Q2 2024 Endeavour Silver Corp Earnings Call

Operator: Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silver Corps 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 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 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 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0.

Speaker Change: I would now like to turn the conference over to Alison Patek, Director of Investor Relations. Please go ahead.

Alison Patek: Thank you, operator. And good morning, everyone.

Alison Patek: 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.

Alison Patek: Our MD&A and financial statements are available on our website at edrsilver.com

Alison Patek: Before we get started, I ask that you view our MD&A with cautionary 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 Dixon, Endeavor Silver's CEO, Elizabeth Senez, our Chief Financial Officer, and Don Gray, Endeavor's COO. Following Dan's formal remarks, we will open the call for questions, and now over to Dan. Thank you.

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 Dixon: Thank you, Allison, and welcome, everyone. It's been a productive second quarter at Endeavor 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 30. 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.

Dan Dickson: It's been a productive second quarter at Endeavor Silver.

Speaker Change: 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 Dixon: Q2 silver equivalent production totaled 22 2.2 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 Dixon: 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 strength of the 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 strength in Mexican peso contributing to higher labour, power and consumable costs, and continued inflationary effects from 2023 that flowed into 2024.

Dan Dixon: 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 purchase 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, direct offering costs. Our mining, processing, and site administrative costs are within management's expectations.

Speaker Change: At Gwanesee, 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.

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.

Dan Dixon: Cash costs and all-in sustaining 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: 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 Dixon: 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, and during the quarter, the company completed its first drawdown of the Terranera Senior Secure Debt Facility, drawing $60 million. Subsequent to the reporting end, the company completed a second draw at $15 million and has an additional $45 million committed and available for future drawdowns expected in the third or fourth quarter.

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 30th, 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.

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 Dixon: 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 1250 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 declines. Development has cut through the Terranera vein, and we've started to develop test stokes.

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 a 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 Dixon: 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 tailing 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 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.

Dan Dixon: Procurement 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 planned operator training program was established, and 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.

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 Dixon: 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 Endeavor's sustainability commitments, performance, and ongoing approach to responsible mining. You can view the full report and the company strategy on our website under the Sustainability tab. With that, Operator, I'm happy to open this up to questions. Please proceed with 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's strategy on our website under the Sustainability tab.

Speaker Change: With that, Operator, I'm happy to open this up to questions. Let's 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.

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 2.

Speaker Change: The first question comes from Jake Sikulski with Alliant Global Partners. Please go ahead.

Jake Sekelsky: Hey Dan and team, thanks for taking my questions.

Dan Dixon: No problem, Jake. Happy to take it.

Jake Sikulski: 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 Sikulski: So just starting with the finished goods build during the quarter, I'm just curious were ounces withheld for higher prices this quarter or is this just a function of timing?

Dan Dixon: 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 Terrana, 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 Terran now 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 just on foreign exchange, I'm just curious, do you think the pesos have 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 Dixon: 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 them when we go into operations and 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.

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 bill.

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.

Dan Dixon: Got it. Okay, that's all for me. Thanks again.

Speaker Change: But we'll see.

Dan Dixon: Thanks for the questions, Jake.

Speaker Change: Got it. Okay, that's all for me. Thanks again.

Lucas Pipes: 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. Riley. 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 decide, 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. My first question is kind of higher level on the operating environment in Mexico. Obviously, there was an election. The administration has yet to...

Speaker Change: 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 Dixon: Yeah, I mean, you're correct. On June 2, there was an election, and the Moreno party won in probably what was expected to be even better than what, better results for them than originally expected. The new president, Claudia Scheinbaum, is effectively a successor to AMLO. It will be interesting over the first couple of years in office how closely she follows the platform, which is expected to be relatively closely. She has privately and now kind of percolated out into the press that she'll be more pro-mining necessarily than AMLO. She's definitely more pro-business.

Claude Scheinbaum: Yeah, I mean you're correct on June 2nd, there is an election. The Moreno party won in probably what was expected to be even better than what Better results for them than was originally expected. The new president, Claude Scheinbaum

Speaker Change: She is a successor to effectively AMLO and will be interesting over her first couple years in office how closely she follows the platform which is expected to be relatively closely. She has privately and now kind of percolated out into the press that mining will

Dan Dixon: 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: 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

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 Dixon: 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 Endeavor 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 ultimately, and those minor reforms will impact Endeavor significantly just because we have departments that can handle that.

Speaker Change: But again until that comes through and actually gets properly approved or properly put through legislation It's difficult to comment on

Lucas Pipes: Really appreciate your perspective. That's, that's helpful. You note the additional 45 million available at Terranera in the second half of 2024. And I wondered if there was any specific project.

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 Dixon: No, there are no specific milestones required for it. The independent engineers that represent the banks,

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.

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 Dixon: Thanks for the questions, Lucas. It's good to hear from you.

Speaker Change: Thanks for the questions, Lucas. Good to hear from you.

Craig Hutchinson: The next question comes from Craig Hutchinson with T.D. Cohen. Please go ahead.

Speaker Change: The next question comes from Craig Hutchinson with TD Collins. Please go ahead.

Craig Hutchinson: I just wanted to know about the underground development.

Dan Dixon: And the underground development rates look like they did pick up nicely in the second quarter. You know, in the past, or like initially, you had some underground geotechnical issues, but 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? Yeah, no, it's a really good observation, Craig.

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 sort of sense in terms of how the underground development work is going?

Dan Dixon: 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 in our technical reports. Water and water management are also right on target with expectations, if not a little bit less so. 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.

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.

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.

Dan Dixon: Okay, and just in terms of the overall progress, you know, 65% complete kind of year to date. 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' stretch. Yeah, and it's a very fair question.

Speaker Change: Okay, and just in terms of the overall progress, you know, 65% complete kind of 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 month stretch here.

Dan Dixon: 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%, so I would say a delta of 12%.

Speaker Change: He applied that over the next two quarters.

Dan Dixon: 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. And as I say, there are some minor structures.

Speaker Change: That takes you from 65% to 77% in short and 90% in full.

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. Our expectation is that it will still be being built while we're in there.

Dan Dixon: One that comes to mind is a maintenance shop that will still be being built while we're in commissioning. Our expectation is it will still be being built while we're in there. So 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 it will be 100% complete either. Okay, that's great.

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 Hutchinson: Thanks for the context. May I have one last question for me just with regard to the commissioning by your end, you know, do

Speaker Change: Okay, that's great. Thanks for the context. May I have the last question from you, just with regards to the commissioning by Iran, you know, do you anticipate

Dan Dixon: and, you know, do you anticipate producing sort of the first concentrate at that point, or is that more pushed out to sort of 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 waste that's produced during commissioning, of course. It's just, it's 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 a matter of how much and exactly when that timing hits.

Dan Dixon: Great. Well, thanks, guys. And good. Thanks for the questions, Craig.

Speaker Change: Okay, great. Well, thanks guys and good luck.

Speaker Change: Thanks for the questions, Craig.

Heiko Ihle: The next question comes from Heiko Ihle with HC Linguistics. Please go ahead.

Speaker Change: The next question comes from Heiko Ibe with HC Lingred. Please go ahead.

Heiko Ihle: Hi Dan, this is Kay from H2Wayne Wright. Heiko is traveling right now and can't make it into the question line, but thank you for taking our question. I'd be happy to. For the Terranera drawdown of the remaining $45 million, would you be able to give us some insight as to when you expect to take the remainder? I assume 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 Senez. Yes, we do plan to draw down this quarter.

Elizabeth Senez: Any idea how much, or is it just played by ear? Yeah, we'll see how this then goes. But the majority of the construction.

Speaker Change: Any idea how much or is it just played all year?

Elizabeth Senez: The Construction Fund will be incurred this quarter as it's remaining, so yes, that would be expected.

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 but that would be the expectation.

Heiko Ihle: Okay, thank you very much. Just one 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 something that got 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 Dixon: 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.

Dan Dickson: I think our operational team or our construction team has done a phenomenal job of always kind of finding Plan B's, if needed to, or even Plan C's and looking at alternatives.

Dan Dickson: 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 Dixon: It's just the timing of different things, or we make adjustments from a concrete standpoint. Obviously, the footprint of Terran Arizona is very small, and it takes a lot of planning with regard to when we bring equipment up. Because ultimately, we have a lay-down yard down in Puerto Vallarta, and things typically don't lay down at Terranera for longer than 48 hours. So 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 were later expected just through some archaeological work that had to be done, and geotechnical work. I think every day there are things that guys make decisions on that are slightly different than what the plan is.

Dan Dickson: And things are typically don't lay down up at Terranera for longer than 48 hours, so

Dan Dickson: 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, it was later expected just through some archeological work that had to be done.

Dan Dixon: And I got to commend Don Gray and his team on how well that's gone. I even think about the mine plan and different iterations of the mine plan, and how we could be more efficient with 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 20m thick.

Dan Dickson: geotechnical work. I think every day there's things that guys make decisions on that are slightly different than what the plan is. I've got to commend Don Gray and his team on 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.

Dan Dickson: Come up with seven different distinct mind plans and that will continue to change because even as we get into

Dan Dickson: the Terranera, we're getting into what's our reserve for the 96 million.

Dan Dickson: 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 Dixon: 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. So 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, sir.

Speaker Change: with us today.

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.

Trevor Ward: 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.

Trevor Ward: Hey Dan, good morning everybody, obviously a pretty shocking day as an individual investor.

Trevor Ward: I'm a bit of a gambler. So I put a lot of eggs in one basket with Endeavor. 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. Fortunately, since we last spoke, I'm actually up overall since I've, you know, I've 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.

Trevor Ward: I'm a bit of a gambler, so I've got a lot of eggs in one basket with Endeavor. 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. But I have bought and sold things over time.

Trevor Ward: Now, 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.

Speaker Change: And so if I manufacture something like I'll make surfboards and things like that if I make a surfboard and Let's say for instance with all my costs it costs me

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]

Dan Dixon: 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 Dixon: 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 Exploration dollars that we spend to increase and extend mine life. Hopefully grow the mines

Speaker Change: and then sustaining capital.

Speaker Change: Sustaining capital obviously from an income standpoint.

Dan Dixon: 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, or 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 metric that solves 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, income statement, and 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 Nicaragua.

Speaker Change: [inaudible]

Dan Dixon: 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 Endeavor. But we do recognize a loss on those forward contract gold contracts amounting to about $7.5 million.

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.

Dan Dixon: 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. 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 for the quarter. 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 Guanasibi 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: 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 contracts, gold contracts, amounting to about $700,000.

Speaker Change: $75 per ounce this quarter. That translates into seven...

Speaker Change: $7.5 million loss in derivatives that's non-impacting to our current operations.

Speaker Change: and obviously out of our hands. 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 sitting around $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.

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 Guanasabit on an operating basis or at both our operations was $13.43.

Speaker Change: at 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 Dixon: 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. 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 comes mainly to mind.

Dan Dixon: 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 draw-off of about 20% is a lot higher than our peers.

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 Pithiria into production, Ventariner 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.

Dan Dixon: 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 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 for someone going through it, but I never like to look at our share price on a one-day basis.

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.

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%

Dan Dixon: 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. 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: That's a great day, but it's not as meaningful if you can stack that together with one week.

Speaker Change: one quarter, one year. So, again...

Dan Dixon: Okay, yeah. But 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 allowed to do? 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?

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: [inaudible]

Dan Dixon: 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're not going to see that happen again.

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: again.

Speaker Change: [inaudible]

Trevor Ward: All right. All right. Well, it's all thumbs up.

Speaker Change: and so I can't promise it won't be there.

Speaker Change: All right, all right, well, let's hold thumbs. Okay, thanks, all the best. Thanks for the questions, Trevor.

Dan Dixon: Okay. Thanks. So, all the best. Thanks for the questions, Trevor. Thanks, buddy. Goodbye.

Operator: Once again, if you have a question, please press star then one. The next question comes from Henry Westendorp, Private Investor. Please go ahead.

Trevor Ward: Thanks, buddy. Good luck.

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 Pitarella? 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 Pittorella? Is there anything moving there, or you kind of get that on the bench until you get Toronero up and running?

Dan Dixon: Yeah, it is moving. We've got a $5M budget at Pizzeria for 2024. We are starting to drill at Pizzeria now. We have 1km of it at it at the beginning of the year. We've extended that at it. We expect it to go through some veins and a manto zone in the back half of this year. So hopefully, we'll have results and a plan put together for the marketplace 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 a zone 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 defined close to 600 million ounces of silver plus lead and zinc.

Dan Dixon: Obviously, it's one of the world's largest undeveloped silver deposits. It's got a resource defined 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 have just started drilling to confirm some of the hypotheses that we have with regard to feeder structures and mantles. Again, I expect to have information on that by the end of the year.

Speaker Change: We are looking at it from an underground standpoint. We are underground miners. I know Pithuria and a lot of people in the marketplace understand Pithuria 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.

Dan Dixon: 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.

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 Dixon: 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 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 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 an 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.

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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.

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