Endeavour Silver: Shareholder letter from CEO

Endeavour Silver: Shareholder letter from CEO

Dear Shareholder,

I have not reached out to you recently on Endeavour Silver, but I think the current opportunity may be of interest if you are thinking to add a silver growth story to your portfolio.

Given Endeavour shares sold off 37% over the four trading days prior to today, I thought I would reach out to you and provide more colour on our short- and long-term outlook.  We think the market has over-reacted to our second quarter financials news release last week wherein we reported $0 earnings per share instead of the consensus $0.01 per share, reduced our production guidance by 5% and raised our cost guidance by 10% for 2017. 

Guanaceví is the only one of our mines underperforming this year. Our other two mines, Bolañitos and El Cubo, are on track to meet or beat their 2017 plans, but the market appears to have concerns about the future profitability of Guanaceví. We think these concerns are overdone. Guanaceví operations are now headed in the right direction, and we have both short- and long-term catalysts to grow shareholder value, as follows:

  • Guanaceví mine operations have now stabilized, and the recently completed electrical and ventilation repairs and construction of a new underground pump station should help boost production and reduce costs in the second half of this year.
  • Boosting Guanaceví’s long-term profitability relies in part on developing two new orebodies: Milache and Santa Cruz Sur. Underground ramp access is already under way toward Milache, where initial production is expected in the second half of 2018. Mine development at Santa Cruz Sur is scheduled to coincide with Milache.
  • Guanaceví should look much better in a year, both in production and in costs, and we think the future of the mine remains very promising.
  • Consolidated production in the second quarter was higher than the first quarter due to improved performance of the Bolañitos and El Cubo mines, which are both on track to meet or beat their targets this year. We expect this trend to continue in the second half of the year.
  • Consolidated all-in sustaining costs peaked in the second quarter 2017, and sustaining and capital spending are expected to decline in the second half of the year, just as they have in most prior years, and even more so as our two new mines get built. AISC at El Compas is forecast to be less than $10 per oz and AISC at Terronera is forecast to be less than $5 per oz.
  • We have one of the strongest organic growth profiles in the silver mining sector. We are building two new mines at El Compas and Terronera over the next three years, which allows us to target substantial production growth and cost reductions over that period.
  • Endeavour is strong financially, with $72 million in working capital net of $4 million in short-term debt
  • We anticipate releasing positive exploration drill results and brownfields property acquisitions from each mine and project over the coming weeks and months.

I trust this update will assist in your understanding and evaluation of Endeavour Silver. If you have any questions, please do not hesitate to contact us.

Warm regards,

 

Bradford Cooke, CEO

August 10, 2017



 

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Endeavour Silver: Shareholder letter from CEO