Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Endeavour Silver Corp (EXK, Financial) reported a 17% year-over-year increase in top-line revenue, reaching $58 million due to higher metal prices.
- The Terronera project has reached 65% completion and is on track for commissioning in Q4 2024, with significant progress in infrastructure and mine development.
- Q2's silver equivalent production totaled 2.2 million ounces, positioning the company well to meet the upper range of its 2024 production guidance.
- The company has a strong cash position of $68 million and working capital of $65 million as of June 30, 2024.
- Endeavour Silver Corp (EXK) has successfully raised $14.7 million through share issuances and completed its first and second drawdowns of the Terronera senior secured debt facility, totaling $110 million.
Negative Points
- The company reported a net loss of $14 million for Q2 2024, compared to a $1 million loss in Q2 2023, primarily due to non-cash and unusual items.
- Cost of sales increased by 28% year-over-year to $48 million, driven by higher labor, power, and consumable costs, as well as inflationary effects.
- Silver grades were slightly lower than expected, which may impact future production profiles.
- The company experienced a significant increase in purchased material costs, rising from $1.5 million in Q2 2023 to $5 million in Q2 2024.
- The higher metal prices have led to increased royalty expenses and special mining duties, impacting cost metrics and contributing to the overall loss.
Q & A Highlights
Q: Were ounces withheld for higher prices this quarter or is this just a function of timing?
A: Just a timing function. Our last shipments went out around the 28th, and we didn't sell anything in advance. Given our position with building Terronera, we are not holding back sales and don't expect to do so at this time. - Daniel Dickson, CEO
Q: Do you think the peso has weakened to a level where you might start putting in broader company hedges in place?
A: We believe there is more weakness coming in the Mexican peso based on government policy, but it's difficult to determine when and how long it will persist. Currently, we have no plans to enter into more FX hedges beyond those required under our debt facility. - Daniel Dickson, CEO
Q: Is there more clarity on the priorities from a regulatory standpoint with the new administration in Mexico?
A: The new President, Claudia Sheinbaum, is expected to be more pro-business and pro-mining than her predecessor. However, some reforms are still pending Supreme Court decisions, and there is some uncertainty. We expect better clarity in the next six months. - Daniel Dickson, CEO
Q: Are there any specific project milestones attached to the release of the additional $45 million available at Terronera?
A: No specific milestones are required. The independent engineers representing the banks review our monthly reports, and everything remains on track. - Daniel Dickson, CEO
Q: How is the underground development work progressing? Are you tracking to plan?
A: We are tracking to plan now. Initially, there was a learning curve, but ground and water conditions are better than expected. We are hitting our marks and expect to complete mine development to meet our tonnage expectations for 2025. - Daniel Dickson, CEO
Q: Can you give a sense of how you arrived at the 65% completion figure for Terronera?
A: The 65% completion is based on a combination of dollars spent versus budget and milestones achieved. We expect to be between 85% and 90% complete by commissioning, with some minor structures still under construction. - Daniel Dickson, CEO
Q: Do you anticipate producing first concentrate by year-end?
A: We expect to have some concentrate by the end of the year. The transition from commissioning to commercial production will depend on hitting capacity numbers. - Daniel Dickson, CEO
Q: Can you explain in layman's terms why there was a significant loss this quarter despite higher sales prices?
A: The $14 million loss includes a $9 million loss related to derivatives. We are required to hedge 68,000 ounces of gold under our credit facility, and the appreciation of gold prices led to a mark-to-market loss. These are non-cash items and do not impact our current operations. - Daniel Dickson, CEO
Q: How many more derivatives are you leveraged for in future quarters?
A: The 68,000-ounce gold contracts will roll out in 2025 and 2026. These will continue to create mark-to-market gains or losses in our income statement until they are settled. - Daniel Dickson, CEO
Q: Can you provide an update on the progress at Pitarrilla?
A: We have a $5 million budget for Pitarrilla in 2024 and have started drilling. We expect to have results and a plan for the marketplace by the end of the year. - Daniel Dickson, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
