.
Operator: The next question comes from Trevor Ward, a private investor. Please go ahead.
Speaker Change: The next question comes from Trevor Ward, private investor. Please go ahead.
Trevor Ward: Hey Dan. Good morning, everybody. Obviously, a pretty shocking day as an individual guest. I'm a bit of a gambler, so I've got a lot of eggs in one basket with Endeavour, so when you see your stock price tumble like it has today, I mean, I'm down personally almost $32,000 on paper in one day. Fortunately, since we last spoke, I'm actually up overall since I got my position, but I'm just curious. As a layman, as somebody that's not well-educated, especially in the buying and selling of stocks, I decided to get into silver, but I have bought and sold things over time. And so, if I manufacture something, like I make surfboards and things like that, if I make a surfboard and, let's say, for instance, with all my costs, it costs me... Transcribed by https://otter.ai, Sixth Sense.
Trevor Ward: Hey Dan, good morning everybody, obviously a pretty shocking day as an individual guest.
Speaker Change: I'm a bit of a gambler so...
Trevor Ward: I've got a lot of eggs in one basket with Endeavor.
Trevor Ward: So, when you see your stock price tumble like it has today, I mean, I'm down personally almost $33,000 on paper in one day.
Trevor Ward: Fortunately, since we last spoke, I'm actually up overall since I've got my position.
Speaker Change: But I'm just curious as a layman as somebody that's not well educated especially in The buying and selling of stocks I decided to get into silver now, but I have bought and sold things over time
Speaker Change: $23, obviously that's not relative, but say it cost me $23 after all my costs and then I'll sell it for $29. I would say that I made $6. So maybe you can explain to me in layman terms
Speaker Change: Why you don't make the adjustments whereby it's easier for us to understand how you lose money if
Speaker Change: your overall costs are way less than what you sold the store before. Can you explain that to me in layman terms and where these other extra costs come while the losses
Speaker Change: [inaudible]
Trevor Ward: I mean, it's pretty devastating to investors. And then you said you were curious why the market reacted the way it has. I mean, I understand the whole market is down today, but maybe you could enlighten me a little bit more in layman's terms why it computes into such a big loss.
Speaker Change: reacted the way it has. I mean I understand the whole market is down today but maybe you can enlighten me a little bit more in layman's terms.
Speaker Change: had computes into such a big loss.
Dan Dickson: Yeah, it's a very fair question, Trevor. And I think part of it and one of the things in the mining space, we talked about cash costs, we talked about all in sustaining costs, obviously, cash costs is kind of on an operating basis, all in sustaining costs takes into account G&A, which is our Vancouver costs, exploration dollars that we spend to increase and extend mine life, hopefully grow the mines, and then sustaining capital, sustaining capital, obviously, from an income statement standpoint doesn't hit earnings.
Speaker Change: Yeah, it's a very fair question, Trevor.
Speaker Change: I think...
Speaker Change: Part of it and one of the things in the mining space we talked about cash costs We talked about all in sustaining costs Obviously cash costs is kind of on an operating basis all in sustaining costs takes into account G&A, which is our Vancouver cost Expiration dollars that we spend to increase and extend mine life. Hopefully grow the mines and then sustaining capital and
Speaker Change: sustaining capital obviously from an income standpoint.
Dan Dickson: And we always try to have this one metric that solves for or distinguishes the company and allows peer groups to kind of compare themselves relatively quickly. And I think, as an accountant by trade, you need a balance sheet, an income statement, and a cash flow statement to fully understand what's actually happening with a company. And unfortunately, in the IFRS world or the accounting principles world, there's been a lot more noise that goes through an income statement now than there was before, and that makes it a lot more difficult for the layperson to understand what's going on in an income statement and ultimately our financial statements.
Speaker Change: income statement standpoint doesn't hit earnings.
Speaker Change: and we always try to have this one, one.
Speaker Change: metric that solves or distinguishes the company and allows peer groups to kind of compare themselves relative as quickly and I think as
Speaker Change: An accountant by trade, you need a balance sheet, an income statement, a cash flow statement to fully understand what's actually happening with a company.
Speaker Change: Unfortunately, there's in the IFRS world or the accounting principles world there's been a lot more noise that goes through NICO.
Speaker Change: in the statement now than there was before, and makes it a lot more difficult for the layman's term to understand what's going through an income statement and ultimately our financial statements.
Dan Dickson: In our case, for this quarter, we have a $9 million loss related to derivatives, and under our credit facility for Terranera, we're required to hedge 68,000 ounces of gold that we locked in at $2,325, I believe on March 28. Obviously, gold appreciated during the quarter, which is a great thing, great for the long-term benefit of Endeavour. But we do recognize a loss on those forward contract gold contracts amounting to about $7.5 million. 23.25, 23.50, and possibly at the end of Q3 when we go through this with gold any price below 2400, we'd recognize a gain on that on those derivative contracts.
Speaker Change: in our case for this quarter.
Speaker Change: We have a $9 million loss related to derivatives. Under our credit facility for Terranera, we're required to hedge 68,000 ounces of gold that we locked in at $2,325, I believe, on March 28th.
Speaker Change: Obviously, gold appreciated during the quarter, which is a great thing, great for the long-term benefit of Endeavor, but we do recognize a loss on those forward contract, gold contracts amounting to about $7,000.
Speaker Change: $75 per ounce this quarter that translates in the Senate
Speaker Change: It's seven and a half million dollar loss in derivatives that's non-impacting to our current operations.
Speaker Change: and obviously out of our hands. And as I say, long term it's probably a benefit, short term it's a movement and it's a mark to market.
Speaker Change: Obviously gold today is near around $24.50, other times during the quarter it got down to $24.50.
Speaker Change: 2325, 2350, and possibly at the end of Q3, when we go through this, if gold is any below 2400, we'd recognize a gain on that, on those derivative contracts.
Dan Dickson: We also have FX derivative contracts and go through our income statement. With all that, it makes noise, and that's driving our 14 million dollar loss for the quarter. Again, we look at it as a management team from an adjusted things, things that we can operate on, and our costs to produce at Guanasabit on an operating basis or at both our operations were $13.43. That excludes depreciation. I think depreciation needs to be considered in there, and that's the total production cost per ounce, and that's about $22 for us.
Speaker Change: We also have FX, Derivative Contracts, that go through our income statement. With all that, it makes noise, and that's driving our $14 million loss.
Speaker Change: for the quarter.
Speaker Change: Again, we look at it as a management team from an adjusted thing, things that we can operate on, and our costs to produce at Gwana Sibi on an operating basis or at both our operations was $13.43.
Speaker Change: as excludes depreciation, I think depreciation needs to be considered in there and that's a total production cost per ounce and that's about $22 for us.
Dan Dickson: But we do have other things that flow through our income statement, and that's investing in the future of the company. We have our exploration properties. So we have exploration. Piteria is one of the things that comes mainly to mind.
Speaker Change: But we do have other things that flow through our income statement, and that's investing into the future of the company. We have our exploration properties, so we have exploration pizzerias, one of the things that come mainly to mind.
Dan Dickson: It's one of the world's largest undeveloped silver deposits. We don't capitalize on that work. We expense it through our income statement. Again, that creates noise, but we think that brings long-term value to our shareholders in the fact that we want to bring Pithiria into production. When Terranera is done, and there's a lot of work left to be done there, but we think that will be beneficial long-term to shareholders. So, of course, today's drop of about 20%, a lot higher than our peers, and that's what we find puzzling because we did put out our production numbers, and the production numbers are in line with expectations.
Speaker Change: It's one of the world's largest undeveloped silver deposits. We don't capitalize that work, we expense it through our income statement.
Speaker Change: Again, that creates noise, but we think that brings long-term value to our shareholders in the fact that we want to bring Pithyria into production when Terranera is done and there's a lot of work left to be done there, but we think that will be beneficial long-term to shareholders. So, of course, today's drop of about 20%, a lot higher than our peers.
Speaker Change: And that's what we find puzzling because we did put out our production numbers and the production numbers are in line with expectations. Our tear and error construction, which is a lot of what people are looking at for the future value of this company, is in line with expectations.
Dan Dickson: Our Terranera construction, which is a lot of what people are looking at for the future value of this company, is in line with expectations. The additional noise going through the income statement can be frustrating, that goes through it, but I never like to look at our share price on a one-day basis. So, even if we're up 20%, that's a great day, but it's not as meaningful if you can stack that together with one week, one month, one quarter, one year.
Speaker Change: The additional noise going through income statement can be frustrating that goes through it But I never like to look at our share price on a one-day basis. So even if we're up 20%
Speaker Change: That's a great day, but it's not as meaningful if you can put that, stack that together with one week, one month, one quarter, one year. So again, we wish it wasn't down 20% today, which is about 15% higher than our peers.
Dan Dickson: So, again, we wish it wasn't down 20% today, which is about 15% higher than our peers. I think that will grind back. So, stick with us, and I believe we'll be able to deliver on this going forward.
Speaker Change: I think that will grind back. So stick with us and I believe we'll be able to deliver on this going forward.
Trevor Ward: Okay, yeah, but what about in the future? How many other derivatives? Not that I already understand what derivatives are, but going forward, how much more of this are you still allotted for that? How do we know that in the third quarter, the fourth quarter, you haven't got all these other derivatives that are stacking up that are going to cause losses in future quarters?
Speaker Change: Okay, yeah, so what about in the future though, how many other derivatives, not that I already understand what derivatives are, but going forward, how much more of this are you still allotted for that?
Speaker Change: I mean, how do we know that in the third quarter, the fourth quarter, you haven't got all these other derivatives that are stacking up that are going to cause losses in future quarters?
Dan Dickson: Yeah, and they'll be there. So these 68,000 ounce gold contracts that we're going to sell are going to effectively roll out in 2025 and 2026. I would, again, from a layman's standpoint, they're non-cash items. It doesn't mean we're losing cash off our balance sheet. It means we're recognizing a decision that we've had to do through a credit facility, that loss now or in the future. Under IFRS, we're required to do that from a mark to market standpoint. And that's fine. Again, it rolls out over the next two years. And so I can't promise that we won't.
Speaker Change: Yeah and they'll be there. So these 68,000 ounce gold contracts that we're going to sell are going to effectively roll out in 2025 and 2026.
Speaker Change: So those are going to be there. If gold price continues to appreciate and we're looking at gold of $2,800, I think you would agree that's positive for the company long term.
Speaker Change: Ultimately, if it goes down and then positive for the company long term, but ultimately it's going to create losses going through our income statement until those roll out. If it goes the other way, it's going to create gains to it. So they're going to be there. I would I would.
Speaker Change: [inaudible]
Speaker Change: From a layman's standpoint, they're non-cash items. It doesn't mean we're losing cash off our balance sheet. It means we're recognizing a decision that we've had to do through a credit facility, that loss now, or the future.
Speaker Change: Under IFRS, we're required to do that from a mark-to-market standpoint, and that's fine. Again, it rolls out over the next two years, and so I can't promise it won't be there.
Trevor Ward: All right, all right, well, let's hold thumbs. Okay, thanks for all the best. Thanks for the questions, Trevor. Thanks, everybody, goodbye.
Speaker Change: All right, all right, well, it's all thumbs. Okay, thanks, all the best. Thanks for the questions, Trevor.
Operator: Once again, if you have a question, please press star then 1. The next question comes from Henry Westendorp, Private Investor. Please go ahead.
Speaker Change: [inaudible]
Speaker Change: Once again, if you have a question, please press star then 1. The next question comes from Henry Westendorp, Private Investor. Please go ahead.
Henry Westendorp: Good morning, very interesting call. We're all very excited about Terranera, but could you give us a few words on this year's progress on Piterella? Is there anything moving there? Or are you kind of putting that on the bench until you get Terranera up and running? Yeah, it is moving.
Henry Westendorp: Good morning. Very interesting call.
Speaker Change: We're all very excited about Terranera.
Henry Westendorp: But could you give us a few words on this year's Progress on Pitorella. Is there anything moving there or you kind of get that on the bench until you get Terranera up and running?
Dan Dickson: Yeah, it is moving. We've got a $5 million budget for Pizzeria in 2024. We are starting to drill at Pizzeria now. We have a 1km adit at the beginning of the year. We've extended that adit. We expect it to go through some veins and a Manto zone in the back half of this year. So, we'll have results and a plan put together for the marketplace hopefully by the end of this year. We are excited about it.
Speaker Change: Yeah, it is moving and we've got a five million dollar budget at Pizzeria for 2024 We are starting to drill at Pizzeria now. We have a one kilometer at it at the beginning of the year We've extended that at it. It's kind of it's gonna we expect it to go through some veins and its own a mantle zone
Speaker Change: in the back half of this year. So we'll have results and a plan put together for
Speaker Change: for the marketplace, hopefully by the end of this year. We are excited about it. Obviously, it's one of the world's largest undeveloped silver deposits. It's got a resource to find close to 600 million ounces of silver plus lead and zinc.
Dan Dickson: Obviously, it's one of the world's largest undeveloped silver deposits. It's got the potential to find close to 600Moz of silver plus Lead and Zinc. We are looking at it from an underground standpoint. We are underground miners. I know Pizzeria, and a lot of people in the marketplace understand Pizzeria as an open pit mine from a historical feasibility study that was done by Silver Standard or SSR Mining. But again, we're looking at it from an underground standpoint. I just started drilling to confirm some of the hypotheses that we have with regard to feeder structures and Mantos. Again, we expect to have information out by the end of the year on that.
Speaker Change: We are looking at it from an underground standpoint. We are underground miners. I know Pitteria and a lot of people in the marketplace understand Pitteria as an open pit mine from a historical feasibility study that was done by Silver Standard for SSR mining.
Speaker Change: Again, we're looking at it from an underground standpoint. I just started drilling to confirm some of the hypotheses that we have with regards to feeder structures and mantles, and again, expect to have information out by the end of the year on that.
Henry Westendorp: It's terrific. Thank you. Thanks for the question, Henry.
Speaker Change: It's terrific, thank you.
Speaker Change: Thanks for the question, Henry.
Operator: This concludes the question and answer session. I would like to turn the conference back over to Dan Dickson for any closing remarks. Please go ahead.
Speaker Change: This concludes the question and answer session. I would like to turn the conference back over to Dan Dixon for any closing remarks. Please go ahead.
Dan Dickson: Thank you, operator. And thank you to everybody listening today. I think Q3 in the back half of the year is going to be an exciting time for Endeavour as we try to bring Terran Air into commissioning and ultimately commercial production to significantly increase our production profile and ultimately cut our cost profile. So thank you again for listening and I hope to talk to you guys soon.
Dan Dixon: Thank you, operator, and thank you for everybody listening today. I think Q3 in the back half of the year is going to be exciting time for Endeavor as we try to bring Terran Air into commissioning and ultimately commercial production to significantly increase our production profile and ultimately cut our cost profile. So thank you again for listening and we'll talk to you guys soon.
Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Music: ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
Speaker Change: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Speaker Change: [inaudible]