Q3 2024 Endeavour Silver Corp Earnings Call
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Speaker Change: Thank you for standing by. This is the conference operator. Welcome to the Endeavorous Silver Corp. 3rd quarter 2024 results conference costs. As a reminder, all participants are endless and lonely, moment and the conference is being recorded.
Speaker Change: After the presentation, there'll 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.
Speaker Change: I would now like to turn the conference over to Alison Pettit, Director of Investor Relations. Please go ahead.
Alison Pettit: On today's call, we have Dan Dixon, Endeavor Silver's CEO, Elizabeth Pines, our CFO, and Dawn Gray, Endeavor's COO.
Alison Pettit: 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.
Dan Dixon: It's been a busy third quarter at Endeavor Silver.
Dan Dixon: As gold reached new all-time highs, and with silver starting to follow, the company's cash flow and financial position should continue to benefit from these higher prices.
From an operational standpoint, Q3 brought an unexpected challenge as the company operated at reduced capacity due to a trending failure of the primary ball mill at the Guana City mine.
Dan Dixon: Temporary modifications were completed in August allowing processing to continue at roughly 50% of capacity.
The estimated timeline back to full capacity remains at 15 weeks, with the mine being in full operation next month.
Dan Dixon: I would like to extend my thanks to our operations team for their dedicated efforts in mitigating the issue.
Dan Dixon: Q3 silver equivalent production totaled 1.6 million ounces, or 875,000 ounces of silver and 9,300 ounces of gold, tracking well towards the updated 2024 production guidance of 7.3 to 7.6 million silver equivalent ounces.
Dan Dixon: 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 we expect the production profile in the fourth quarter to be similar to Q3.
Dan Dixon: At Terranera, substantial progress was made during the third quarter. Surface construction reached 77% at September 30th, with more than $258M spent to date.
Dan Dixon: The finish line is in sight as Terranera continues to remain on track for commissioning near the end of the year, and we are excited to have this transformative project added to our production profile in 2025.
Dan Dixon: Moving to our financials, we reported top line revenue of $53 million, up 8% year over year, benefiting from the higher precious metal prices compared to Q3 2023.
Dan Dixon: Cost of sales totals $41 million, a decrease of 12% compared to Q3 2023, driven by lower silver ounces sold in the quarter as well as cost management measures undertaken at Guantanamo Bay following the Trident failure.
Dan Dixon: which also includes the termination of a third-party contract mining activities.
Dan Dixon: Direct operating costs on a per ton basis and a per ounce basis were evaluated elevated due to the reduced operating capacity at Quantas City.
Dan Dixon: Because of the reduced operating capacity, management withdrew cost guidance for 2024 in August.
Dan Dixon: The company reported a net loss of $17 million for the three-month period ended September 30, 2024, compared to a $2.3 million loss in Q3 of 2023.
Dan Dixon: Excluding certain non-cash and unusual items and items that are subject to volatility which are unrelated to the company's operations, adjusted income was 1.6 million dollars compared to an adjusted loss of 8.3 million in Q3 2023.
Dan Dixon: As of September 30th, the company's cash position was $55 million and working capital was $29 million.
Dan Dixon: During the quarter, the company completed drawdowns of $25 million from the senior secured debt facility for Terranera, and subsequent to the quarter, the company completed its final drawdown of $35 million.
As I mentioned earlier, the overall progress at Terranera reached 77%, with more than $258 million of the project's budget spent to date.
Dan Dixon: Project commitments total $270 million, which is 99% of the $271 million capital budget, and remains on track for commissioning near the end of Q4 2024.
Dan Dixon: During the third quarter, 1,050 meters of underground mine development was completed for a cumulative total of 5,550 meters, and the team continued progressing portals 1, 2, and 4, with long-wall stokes being developed and an initial production plan for Q4.
The underground explosive magazines were also completed with the explosive use permit application submitted for approval and anticipated in the new year. On the upper platform, surface mill and infrastructure construction is 90 percent complete and continues to transition to operations.
Dan Dixon: The Corus Ore Stockpile and Reclaimed Tunnel reached 100% completion with pre-commissioning testing beginning in the third quarter, and the primary jaw crusher was commissioned with ROC in August, marking a major project milestone.
Dan Dixon: The excavation of the Tailing Storage Facility Embankment Key Trench is 100% complete, with the secondary key at 40% complete.
Dan Dixon: Structural steel columns and beams were erected for the concentration filter building and equipment mechanical structures and remains on the critical path for commissioning in Q4. Through September 30th, procurement was 99% complete and the project team continues to excite pending arrivals.
Dan Dixon: And lastly, from a community relations standpoint, with local community support continue to be a major commitment in Q3, the company supported a series of local initiatives and investments.
Dan Dixon: such as the inauguration of an early childhood development center scholarships for university students in Santiago, so females, you know, simple road maintenance, workshops or business entrepreneurship for local residents.
Dan Dixon: For a fulsome construction update at Terranera, I encourage you to visit our website where you'll find our quarterly photo gallery showcasing the latest developments, progress, and information.
Dan Dixon: With that, I'm happy to open up to questions. Operator, please proceed to our Q&A session.
Speaker Change: Certainly. We'll now begin the question and answer session.
Speaker Change: To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys. To withdraw your question, please press star then two.
Speaker Change: We can hear you really well, Iko. It's nice to hear from you.
Iko: Perfect. I was going through your October 21st press release regarding Piranera earlier today again. Just a few follow-ups from the release. You hinted at a few of them earlier on this call.
Iko: You mentioned that you're recruiting and training team members. How many folks are currently on the payroll, and can you maybe give a trajectory for staffing levels with the timeline from now until full employment at the site?
Speaker Change: I can tell you that full employment at the site when we're in operations is about just over 500 people. Currently, we're well over 750 people at site. In fact, we have a second ship coming to help push us to the end of the year here with regards to our tailings filter press.
Dan Dixon: As far as the ramp up of where we're exactly right now compared to where we're going to be when we're in full operations
Dan Dixon: I think we have about 250 Endeavor Silver employees, and I think there's actually 800 contract workers on site trying to push to get us to the end here.
Speaker Change: Impressive numbers.
Speaker Change: Are you seeing community embracement from all of this? I mean, there's still a decent amount of local job creation from all of this. What are you seeing? Can you maybe give some examples of and obviously you're doing the scholarships and you're doing all sorts of stuff. Is it working? Are they embracing it?
Speaker Change: Yeah, I'll touch on a bit, maybe pass it to Dawn, who's that site a bit more than I am. But ultimately, we've had a community relations group on site since 2013, when we really acquired the property and I got to hand it to our explorations team that's done a phenomenal job of incorporating
Speaker Change: things that would help the community benefit from our mind and ultimately incorporating them with understanding what we're doing at Ternera. I'd say over our last four or five years, we've had great engagement with the community. I think Santiago de los Pinos.
Speaker Change: will great benefit greatly and I think they're greatly involved. We've hired people there and ultimately brought a lot of
Dan Dixon: Direct and indirect jobs the community
Dan Dixon: As far as the programs that we have, and it's similar to what we've always done at Guanasvi and Bolognitos.
Dan Dixon: We feel like we're neighbors and to be a good neighbor, you got to be part of the community and help out where we can. Obviously, I touched on some in my talk with tree donations, community support.
Dan Dixon: for various days like Day of the Dead. We're always involved with that and always looking ways to kind of incorporate ourselves in the community because obviously having a social license to operate has been a foundation of Endeavor and I think that's going to continue to be the case.
Dan Dixon: Don, I don't know if there's anything else you want to add or other community programs that we're doing that you see has been greatly beneficial
Speaker Change: I think I mentioned on on our we have a phased training program for our mill operators and
Dan Dixon: We filled out all the slots. So I think that's a real real tribute to our guys Putting together good programs and working with the community
Speaker Change: Yeah, no, for sure. I, it's, I'm not going to get too much into 2025. But ultimately, if you look back at the history of Endeavor, our GNA from the cash perspective has always been about eight to $10 million US.
Daniel Dickson: Unknown Executive, Daniel Dickson
Speaker Change: Very good. I'll get back in queue. Thank you so much.
Speaker Change: Thank you, Aiko, for the questions.
Speaker Change: The next question is from Lucas Pipes with B Raleigh Security. Please go ahead.
Speaker Change: Thank you so much, operator. This is Nick Giles asking questions on behalf of Lucas. Dan and team, congrats on all the progress at Terran Air so far.
Nick Giles: Maybe a question for both Dan and Don.
Speaker Change: Just would love to get a little bit more color about the RAMP process, how to think about timing, and ultimately, what would you consider the largest potential bottlenecks during that process? Thank you very much.
Speaker Change: Thanks Nick. I can help out a little bit with Don. Ultimately we expect kind of a three-month ramp up. We're hoping to go a little bit quicker and I'll leave it to Don. He expects the bottlenecks could be, but I'm sure there's many that come through his head.
Don: Yeah, I mean, it's normal, you have the normal startup items. And we do have much of the upper platform completed. So there's a lot of a lot of things we can get pre checked in advance, we're where we'll have the focus.
Speaker Change: is on the, is on the, especially on the concentrate and the tailing filters there.
Speaker Change: You know, we want to get one, we want to get one circuit up and running real well, and then we can, we can complete the, a lot of the commissioning. So our focus will be there and we feel we brought in the right talent, have the vendor support. So we think it'll, it'll go along as planned.
Speaker Change: That's great to hear. I appreciate the color.
Speaker Change: Any updated view on cash costs or on sustaining just based on current gold and silver prices?
Speaker Change: Yeah, I'm guessing, Nick, you're asking for 2025 in relation to Terranera.
Nick: That's correct.
Speaker Change: Yeah, where our plan will be once we get into commissioning and ramp up, we'll come out with 2025 guidance early next year. Ultimately, our feasibility study that came out in 2021, we updated that and great prior to.
Speaker Change: start the build or ultimately making our best decision. And our cost per ton at the time was $81. And we fully understand that we've seen a lot of inflationary pressures over the last two years. And we've seen that other existing operations want us to be in Bolognese.
Speaker Change: As we get into going through all our budgeting and make sure our cost driver is right, it'll take a little bit of time and we want to make sure we understand all the numbers and then the timelines to come out with that. So you can bear with us, we expect them to come out, like I say, in January, February of next year.
Speaker Change: Fair enough. No, I appreciate that. If I can squeeze one more in, maybe a question for Elizabeth. It would be great to get your perspective on target liquidity, cash on balance sheet, just as Terranera reaches full run rates.
Speaker Change: Processing to see cash flows coming in at Terra Nera early in 2025.
Alison Pettit: Great, that's super helpful. Dan, Elizabeth, Don, to you and the rest of the team, continue best of luck. Thanks so much.
Speaker Change: The next question is from Nicholas Clark with TD Cohen. Please go ahead.
Nicholas Clark: Hi Dan and team, thanks for taking my questions. Nick Clark here asking on behalf of Craig Hutchinson. Just one question if I could circle back on Terranera and maybe...
Nicholas Clark: This is just a little more verification, but if we're looking at about 99% of that $271 million,
Nicholas Clark: budget being committed currently. Would it be fair to kind of think of that remaining 23% left on a fiscal completion as being covered by those commitments or would there be a little bit of a delta there? Thank you.
Speaker Change: Yeah, I'm happy to answer that. I mean, Libby and Don are sitting right now in Mexico.
Speaker Change: Ultimately, the $270 million committed and the $258 million spent, the $258 million spent includes prepaids and advances that Libby touched on with Nick Giles' question there.
Speaker Change: Ultimately with what's left.
Speaker Change: and it's a very dynamic question because we have a lot going on with regards to our LNG vaporization plant. Ultimately, we've been staying in the market that's going to be ready in 2025, we're open by the end of the
Speaker Change: first quarter, but we could ultimately be in commercial production before that's completed. We have the embankment on our tailings dam. Originally, it's estimated to be $40 million in that 271. We think we can start up with a lower embankment. Of course, we're trying to hit what our percentage completion was.
Speaker Change: actual expectation, and then mine development. And depending on that commissioning timeline, it's difficult, but we do know we're in the ballpark, and we're not coming out with a commitment of exactly what our spend will be. But we're on good track right now.
Speaker Change: Correct.
Speaker Change: Great. Thanks, guys.
Speaker Change: The next question is from Jake Sikowsky with Alliance Global Partners. Please go ahead.
Jake Sikowsky: Hey, Dan and team. Thanks for taking my questions.
Speaker Change: Yeah, I'll happily pass that to Don.
Don: You know, I think, as Dan mentioned in the opening comments, our operating team did a really good job.
Don: working on the milling circuit and keeping that going.
Speaker Change: And also they've done equally as good a job on the repair work, maintaining close contact with the foundry because we did have to have some things.
Speaker Change: put together and that that's continuing like we planned so I think we're in we're in good shape we have the contractor lined up for when when the parts get there and the components and and we don't expect any don't expect any glitches there so
Speaker Change: In a broad sense, with where precious metals prices are, I'm just curious, does that cause you guys to revisit any of the near-term or medium-term mine plans or how you're looking at milling at Juan Acevedo?
Speaker Change: Yeah, I mean, that's a good question. It's something that we look at every year at that time of year right now, budgeting and mind plans and finalizing those for next year and
Speaker Change: I would say even at Terranera, it's a dynamic with where prices are. And obviously, in our resource models, we have indicated ounces, we have inferred ounces. And often we as Endeavor, with our underground mining, have brought in inferred ounces and indicated ounces into the mine plans. Sometimes potential ounces aren't even in our resource.
Speaker Change: with higher prices allows us to go in some areas that we may be abandoned in the past. And again, we're going through a resource update for 2024, year-end 2024, and we'll come out with that probably in our MD&A or our information, but our AIF ultimately per year-end.
Speaker Change: Thanks for the questions, Jake.
Speaker Change: Once again, if you have a question, please press star then one. The next question is from Steven Suk with Stifo. Please go ahead.
Steven Suk: I just wanted to ask with the underground at Terranera, has there been any test mining or update on how the ore body and or ground conditions look compared to expectations now that you're well into it? And maybe just kind of as a follow on, how comfortable are you with the amount of underground development established now that we're just ahead of the start of production?
Speaker Change: Great question, Stephen. I'll let Dawn respond.
Speaker Change: Okay.
Dawn Gray: So we, we are
Dawn Gray: We have developed an area to do a test stove, we're actually
Dawn Gray: Close to
Dawn Gray: close to beginning some blasting in that in that stope and extracting the ore. The the good thing is that area it'll be a long hole stope in that area originally in the feasibility it was it was cut and fill and we have seen ground conditions.
Dawn Gray: in the veins better than what we anticipated.
Speaker Change: doing a lot of rock mechanics work and feel there's some upside there.
Speaker Change: for the development because we are finding more areas for that will put in the mine plan as long hole stoping that just that just takes the pressure off of so much development to get the cut and fill stokes ready so we'll be in good shape
Speaker Change: That's great to hear, and hopefully continues. I know that has really positive implications on your ASIC number if you're able to cut down that life and mind development through more long holds, so that's great.
Speaker Change: Maybe just on a bit of a different note, can you just give us a quick update on what's happening at Pittorea and maybe just to what to look forward to there through 2025 at a high level?
Speaker Change: Yeah, that's a great question, actually, Steven.
Speaker Change: Ultimately, which was in our original guidance for the year, we're going to spend about five million dollars at Pizzeria advancing an underground ramp that we had towards what's called our Manto zone.
Speaker Change: and then we feel like there's some feeder structures there. So we've been drilling there for the last...
Speaker Change: Almost three months and we should have news out on Pizzeria.
Speaker Change: in the coming weeks.
Speaker Change: to push that forward. Ultimately, we really believe in what we have at Pizzeria. We think ultimately what we purchased two years ago from SSR Mining is a special asset. For those that aren't familiar with Pizzeria, we have 600 million ounces.
Speaker Change: So great timing for that question, Stephen.
Speaker Change: Thanks for the questions.
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.
Dan Dixon: Thank you, operator. Thanks for everyone attending our Q3 financial call. Like I said at the beginning of our call today, it was a bit of a challenging quarter with the trending. I think our operating team did a phenomenal job to mitigate that as best we could.
Dan Dixon: Terranera continues to be on track and we're excited to see what Q4 in 2025 brings for the company. Thank you everyone for attending.