This news release has been amended to reflect the correct estimate for the Company’s 2022 All-in Sustaining Cost estimate of $20- $21 per ounce in the 2022 Revision to Guidance Section. Complete corrected text follows:
VANCOUVER, Aug. 09, 2022 -
Endeavour Silver Corp. (“Endeavour” or the “Company”) (NYSE: EXK; TSX: EDR) is pleased to announce its financial and operating results for the three and six months ended June 30, 2022. As a result of the Company’s strong operating performance, Management has raised its 2022 production guidance. All dollar amounts are in US dollars (US$).
“We have continued to outperform our mine plans, by delivering an exceptional Q2 with production 15% above plan, stated Dan Dickson, CEO of Endeavour Silver. “This has prompted management to raise our production outlook for 2022 to 7.6 – 8.0 million silver equivalent ounces. The additional production has allowed us to maintain our cost guidance on per ounce metrics, but industry-wide inflation continues to be a challenge. We are seeing the largest inflationary impacts on energy costs, plant reagents and steel prices which are affecting both operating and development costs. Cost control will continue to be a key focus as cost pressures are expected to continue for the remainder of the year.”
Added Mr. Dickson, “During the 2nd quarter, again we made the decision to withhold from sale a meaningful amount of silver, due to the drop in silver price. We are holding over 1.6 million silver equivalent ounces in finished goods inventory for future sale. Short term, the increased inventory has negatively impacted our quarterly financial metrics such as revenue, earnings, cash flow and our cash balance. Longer term, we anticipate selling the inventory at higher metal prices.”
Q2 2022 Highlights
- Higher Production: 1,359,207 ounces (oz) of silver and 9,289 oz of gold for 2.1 million oz silver equivalent (AgEq)(1) reinforces delivery of improved consolidated production for the year.
- Lower Revenue Due to Withholding Metal Sales: Revenue of $30.8 million from the sale of 602,894 oz of silver and 9,792 oz of gold at average realized prices of $22.72 per oz silver and $1,840 per oz gold.
- Negative Earnings and Lower Cash Flow Due to Lower Revenue and Non-Cash Items: Net loss of $11.9 million, or $0.07 per share. Adjusted net loss of $4.3 million(2) after adjusting for a $7.6 million change in the fair value of investments. $3.6 million in operating cash flow before working capital changes(2) and Mine operating cash flow before taxes(2) of $8.8 million.
- Operating Costs per Ounce In-Line with Guidance, Despite Industry-Wide Inflation: Cash costs(2) of $10.08 per oz payable silver and all-in sustaining costs(2) of $19.56 per oz payable silver, net of gold credits.
- Healthy Balance Sheet: Cash position of $116.2 million and working capital(2) of $149.7 million.
- Guanacevi Continued to Outperform: Production exceeded plan driven by higher grades.
- Bolañitos Remained Steady: Strong silver production from higher silver grades and increased throughput were offset by lower gold production and lower gold grades.
- Withheld Significant Metal Inventories: Metal inventory at quarter end totaled 1,399,356 oz silver and 2,580 oz gold of bullion inventory and 12,408 oz silver and 587 oz gold in concentrate inventory. The market value of finished goods at June 30, 2022 was $34.5 million.
- Advancing the Terronera Project: Work continued on the early works program initiated last year including engineering, critical contracts, procurement of long-lead items and extensive due diligence on the project financing. The Company intends to make a formal construction decision subject to completion of a financing package and receipt of additional amended permits in the coming months. $18 million has been spent as of June 30th 2022, with an additional budget of $23 million expected to be spent through to the end of October to continue the advancement of the project.
Subsequent to Quarter End
- Closed the Acquisition of the Pitarrilla Project: The addition of the Pitarrilla project enhances the company’s growth profile while maintaining a silver focus.
Revision to Full Year 2022 Guidance
The following table summarizes the updated 2022 Production Guidance for Endeavour Silver:
Guanacevi Bolanitos Consolidated
Tonnes per day tpd 1,100 - 1,200 1,000 - 1,200 2,100 - 2,400
Silver production M oz 4.3 – 4.5 0.6 - 0.6 4.9 – 5.1
Gold production k oz 13.0 - 14.0 21.0 - 22.0 34.0 - 36.0
Silver Eq production1 US$/oz 5.3 – 5.6 2.3 - 2.4 7.6 - 8.0
Cash costs, net of gold by-product credits2 US$/oz $9.00 - $10.00
AISC, net of gold by-product credits2 US$/oz $20.00 - $21.00
- Consolidated Silver Equivalent(1) Production has increased to 7.6 – 8.0 million oz from 6.7 – 7.6 million oz. The increase to consolidated production is primarily driven by higher than planned ore-grades along the El Curso orebody at Guanacevi. Production at Bolanitos has been slightly revised upwards to meet the upper end of its previous guidance.
- Operating Costs Guidance is expected to remain unchanged with cash costs expected to average $9.00 - $10.00 per oz and AISC are expected to average $20.00 - $21.00 per oz. Management notes that the Company is tracking to meet the upper end of the guidance range, given persisting global inflationary pressures. Increases in prices of raw materials such as reagents, explosives, steel, diesel and power are driving continued cost escalation across the industry. The company has identified efficiencies to mitigate pressure on costs and cost metrics in the second half of the year, including enhanced monitoring and tracking at the mines, improved blasting in development, the gradual increase of tonnes milled and reduced waste handling at Guanacevi.
Financial Overview (see appendix for consolidated financial statements)
Three Months Ended June 30 Q2 2022 Highlights Six Months Ended June 30
2022 2021 % Change 2022 2021 % Change
Production
1,359,207 1,073,724 27% Silver ounces produced 2,674,162 2,121,824 26%
9,289 11,166 (17%) Gold ounces produced 17,984 22,275 (19%)
1,346,276 1,062,267 27% Payable silver ounces produced 2,649,816 2,098,977 26%
9,117 10,955 (17%) Payable gold ounces produced 17,666 21,849 (19%)
2,102,327 1,967,004 7% Silver equivalent oz produced(1) 4,112,882 3,903,824 5%
10.08 13.03 (23%) Cash costs per silver ounce(2) 10.14 10.48 (3%)
14.26 19.55 (27%) Total production costs per ounce(2) 14.69 17.51 (16%)
19.56 25.39 (23%) All-in sustaining costs per ounce (2) 20.22 22.69 (11%)
201,361 242,018 (17%) Processed tonnes 407,508 451,471 (10%)
132.63 119.94 11% Direct operating costs per tonne(2) 127.69 116.43 10%
148.11 141.61 5% Direct costs per tonne(2) 148.32 134.48 10%
14.12 18.52 (24%) Silver co-product cash costs(2) 14.74 16.89 (13%)
1,144 1,289 (11%) Gold co-product cash costs(2) 1,169 1,116 5%
Financial
30.8 47.7 (35%) Revenue ($ millions) 88.5 82.2 8%
602,894 1,120,266 (46%) Silver ounces sold 2,320,662 1,743,645 33%
9,792 9,810 (0%) Gold ounces sold 18,173 20,473 (11%)
22.72 26.82 (15%) Realized silver price per ounce 23.95 26.95 (11%)
1,840 1,866 (1%) Realized gold price per ounce 1,900 1,781 7%
(11.9) 6.7 (279%) Net earnings (loss) ($ millions) (0.3) 18.9 (101%)
(4.3) 2.4 (280%) Adjusted net earnings (loss) (2)
($ millions) 2.0 (3.7) 155%
4.5 10.2 56% Mine operating earnings ($ millions) 24.7 15.9 56%
8.8 17.2 (49%) Mine operating cash flow before taxes
($ millions)(2) 35.5 30.5 16%
3.6 8.7 (58%) Operating cash flow before working
capital changes(2) 24.2 13.9 74%
(4.3) 15.9 (127%) EBITDA(2) ($ millions) 21.3 39.8 (47%)
149.7 146.8 2% Working capital (2) ($ millions) 149.7 146.8 2%
Shareholders
(0.07) 0.04 (275%) Earnings (loss) per share – basic ($) 0.00 0.12 (100%)
0.02 0.05 (61%) Operating cash flow before working
capital changes per share(2) 0.14 0.08 62%
180,974,609 168,383,755 7% Weighted average shares outstanding 176,291,929 164,051,368 7%
(1) Silver equivalent (AgEq) is calculated using an 80:1 silver:gold ratio.
(2) These are non-IFRS financial measures and ratios. Further details on these non-IFRS financial measures and ratios are provided at the end of this press release and in the MD&A accompanying the Company’s financial statements, which can be viewed on the Company’s website, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
For the three months ended June 30, 2022, net revenue, decreased by 35% to $30.8 million (Q2 2021: $47.7 million).
Gross sales of $31.7 million in Q2 2022 represented a 34% decrease over the $48.3 million in Q2 2021. Silver oz sold decreased by 46%, due to the buildup of the larger finished goods inventory held at June 30, 2022. There was a 15% decrease in the realized silver price, resulting in a 54% decrease in proceeds from silver sales. Gold oz sold were flat with a 1% decrease in the realized gold price, resulting in a 1% decrease in proceeds from gold sales. During the period, the Company sold 602,894 oz silver and 9,792 oz gold for realized prices of $22.72 and $1,840 per oz, respectively, compared to Q2 2021 sales of 1,120,266 oz silver and 9,810 oz gold for realized prices of $26.82 and $1,866 per oz, respectively. In Q2 2022, London spot prices for silver and gold averaged $22.60 and $1,877, respectively.
The Company significantly increased its finished goods silver inventory and slightly decreased its finished goods gold inventory to 1,411,764 oz and 3,167 oz, respectively, at June 30, 2022 compared to 668,382 oz silver and 3,841 oz gold at March 31, 2022. The cost allocated to these finished goods was $20.8 million at June 30, 2022 compared to $13.5 million at March 31, 2022. At June 30, 2022, the finished goods inventory fair market value was $34.5 million, compared to $24.1 million at March 31, 2022. Earnings and other financial metrics, including mine operating cash flow(2), operating cash flow(2) and EBITDA(2) were impacted by the withholding of sales during Q2 2022.
After cost of sales of $26.3 million (Q2 2021 - $37.5 million), a decrease of 30%, mine operating earnings were $4.5 million (Q2 2021 - $10.2 million). The decrease in cost of sales was impacted by the decrease in the quantity of silver ounces sold during the period offset by increased labour, power and consumables costs with lower royalty costs. Royalties decreased 49% to $2.2 million primarily due to the decrease in silver ounces sold during the period.
The Company had an operating loss of $1.3 million (Q2 2021: operating earnings of $0.8 million) after exploration and evaluation costs of $3.8 million (Q2 2021: $5.0 million), general and administrative costs of $1.3 million (Q2 2021: $4.3 million) a write off of exploration properties of $0.5 million (Q2, 2021 - $Nil), and care and maintenance cost of $0.2 million (Q2 2021: $0.1 million).
The loss before income taxes was $8.8 million (Q2 2021: earnings before taxes of $8.9 million) after finance costs of $0.3 million (Q2 2021: $0.2 million), a foreign exchange loss of $0.3 million (Q2 2021: gain of $0.7 million), and investment and other expense of $6.9 million (Q2 2021: investment and other income of $1.8 million). The investment and other expenses during Q2 2022 primarily resulted from an unrealized loss on marketable securities and warrants of $7.6 million (Q2 2021: $1.5 million).
The Company realized a net loss for the period of $11.9 million (Q2 2021: net earnings of $6.7 million) after an income tax expense of $3.1 million (Q2 2021: $2.2 million). Current income tax expense increased to $1.3 million (Q2 2021 - $1.1 million) due to increased profitability impacting the income tax and special mining duty, while deferred income tax expense of $1.8 million is primarily due to the estimated use of loss carryforwards to reduce taxable income generated at both Guanacevi and Bolanitos (Q2 2021 – $1.1 million).
Direct operating costs(2) on a per tonne basis increased to $132.63, up 11% compared with Q2 2021 due to higher operating costs at Guanaceví and Bolañitos. Guanaceví and Bolañitos have seen increased labour, power and consumables costs and at Guanaceví, increased third party ore purchased and operating development have increased compared to the prior year.
Consolidated cash costs per oz(2), net of by-product credits, decreased to $10.08 driven by increased silver grades, reduced royalty costs and increased by-product gold sales, offset by increased direct operating costs per tonne(2) AISC(2) decreased by 23% on a per oz basis compared to Q2 2021 as a result of a 27% increase in ounces produced driven by a 51% increase in silver grade, decreased allocated general and administrative costs and a decrease in mine site exploration offset by increased sustaining capital expenditures.
The complete financial statements and management’s discussion & analysis can be viewed on the Company’s website, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. All shareholders can receive a hard copy of the Company’s complete audited financial statements free of charge upon request. To receive this material in hard copy, please contact Investor Relations at 604-640-4804, toll free at 1-877-685-9775 or by email at gmeleger@edrsilver.com.
Conference Call
A conference call to discuss the Company’s Q2 2022 financial results will be held today at 10:00 a.m. PT / 1:00 p.m. ET. To participate in the conference call, please dial the numbers below.
Date & Time: Tuesday, August 9, 2022 at 10:00 a.m. PT / 1:00 p.m. ET
Telephone: Toll-free in Canada and the US +1-800-319-4610
Local or International +1-604-638-5340
Please allow up to 10 minutes to be connected to the conference call.
Replay: A replay of the conference call will be available by dialing (toll-free) +1-800-319-6413 in Canada and the US (toll-free) or +1-604-638-9010 outside of Canada and the US. The replay passcode is 9151#. The replay will also be available on the Company’s website at www.edrsilver.com.
About Endeavour Silver
Endeavour Silver Corp. is a mid-tier precious metals mining company that operates two high-grade underground silver-gold mines in Mexico. Endeavour is currently advancing the Terronera project towards a development decision, pending financing and final permits and exploring its portfolio of exploration and development projects in Mexico, Chile and the United States to facilitate its goal to become a premier senior silver producer. Our philosophy of corporate social integrity creates value for all stakeholders.
SOURCE Endeavour Silver Corp.
Contact Information
Endeavour Silver Corp.
Galina Meleger, Vice President of Investor Relations
Tel: (604)640-4804
Email: gmeleger@edrsilver.com
Website: www.edrsilver.com
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Endnotes
1 Silver equivalent (AgEq)
AgEq is calculated using an 80:1 silver:gold ratio.
2 Non-IFRS and Other Financial Measures and Ratios
Certain non-IFRS and other non-financial measures and ratios are included in this press release, including cash costs per silver ounce, total production costs per ounce, all-in costs per ounce, all-in sustaining cost (“AISC”) per ounce, direct operating costs per tonne, direct costs per tonne, silver co-product cash costs, gold co-product cash costs, realized silver price per ounce, realized gold price per ounce, adjusted net earnings (loss) adjusted net earnings (loss) per share, mine operating cash flow before taxes, working capital, operating cash flow before working capital adjustments, operating cash flow before working capital changes per share, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA per share and sustaining and growth capital.
Please see the June 30, 2022 MD&A for explanations and discussion of these non-IFRS and other non-financial measures and ratios. The Company believes that these measures and ratios, in addition to conventional measures and ratios prepared in accordance with International Financial Reporting Standards (“IFRS”), provide management and investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS and other non-financial measures and ratios are intended to provide additional information and should not be considered in isolation or as a substitute for measures or ratios of performance prepared in accordance with IFRS. These measures and ratios do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to other issuers. Certain additional disclosures for these non-IFRS measures have been incorporated by reference and can be found in the section “Non-IFRS Measures” in the June 30, 2022 MD&A available on SEDAR at www.sedar.com.
Reconciliation of Working Capital
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